Extracting Value From Inventory by Any Other Name

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rose_smallADOTAS – There has been a lot of talk lately about demand-side platforms (DSPs), exchanges, networks and their ilk, which seems like good discourse for an industry finding its way among so many choices in the complex and highly fragmented display advertising landscape.

But as we navigate these uncharted waters, it’s important to evaluate each additional service layer on its own merits, and with an understanding that each are just different ways to more intelligently access inventory.

Portals, exchanges, networks, etc. are essentially “audience aggregators” — single sources of large pools of inventory where buyers can come to find their audience. While there are distinctions to be made and nuances to be understood between them — and each holds a common goal to help marketers reach their audience more efficiently — getting caught up in over-labeling only causes confusion and doesn’t help anyone, buyers or providers.

When you distill it all down, what buyers want — and a crop of new vendors exists to facilitate — is to maximize their media spend and more efficiently access their audiences. And audiences are found among an endless sea of inventory to which everyone now has access.

By deploying the most effective combination of audience targeting data, delivery technology and actionable insight, media buyers can extract value from this inventory regardless of what it is called. But to do so requires finding the right mix of partners and technologies, something that can only be done by first understanding the basic differences between DSPs, exchanges and networks.

DSPs came about because companies without experience in aggregating audiences and mining into the data wanted to find a way to do just that. But just in the way buying the prettiest, coolest new hammer at Home Depot doesn’t make you a master carpenter, working with a DSP may not add any more value than the ad targeting, serving and reporting capabilities major display networks have provided for the past 12 years.

Ultimately, buyers need to find as large a swath of their target audience as quickly, easily and cost-effectively as they can. “Networks” do that by aggregating audience, providing mining/targeting capabilities and providing it at below-wholesale prices. “Exchanges” and “DSPs” do this codependently as the former aggregates the audience at cheap rates and the latter provides the mining/targeting necessary to extract the value from that inventory.

But there is a cost for DSPs to do so, which offsets the original lower price — meaning their targeting needs to work well enough to justify the expense. In addition, DSPs must account for ad-serving fees and third-party data, whereas networks have it baked into one price for everything.

Also not to be overlooked is the value proposition to publishers, without whose hard-earned audiences none of this scalable targeting would be possible. If publishers are commoditized out of the equation they are not likely to continue making inventory available via networks and exchanges.

Fortunately, technology has improved the ability to pay publishers based on the true value of each impression and they should continue to derive relative value from networks and exchanges.

Fundamentally, buyers need to know what percentage of their spend is actually going toward their campaign appearing on media, versus the costs associated with facilitating the buy; and they want to know the ROI for that spend based on whatever it is they are trying to accomplish (e.g. leads, sales, awareness, etc.).

By understanding the role each provider plays in the new environment, how much of the pie they’re getting and the results they are providing for that slice, buyers are in a much better position to justify the additional costs.

All of this speaks more to a market that is becoming more efficient, but in the meantime presents a wide range of methods and an impossible number of vendors to be aware of, let alone meet with or employ. The key question to ask in relation to identifying the best combination of partners is whether the additional layers of effort and cost being taken away from actual media placement are actually paying off for your business?

When making a decision to go with one of these new “platforms,” buyers may actually be complicating the situation, having less transparency than before, and possibly getting less actual ad placement, presumably all for the honor of having worse ROI.

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