IAB Marketplace: Network and Xchanges

The IAB’s inaugural Ad Networks & Xchanges event was held in NYC on March 31st. IAB President & CEO Randall Rothenberg kicked off the day by introducing the theme, “Teach me now, teach me how.” Attendees learned about the growing importance of exchanges and ad networks at panels and sponsor-presented breakout sessions.

The best explanation on the differences of exchanges and ad networks came from Christine Cook, Martha Stewart Living Omnimedia’s SVP, digital advertising sales during a panel discussion.

“Exchanges are increasingly interesting because it allows the publisher to set the CPM bar. We are still in control of our inventory. The ad networks do not offer that model,” said Omnimedia’s Cook.

William Morrison, an Equity Partners’ analyst, made the point that “hyper-fragmentation on the Internet presents challenges for marketers. Marketers are interested in video, blogs, RSS, mobile and social networks and they are asking the question, how do I work with them?” Exchanges/ad networks are bringing efficiency, reach and targeting to the media buying process and the exchanges/networks “that can give you transparency and control” are the best to work with.

Morrison also addressed the commodity issue that some parties associate with ad networks and exchanges. “Commodity markets show that porkbellies have increased in price seven percent annually during the past 20 years. There is definitely volatility in pricing but the overall trend is price increases.”

Carat Group Media Director Steve Ustaris said, “Ad networks and exchanges are revolutionizing the way media is purchased. Exchanges/ad networks allow you to reach a high volume of audience across multiple placements from one source. Ad networks, with the ability to segment audiences across multiple content verticals, are great for testing creative. Plus you can include the thousands of long tail sites.”

Ustaris noted potential benefits:
• Greater control of ad placement
• Determine true value of inventory
• Address cross-site duplication
• Greater understanding of site level performance

He feels the current challenges for media buyers include:
1. Risk versus reward: how many top tier pubs will participate and how much inventory will be available?
2. Current lack of understanding and infrastructure on the agency side to manage the new exchange system.

“Who is going to actually buy and manage the media? The jury is still out if it will benefit the agencies to use exchanges. Testing will tell us,” said Carat’s Ustaris.

The question of ESPN’s recent decision to stop working with ad networks came up through out the day. One publisher panelist thought the decision was interesting, “they must have determined that having control over all inventory by their internal sales force made the most financial sense.”

Later, Michael Kelly, Eyeblaster’s digital media advisor, investor and chairman of the board, mentioned that he had not spoken to anyone at ESPN but speculated that they feel “they can sell out all of their cross-media opportunities” with their internal sales force. He went on to say that “ad networks and exchanges are now growing fast and this is important.”

As our industry continues to evolve, the ad networks/exchanges will satisfy advertiser needs such as the audience scale issue. They will also drive the growth in efficiency-not lower CPMs, but ease of use. A media buying/selling process that is simplistic “will lead to growth. We need to simplify a process that can be very inefficient,” said Eyeblaster’s Kelly.

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