Say "Cheese" Agency Trading Desks, DSPs And Exchanges

The Sell-Sider"The Sell-Sider" is a column written by the sell-side of the digital media community.

Ali C. Mirian is VP, Product and Technology, at IAC Advertising.

It was the greatest cheddar cheese I have ever tasted. Sweet, yet subtly sharp, and utterly mouth-watering.

Jasper Hill Farm in Greensboro, Vermont has one goal - to produce, age and distribute artisanal cheese of the highest quality. Mateo and Andy Kehler bought Jasper Hill Farm in 1998 and spent the next five years trying to figure out how they can build a business model for sustainable agricultural development. They tried farmstead beer, no luck. Took on tofu from home grown soy beans. Strike two. Then in 2002, they bought 15 heifers, and set out to create a farmstead cheese company with a twist. Not only will it create delicious cheese from its own milk, it will build large-scale caves to age cheese for other local makers in their own caves. They will even handle the distribution of the cheeses on top of their existing palettes and ship them off together in bulk. Small cheese makers don't have to worry about costly shipping charges and don't need to build a cave. They can simply do what they do best: make great cheese.

To cheese makers, aggregation is a means to higher prices for smaller suppliers. To publishers, aggregation means something else entirely. For centuries, ad networks - the aggregators of our time - have been accomplices in the drive to bring prices down in order to provide buyers a cheaper alternative. As a result though, advertisers are losing trust in the ad networks that cannot provide both disclosure and quality assurance on their inventory pool, which has further decreased the prices ad networks can garner. Ad networks succeeded by acquiring inventory cheaply, and selling it less cheaply, while vigilantly managing the spread. But by virtue of the very efficiencies they've created (thanks, we appreciate it), ad networks unwittingly forced themselves to remodel. Now that agencies have joined the aggregation game in the form of the Agency Trading Desk (ATD), there is a whole new breed of next-gen intermediaries who are asking publishers to trade one middleman for another, while promising new value creation.

But how does the ATD appear through the lens of the publisher? You may say publishers should not care about what pipe brings the demand as long as price is increasing, brands are protected, and it flows efficiently. But this doesn't leave the Agency Trading Desks, Exchanges, and Demand Side Platforms scot-free. If these aggregators want the full-scale participation of publishers, they must create an even playing field inherent in a fully-reciprocal, open market.

In a land where asymmetry runs rampant, the staid publisher will tread softly. When a buyer gets URL transparency at the ad call level, does the seller get advertiser transparency? When the trading desk requires the publisher to pass back unwanted impressions, is not the publisher taking the risk? When a buyer can plug in a start and end date for its advertiser, can a publisher put a start and end date for its ad unit? If the first impression is more valuable than the tenth impression, can a publisher price them differently? Answers: No, Yes, No, and No. With reciprocity, there shall be publisher ubiquity. Until then, the aggregators need to keep innovating (and, you're almost there!).

Counter-intuitively, the aggregation concept is moving up the food chain while ad networks are moving further down the ad delivery decision totem pole. Perhaps it is because publishers are no longer willing to absorb the risk created by blended CPM's and pass-backs. A flight to quality is now beginning. Emerging is an aggregation model built on aligning quality brands under one roof, combined with deep targeting capabilities. "Super Publishers" that own and operate multiple properties are finally achieving the economies of scale needed to efficiently aggregate both inventory and data. As the media conglomerates scoop up the few remaining independent large-scale properties and synthesize sales strategies, they create leverage to build stronger connections between advertiser and consumer, and obviate the need for middlemen.

Consolidation is inevitable. But it is less likely among networks that are built on distribution relationships etched in sand. Instead inventory consolidation will occur among media companies who will continue to build scale. The acquisition of The Weather Channel and CNET in 2008 marked the end of an era when large niche publishers could survive on their own. Since then, there are exactly zero standalone content properties in the comScore Top 50 whose business model is primarily driven by advertising. Media conglomerates have all sent smoke signals that their ambition is to evolve to fully-integrated, high-class aggregators (present company included) bringing to bear targeting, scale, and trust under one roof. And lest we forget the power of a publisher with first party user data, it's a wonder an ad network is needed at all.

With media companies and agencies building aggregation models of their own, where does that leave the conventional ad networks? With far less access to quality inventory, ad networks are forced to either sacrifice margins to lock in quality inventory, build a more high-touch white glove service model, or rely heavily on black box targeting and optimization to extract value from lower quality inventory. No less critical a role, it simply allows these businesses to do what they do best - turning low value into something worth selling.

So if you're a buyer looking for scale, targeting, and trust, go ahead and call your publisher now. Just as Jasper Hill leverages aggregation to deliver premium products, Advertisers should expect the same from their aggregators. Because in the end, you get what you pay for.

1 Comment

  1. "advertisers are losing trust in the ad networks that cannot provide both disclosure and quality assurance on their inventory pool, which has further decreased the prices ad networks can garner."

    Agreed, but how many ad networks are left that fit this description? Most legit nets we know are providing both disclosure and QA, and seeing prices increase on the back of placement and engagement optimization. The bottom feeders are simply going out of business - a truism.

    Reply

Add a comment

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>