So what do these new ways of buying and selling inventory actually look like?
Berens: What's the elevator pitch for what your company is doing that is new and different?
Walrath: Right Media has created the first open media exchange in order to bring more efficiency, value and standardization to interactive advertising.
The Right Media Exchange is open to ad networks, publishers and advertisers who buy and sell digital media using our common open transparent platform. Right Media offers these companies a range of solutions to help them operate more efficiently. Our current offerings include simple exchange access, white label sales programs and professional services. We also encourage companies with proven technologies to use our open APIs to provide better behavioral targeting, campaign optimization, contextual targeting and other value-add services that all Exchange members can use to improve their businesses.
The Right Media Exchange currently handles two billion ads per day, and has over 11,000 advertiser, publisher and network participants.
Edwards: Federated Media is pulling together leading, independently published sites in order to give marketers a scalable and safe opportunity to join the highest quality, most engaged conversations online.
Urschel: AdECN is a real-time automated exchange for online ads. In a way, we took the computer-based "ECN" exchanges that do most of the stock trading these days (Island was recently acquired by the NYSE) and applied the concept to online advertising. It is all about solving that liquidity problem.
Like a stock market, we serve the members of our exchange: advertising networks, some agencies, brokers and others; anyone with solid relationships with both buyers and sellers. A member buys on the exchange for its advertisers and sells on the exchange for its publishers. Our members in turn work with their clients, as always.
The core of the exchange is a real-time auction for every impression in which the advertiser can use a dozen targeting methods. Every time a viewer lands on a web page in the exchange it triggers an auction among all the interested advertisers; in less than 100 milliseconds the highest bid wins and that ad is shown. The advertiser knows what he is getting and he is paying only what it is worth to him. The publisher gets the highest price possible for each impression, and he sells more of his inventory.
The bottom line is that our members get the best possible liquidity. Fewer campaigns go unfilled; less inventory goes unsold. As the financial clearing house, AdECN even guarantees that everyone gets paid.
AdECN is just getting started. We launched in a limited way back in October with Experclick as the first seat on the exchange. We brought on five more members at the end of July, and are opening the doors to others in the second half of August.
Berens: The May 15 issue of Ad Age had a cover story that talked about an online auction for all types of advertising, with Wal-Mart CMO Julie Roehm as its fiercest advocate-- particularly for television. Aside from the more narrow scope of your project to online (at least at the moment), how does what you're doing relate or not relate to what Roehm proposes?
Walrath: In principal, what we're doing is closely related to what Roehm proposes. We're bringing efficiency, transparency and accountability to the sales process for online media, which is precisely what Roehm's initiative is calling for.
In practice, there are some fundamental differences between how TV can be auctioned and how online media can be auctioned. TV is still mainly a one-to-many advertising experience, and even in an auction marketplace it will be sold in blocks of inventory, in advance. Online is a one-to-one advertising experience. Because of the granularity of data associated with an online ad, advertisers can inform their bidding for each impression in real-time, and publishers can discover the true market value of an impression on every impression via the same real-time bidding mechanism.
Another similarity between the Roehm/eBay initiative and the online market is that there is a fair amount of concern/unrest on the part of networks and publishers over the threat of inventory commoditization through an exchange. This is an important psychological barrier for sellers of media. They're naturally concerned that putting their inventory up for auction will result in lower ad rates. Most market history refutes this idea. An efficient marketplace is more likely to increase the value of inventory by allowing a far broader set of buyers to compete for available inventory. Of course, pricing will fluctuate as the market moves (advertising is cyclical in nature), but more efficient mechanisms for selling inventory will smooth out the dips and provide sellers with more consistency and upside, even as buyers gain transparency.
Edwards: FM is a big supporter of dynamic pricing based on demand. But it forces publishers to create one-size-fits-all advertising packages for display "on the auction block," rather than opening a dialog between a marketer (who often has a unique challenge he/she wants to solve) and a publisher (who may have a unique solution to that challenge). While marketplaces like eBay and Google teach us a lot about pricing floors for commodity products, we still see value in human intervention to create customization for marketers and a premium for publishers who can execute that customization. Here's a somewhat absurd example: A woman sells an ad tattooed on her forehead and eBay got her a mere $11 CPM!
Urschel: Ms. Roehm's proposal is, I think, a good one for television advertising. But television is still a bulk-buy. We're talking about a very simple auction for, say, a 15-second ad spot on a show, where every viewer of that show will see the same ad.
AdECN is all about the uniqueness and value of each individual impression. When each television set has a unique IP address, AdECN will be able to target to the individual viewer linked to that address, showing each viewer potentially a different ad in that same 15-second spot, and advertisers will pay different amounts to show different ads to different viewers. AdECN does exactly that today on the web, and we will be doing it soon on mobile devices (which have something like IP addresses), but for now, television is not granular enough to benefit from the AdECN exchange.