Publishers are getting ripped off, plain and simple.
At least that was the gist of Erich Wasserman’s speech at Washington and Lee University on Monday. Wasserman, the co-founder and vice president of an online media trading company, said there are three ways in which publishers sell display ads online. But most publishers know about only two ways: Directly sold inventory and indirectly sold inventory/third-party ad networks.
Directly sold inventory is when the publisher sells display ads on its site directly to the ad agency. For example: The New York Times sells a banner ad to Sony. Directly sold inventory guarantees that 100 percent of every dollar from the sale goes to the New York Times.
The downside? Usually, publishers can only sell about 30 to 40 percent of their display ad inventory directly.
Traditionally, this has been where ad networks and indirectly sold inventory step in. A third party ad network comes along and offers to buy the inventory the publisher hasn’t been able to sell. So everything our theoretical New York Times publisher couldn’t sell directly is bought up by an ad network, let’s say Traffic Marketplace.
Traffic Marketplace pays the New York Times, but only about 30 percent what they would be able to sell the inventory for directly. Then, Traffic Marketplace turns around and sells all that display ad space to agencies like Sony at full price.
The bitter end? The New York Times is only making 30 cents for every dollar that Traffic Marketplace makes. Publishers are getting ripped off, and they don’t think there’s another alternative.
But Wasserman says there is.
Enter ad exchanges. (DoubleClick, AdECN, Right Media are the big ones right now.)
(Copyright 2009 by Will Scully-Power)
Ad exchanges are ways for publishers (sellers of display ads) and agencies (the buyers) to plug into an open technology platform (provided by the ad exchange) in which ad prices are set in a constantly updating (real-time) auction.
This marketplace basically decides the value of a publisher’s users, which helps set the price for display ads on that publisher’s site. Ad exchanges help publishers to better monetize their Web-sites while improving returns for advertisers, said Wasserman.
He estimates that publishers will get back 85 percent of every dollar spent when they use ad exchanges. That’s a lot better than the 30 percent a publisher will receive for every dollar the ad network collects.
“Forget the ad network,” Wasserman said.
It’s important to remember that Wasserman stands to benefit from publishers turning to ad exchanges because his company partners with them so they can, in turn, partner with agencies.
Still, I think what he said makes a lot of sense. I think publishers don’t have a lot to lose. Why not give ad exchanges a chance? Or do they already?
