Ad Network & Exchange Guide 2010

Marketers Still Trying to Break Free From Inventory-Based Buys

Demand-Side Platforms Gain Traction in Online Marketplace, but Sea Change Is Unlikely

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NEW YORK ( -- When demand-side platforms (DSPs) burst on the scene a few years back, the people and agencies behind them touted the services as a potential key to unlocking the holy grail for marketers -- near-real-time one-to-one marketing.

Varick Media Management's Darren Herman says, despite the noise generated by coverage of DSP, 'the activity is fairly substantial.'
Varick Media Management's Darren Herman says, despite the noise generated by coverage of DSP, 'the activity is fairly substantial.'
Called one of the biggest growth sectors in online advertising over the next decade, holding companies poured significant investments in the concept to satisfy marketers' craving for more relevant and timely marketing messages. But there appears to be more smoke than fire in the space, at least for now.

Why? Some will argue it's still "early days" for DSPs, a stance that no doubt has its merits. But others argue the problem is more than an age thing, and that both clients and vendors have concerns about the DSP business model. (To recap: DSPs are essentially ad exchanges from the marketers' perspective, hence the demand side, as opposed to exchanges that cater to publishers' ad inventory, or the supply side.)

"There are just a whole host of questions about the business model and how clients and publishers perceive these platforms," one digital audience-measurement executive said. "If you're one of the largest clients of an agency, do you want your spend aggregated with smaller clients that the agency may handle and leveraged in the marketplace in a way that doesn't fully benefit you? And publishers have an issue because it commoditizes the inventory and allows the agency player or DSP operator to layer on the audience value."

Michael Brunick, VP-media technology at Interpublic Group of Cos.' Mediabrands and Cadreon, its DSP, said the goal in this space is to make online advertising more valuable and more relevant to all parties within the ecosystem, including advertisers, consumers, and publishers. "We should not be commoditizing anything, especially a publisher's content, and by default, its ad inventory," Mr. Brunick said.

Core issues
Ramsey McGrory, VP North American Marketplaces at Yahoo, which recently rolled out a DSP pilot program in partnership with Invite Media, MediaMath, DataXu, Turn and X Plus One, said the platforms can help marketers achieve more efficient and effective media buys by addressing key operations.

"The DSPs are innovative companies that are addressing core issues, including how much does it cost to actually manage and deliver digital advertising, how well are buyers engaging their desired audiences, are buyers able to control frequency of exposure globally and are buyers managing the costs of their media effectively?" Mr. McGrory said.

Mr. Brunick said there are more than 10 Interpublic clients currently using Cadreon and the number of campaigns it has run "is well into the triple-digits." He agrees there is more smoke than fire in the sector and that it could be further along at this point but he said clients are adopting it.

"Broadly speaking there is less substance backing all that noise up," he said. "But that isn't only the agency side of the house that's to blame. It spreads to the individual DSP and the service provider/tech platform side as well. I would like to see us all be a bit farther along then we are at this point."

Mr. Brunick said there are a few obstacles preventing the wider adoption of DSPs, including the lack of "huge chunks" of money currently being funneled through them.

"It is also a fundamentally different way of both planning and buying media," he said. "That has repercussions throughout the entire media landscape. Shifting focus from inventory-based buys to audience-based buys requires a shift in thinking and how that manifests itself in a campaign's strategy all the way to creative development."

He said Mediabrands has spent a considerable amount of effort on education for its agencies and clients. DSPs also require new methods of measurement and accountability, because the ad buys are actually being made against a different currency: audiences.

"We are actively working on developing a more appropriate metric than the typical CPM/CPC/CPA models prevalent today, so that audience-based campaigns can be evaluated on a more relevant performance variable," Mr. Brunick said.

Darren Herman at Media Kitchen's Varick Media Management said it's the first inning of a nine-inning game that may go into extra innings. "It's only 2 years old and dollars only flow into something when it's proven that it works, and that's in any industry," Mr. Herman said. "And, from a VMM perspective, there are significant dollars flowing in to this newly created unit."

Mr. Herman said a number of clients, including BMW, Vespa and Armani Exchange, are currently using VMM. He said there may appear to be more noise than action in the space because of the coverage it has received. "But the activity is fairly substantial," Mr. Herman said. "The agencies and holding companies being proactive in the space really see the future of where standardized units are going to be bought and optimized from. DSPs are the future of how standardized media will be bought and sold and they bring tremendous creative opportunities that allow for real-time media buying, which lets us serve creative on an individualized basis."

Mr. Herman believes DSPs could eventually make traditional media-buying shops a thing of the past. "As media is bought more and more digitally, more of the campaign optimization and maintenance is going to exist within companies like ours," he said.

Matt Spiegel, CEO of Omnicom Group's OMG Digital, said the ability to buy inventory off exchanges and do some optimization and data-driven targeting is there, but it's the real-time bidding aspect that isn't running at an optimal level.

"The amount of real-time bidding that's available is where there is more hype than action," Mr. Spiegel said. "This is all moving to more real-time biddable inventory. But that's not where we are today in terms of the vast majority of inventory being available to us in that manner. But the premise that this whole thing is more hype than reality is not true. There's real work being done and clients are actively using the biddable inventory and technology to improve their media performance."

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