Yahoo! Dreams Premium at Networks’ and Small Pubs’ Expense


boot_small.jpgADOTAS -The equivalent of eviction notices were nailed to the door of small publishers and second- and third-tier ad networks as Yahoo! announced it was shutting down the Direct Media Exchange (DMX) segment of Right Media. As of Jan. 31, 2010, the DMX platform will no longer serve ads and Yahoo! has no plans to develop and operate a new platform for small publishers.

Change has been afoot in Yahoo!’s display game. Almost as soon as the news broke that Right Media founder Michael Walrath, who sold the company to Yahoo! in 2007 and served as senior vice president of advertising strategy, was leaving Yahoo!, new Vice President and General Manager of Ad Platforms Bill Wise announced that Right Media was amending its strategy to transform into a “a premium exchange focused on being transparent, differentiated and interoperable.”

“Consumers are spending more and more of their time online and we as an industry have not effectively shown large marketers why the dollars should shift as well,” Wise wrote on the Right Media blog. “Now, that’s changing: The advertising community wants an upscale, high-quality marketplace where audiences can be bought at scale, and in real-time.”

As bigger brands are seeing the value in pushing their campaigns online, Right Media’s rebranding is an attempt to attract this business through reeling in more higher-caliber publishers, including Ziff Davis, while purging ad networks lacking quality data and advanced targeting — in other words, the little guys.

Cleaner, Premium Inventory

“Right Media was never given the full care and love from Yahoo! that it should have,” said J.T. Batson, executive of revenue and global development at the Rubicon Project.

Automated ad service has never been the company’s bread and butter, he noted, but as bigger brand dollars enter, they’re increasing concerned about the quality of the inventory.

“Clean inventory is one of the most major, if not the most, concerns of a brand,” commented Zach Weinberg, cofounder and CEO of Invite Media. “The first question we always get is about the quality of our inventory.”

Overall, he believes Right Media’s rebranding makes the display marketplace more attractive. In particular, it offers a catalyst for standardization of publisher transparency, Weinberg said. Ad exchanges have been underestimated, and Yahoo!’s moves will also allow publishers to better understand controls such as setting minimums for inventory.

Yahoo!’s aim to take Right Media upmarket is certainly a response to premium-focused Google. Although Google is making inroads into the segment with the relaunch of the DoubleClick ad exchange and adding dynamic ad capabilities with the acquisition of Teracent, Yahoo! is still the company that brands trust most with display campaigns, noted Kirby Winfield, chief revenue officer for Mpire. The company is sympathetic to their business and has toiled for years to earn their trust.

But actions speak louder than words. “For the Right Media rebrand to be taken seriously by Yahoo’s core advertisers … there will need to be more than lip service paid to brand safety (for publishers and advertisers alike) and transparency — two of the largest complaints about Right Media to date.” said Winfield.

In general, Right Media’s rebranding is symbolic of the extreme precedence of premium publishers.

“In many ways, Right Media pioneered the concept of an ad exchange,” said Rajeev Goel, cofounder and CEO of Pubmatic. “But the market has changed and premium is now highly valued.”

A legacy component of Right Media’s exchange, Goel noted that there has been a lack of investment and engagement from Yahoo! in the DMX platform since the acquisition in 2007.

Right Media’s new focus might not expand the display arena. Goel expects a disruption in the second- and third-tier network as many substantial networks find themselves kicked out of Yahoo!’s abode. They will be forced to develop new technology and business plans, the latter being a formidable obstacle. Some networks may even be forced to call it quits.

“That would be a shame,” Goel said. “‘High quality’ is in the eye of the beholder — what a premium advertiser doesn’t want to work with can make a perfectly good home for someone else.”

While he does expect midmarket exchange and similar companies to benefit from increased business, he doesn’t see a mass movement of traffic from DMX to these players.

In addition, CPX Interactive CEO Mike Seiman doubts that the ramifications for the ecosystem will live up to the hype following the announcement.

“The online display advertising space has grown incredibly robust,” he said, “offering publishers of every size numerous options in achieving their monetization goals.”

The Fate of Smaller Publishers

“Smaller publishers will always have a space but publishers bringing in 20,000 to 30,000 impressions aren’t the ones that proved value to major brands,” said Weinberg.

In particular, by shutting down DMX, Right Media plans to shed networks that are trading inventory to each other in an arbitrage model. These long-tail publishers and arbitrage networks only detract value from the space, said Weinberg.

Abandoned smaller pubs will likely look in the direction of revenue optimizers or horizontal reach networks, as well as Google’s and Microsoft’s ad exchanges. Hybrid revenue optimizers will inherit a great deal of publishers looking for the best way to navigate the ad networks.

However, maximizing the inventory of small pubs requires a lot of work for not much value. Rubicon expects to see more interest from small pubs, but requires $30,000 in monthly ad revenue for a publisher to use its REVV platform. The display space in general is hard focused on keeping advertisers happy rather than boosting publisher revenue.

“Because advertisers have money, they hold the key and everyone is fighting for their dollars and focusing on premium publishers,” Batson said. Hence why companies such as Yahoo! are building a product hospitable to advertisers rather than helping publishers manage their business more effectively.

Right Media partners like Kitara Media have used the termination of DMX as an opportunity to work directly with displaced publishers.

“Kitara Media is one of the main providers to DMX pubs now on the exchange and has built a similar publisher system allowing DMX partners to easily migrate and get additional benefits like reward and referral points,” said Lizz Cramm, head of publisher services for Kitara Media.

Seiman agreed that the dissolution of DMX offers CPX an opportunity to work directly with smaller and midsized publishers that it previously serviced through Right Media.

However, according to Winfield, undifferentiated content and long-tail publishers will use revenue optimizers and horizontal networks to retain the anonymity that has reaped outsized CPMs on Yahoo! remnant inventory on DMX. Arbhouses may be wounded by Yahoo!’s shifts, but they will slither on.

(Disclaimer: The publisher of Adotas, Robert Regular, is an executive of Kitara Media.)


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