Ad exchanges have been around for a number of years now, with Yahoo's RightMedia being the largest and most successful exchange to date. DoubleClick launched its ad exchange shortly before being acquired by Google, but since the acquisition have not promoted it heavily, and put it on idle while rethinking and rebuilding the tool.
At a recent roundtable event, Google outlined their next generation ad exchange to be launched in the autumn of this year. The way they've tweaked the model is simple, yet fundamental. Here are the most significant changes and how it will impact publishers and advertisers alike:
1. AdWords becomes the buying platform
One of the biggest barriers to purchasing from ad exchanges is that they are separate platforms with their own workflow, billing and legal requirements. In short, it is hard for buyers to start trading with them. But from autumn, all agencies and advertisers will be able to buy ad exchange ad inventory through the AdWords UI. This means that all of Google's existing paid search advertisers will have instant access to all ad exchange inventory, producing a massive increase in liquidity, better workflow and fewer barriers to trade. For AdWords customers that are already buying 'content' as part of their paid search buys, the change will be almost unnoticeable.
It also makes the ad exchange that much more appealing to publishers looking to increase their yield and sell-through rates. The more advertisers, the greater the chances of getting a good price for hard-to-sell blocks of inventory (like long-tail international inventory) or of getting a match for user list targeted impressions in a remarketing campaign. A classic positive network effect.
2. Guaranteed publishers payments on 30 days
Yes, this is not a typo! No sequential liability, no waiting for payment. Google is guaranteeing 100 per cent of revenues for publishers on 30 days, regardless of whether they have been paid by the advertiser. Of course, everyone pays Google on time, so this is probably not a major risk for them, but for most publishers (even large enterprise publishers) invoicing correctly and getting paid on time is a major headache and a major inefficiency in their businesses. A sales channel that guarantees payment on 30 days therefore becomes incredibly appealing.
3. Dynamic allocation for all
Dynamic allocation refers to the ability of an ad server to automatically select the highest yielding ad for a particular publisher impression, without the publisher having to make a hard allocation of that impression for a particular campaign or sales channel. The concept is fundamental to publishers that want to maximise yield across multiple sales channels (direct, sales houses, multiple ad networks etc). In the first version of DoubleClick's ad exchange, dynamic allocation was only possible if you ran DoubleClick's DART for Publishers as your ad serving tool. The new Google ad exchange will make dynamic allocation available to all publishers via an open API. This means that any publisher -- regardless of what ad serving platform they use -- will be able to include the Google ad exchange in their sales channel mix. This will massively increase the available set of publishers who can sell inventory through the exchange.
The bottom line
The above issues might seem slightly obscure or theoretical to some of you, and their impact will probably not be visible in the marketplace until well into next year, but the result is inevitable. Google will win the ad exchange battle. Integration with AdWords, guaranteed payment and the opportunity for more publishers to get involved, all equates to a stronger network and better potential to monetise.
As a publisher, you should seriously consider integrating Google's ad exchange as part of your sales channel mix, and figure out how best to use it to increase yield. And as an advertiser or agency, make sure you understand how to buy display inventory through AdWords and leverage the advanced targeting, retargeting and optimisation techniques it offers.
Stephan Pretorius is the president of Acceleration.