One Year Later, What We've Learned About Private Ad Exchanges
If 2011 was the year of testing for publishers who operate so-called private ad exchanges, 2012 looks like it may be the year of putting lessons into action.
Private exchanges began popping up in late 2010, with the goal of increasing the price of online-ad inventory that was going unsold by direct-sales teams.
To accomplish that , publishers license real-time bidding technology from tech partners. It helps them orchestrate auctions for ad impressions and determine which buyers get access to inventory, as well as what inventory is made available at what prices. Though exchanges have perhaps dozens of other characteristics, that 's where the standardization ends.
That's because publishers who have taken the leap have charted vastly different paths, employing sometimes contradictory business rules, forcing advertisers and the trading desks and technologies through which they bid on audience segments to learn about each on the fly.
Take, for example, the thorny problem of whether to sell private-exchange inventory to advertisers already making more-expensive ad buys from the sales team. Some publishers fear that big-spending direct advertisers will spend less or stop spending altogether on reserved inventory if they see how much cheaper the unreserved inventory is in the private marketplace.
Forbes initially blacklisted advertisers that bought reserved inventory, then reversed course. On the other hand, Condé Nast at first granted access only to advertisers that increased their direct-sales buys in fourth-quarter 2011 from the year before.
"Blacklists still abound," said Michael Barrett, former CEO of Admeld, which was acquired by Google. He's now a Google sales director. "But buyers sometimes view it as retribution for doing business."
Publishers also need to determine which categories of new buyers (agency trading desks, demand-side platforms, ad networks) will have access, and how many companies within those categories will have it.
When The Weather Channel launched its private marketplace in late 2010, it did so "very conservatively," according to Bill Murray, VP-advertising operations.
But as Mr. Murray alleviated some of the sales force's concerns about "rate degradation," as he described it, the company opened up the exchange to new categories of buyers and to more buyers within each category. "Right now, more seems better," he said.
Michael Greene, an analyst who covers the sell-side of the online-ad ecosystem for Forrester Research, goes a step further.
"There's still a major problem with publishers that took the idea of private exchange [as a way] to limit access to inventory and limit liquidity of demand by simply white-listing a couple of buyers to buy a small section of the site," Mr. Greene said.
"It doesn't make sense," he added. "When you have supply that 's generally not good and that brings only a couple of advertisers in, prices will generally be pretty low."
The one thing that publishers, analysts and tech providers alike all agree on is that proper staffing is a critical element.
"Once you start down the road, your operation needs to begin thinking about what's your data practice, what's your data-privacy practice, what makes up your first-party data," said Mario Diez, CEO of QuadrantOne, an alliance of four major newspaper companies that operates Q-Exchange, a collaborative private exchange.
"There's a lot of operational investment that has to go into it that I think a lot of publishers weren't really prepared to have," Mr. Diez said.