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A Seismic Shift Is Underway in Ad Tech

By Published on .

The ground is shifting under ad tech, argues Index Exchange CEO Andrew Casale.
The ground is shifting under ad tech, argues Index Exchange CEO Andrew Casale. Credit: istock
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It's time for ad tech to take responsibility.

Even as ad tech players gear up to yet again take over Yacht Row at the Cannes ad festival and anticipate talking shop over glasses of rosé, they need to recognize the tone is going to be very different than when they first stepped onto the French Riviera.

Brand safety concerns and a rising industry chorus around transparency with clients is pushing our industry to finally halt its blatant mistreatment of marketer dollars.

Since last year's Cannes, we've seen the rise in practices like header bidding rip control from the hands of individual, dominant companies. Other developments like the emergence of the Ads.txt initiative are finally helping address the challenges in our supply chain and attacking fraud tools like domain spoofing.

Efforts like these, and many others currently underway, are bringing more transparency to the market. But there's still work to done and players that aren't on board should be wary. I believe we're about to see a seismic shift within our industry that will cause massive amounts of consolidation and commoditization throughout our supply chain.

Perspective from another market
Parallels are often drawn between programmatic and the stock exchange, and there are similarities towards both industries' trajectory towards efficiency. A report by a Columbia University student shows the price to buy and sell stock was extremely high from the 1920s into the early 1970s. During this period, stock brokers had fixed-rate commissions and were taking large fees off the top of trades. When the market was deregulated in 1975, these fixed-rate commissions were no longer allowed. This move definitively changed the way the market was priced. Jason Zweig, commentator for The Wall Street Journal, said this about the market shift:

The obvious lesson is that when brokers treat their customers more fairly, the customers prosper. May Day smashed Wall Street's monopoly, unleashing the discount-brokerage industry, fostering independent research and democratizing the world of investing. The subtle lesson is that when brokers treat their customers more fairly, everyone prospers.

Since 1975, the stock market has improved in benefit to its customers. Before a stock is purchased, one has full transparency into how the stock is trending, trade volumes, historical valuations, and the instantaneous market price of any given share. This valuable information leads to true price discovery and has created a trusted market where costs associated with transactions need not be questioned.

Furthermore, when you buy a share of a company, it's implied that the transaction is trusted. There are no concerns that some middlemen spoofed a publicly traded company and that the share you are buying could in fact be worthless.

Arbitrary, unclear and unprotected
Now compare Wall Street operations to the current state of the programmatic industry. In programmatic, publishers don't know what the market will pay for their inventory until a sale is completed, and buyers don't know what will be charged at the onset of a transaction. Prices are set arbitrarily, and it's unclear how much money from the marketer's dollar is going into a publisher's wallet.

These underlying problems have created distrust and are further amplified by the state of today's porous supply chain where buyers are concerned about acquiring spoofed or fraudulent impressions. One need only look at the Ad Tech Lumascape to see the high volume of companies involved in transacting just one impression, often leading to associated fees being vehemently inefficient. Compare this to Wall Street where middle men are commoditized, fees are kept to a minimum and value remains with participants on the edge of a transaction (not the middle).

I believe 2017 is programmatic's 1975.

This past year has given more power to publishers in which they're able to operate their own marketplaces rather than ad tech running the market only in their favor. Value is returning to the customer, much like how more value was given to shareholders after the stock market was commoditized in '75.

There's no doubt conversations in Cannes will address this impending market shift and strategies for how we can fulfill a trusted supply chain. Because more transparency will mean the barrier to list an impression in our market will rise, there will be a reduction of participants as more commoditization occurs. I do believe we will see the true beginnings of a fully trusted and transparent supply chain by the end of the year, which will mean Yacht Row will look very different next year on the Riviera. My hope is we replace ad tech yachts with media company yachts, as our customers prosper.

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