5 Things Publishers Should Know About Private Ad Exchanges

The Right Questions to Ask Before Kicking Third-Party Networks Out

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Private ad exchanges are the rage, a way for publishers to participate in the real-time, auction-based online ad market without doing business with third party ad networks. As News Corp. CEO Robert Thomson said when News Corp. launched one a few weeks back, "Third parties are no longer invited to the party."

With a nearly 74% increase in so-called programmatic ad spending estimated by eMarketer this year, digital publishers can no longer simply ignore the market. The hope at News Corp. and other publishers is that by gating off their ad inventory in private exchanges will bring in higher CPMs from buyers, while not exposing its business to the downsides of the public exchanges.

But while the idea of selling all your ads directly sounds like a great idea for publishers in principle, does it work in practice? Here at Ad Age, we thought it might be helpful to identify a few key issues publishers should think about.

Are third-party networks and ad exchanges really that bad?

Eliminating open exchanges completely, as News Corp did, is actually an extreme move according to a number of sources we spoke to. A story we heard more than once likened public and private exchanges to eBay and Sotheby's. A private exchange is the glitzy auction house of the programmatic world, a place to sell higher quality inventory at a premium price. But it doesn't eliminate the need for an "eBay," where you can still get some money for your less prized possessions. The choice for many publishers, then, is often not to eschew one over the other, but whether to operate in both.

Liz Schimel
Liz Schimel

That said, opening a private exchange can make sense for a publisher when it believes its inventory is being commoditized on the open exchanges. "The value of a private exchange is actually having a product that becomes part of the dialogue with the agency or the client about why that inventory is valuable," said Liz Schimel, who explored launching a private exchange at while Chief Digital Officer at Meredith. The theory is that those conversations will place a publisher's programmatic inventory into a conversation with its premium, giving a publisher a chance to capture some of a buyer's programmatic budget which otherwise may have been spent on anonymized bundles in the open exchanges.

Sounds great. What's the downside?

But there are tradeoffs, added Ms. Schimel. "As you make inventory available in those exchanges, of course there are going to be complicated concerns of whether you're cannibalizing your premium inventory," she said. The concern is that buyers who might have bought direct will spend the money instead on the (often cheaper) inventory listed in the exchange.

What are the key questions publishers should be prepared to ask when thinking about a private exchange?

When considering opening a private exchange, a publisher should to ask itself what will draw buyers to its exchange as opposed to the numerous other programmatic options available, and what will make those buyers pay higher prices. A unique data offering is one way to do it. "Publishers," said Yieldex CEO Andy Nibley, "need to have the data to be able to show brand advertisers why their inventory is valuable and should command a higher price."

Pubmatic President Kirk McDonald
Pubmatic President Kirk McDonald

A private exchange can, in theory, be a safer environment for a publisher's first party data, so they should have a clear strategy for how to use it. "Data is a critical piece," said Kirk McDonald, president of Pubmatic. "You've got to have something beyond third party data."

There's also the matter of who you let into the exchange. "The first question every publisher asks itself is should I let my direct sold accounts buy me programmatically, through the indirect channel, on a private exchange or a public exchange," said Mike Smith, Hearst's vice president of revenue platforms and operations. Hearst operates a private exchange and Smith said that allowing those who by direct to participate in the private exchange is a good thing, believing that a rising tide lifts all boats. Publishers should try to estimate the impact to their direct sales if they go that route, understanding that some cannibalization may occur.

What due diligence should publishers do beforehand?

Discussions with vendors can be one of the best ways to learn the ins and outs of private exchanges, said Ms. Schimel. "Go talk to these companies" she said. "They are specialists." Ms. Schimel said she invited a mixture of tech companies to meet with her team, some which were geared primarily towards publishers (companies like Rubicon and Pubmatic), others with more neutral stances. Ms. Schimel said she and her team learned a lot after watching presentations from the vendors, which each did their own deep dive with their own point of view. The result was a well rounded view of how the system works.

It's also critical to have all stakeholders on hand during these meetings, said Ms. Schimel, everyone from sales, to ad ops, to the data team, and even editorial. "When these things start to not work, a lot of it is a few people make decisions," she said. "People get upset and then you start changing your strategy because not everybody was on board, You want to avoid that if possible."

Is a private exchange only possible for giant multi-brand media companies?

Vox Media's Jim Bankoff
Vox Media's Jim Bankoff

A giant media company like News Corp. has an advantage in that it can give buyers access to its inventory at scale. but small publishers can still benefit. A private exchange, for instance, can remove much of the hassle of selling an executing direct deals, all while giving buyers an opportunity to purchase their inventory in a method that is on its way towards becoming a preferred way of doing business.

Jim Bankoff, CEO of Vox Media, said while a private exchange has not been a priority for his company, it may be something they put into place down the line. "We certainly are open to all ways to reduce friction in the buying process," he said. "To the extent that there is demand for that and to the extent that we can have more clients and happier clients, we're going to evaluate that."

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