What’s Next for Private Exchanges?

Written on
Jun 11, 2014 
Prasanta Behera  |

ADOTAS – Over the past couple of years, we have seen an eruption of discussion surrounding private exchanges. Many big publishers are now moving to the programmatic model via the private exchange path. For example, earlier this year, Google and Time Inc. introduced the Time Inc. Global Exchange, an ad exchange that gives marketers programmatic access to Time Inc.’s digital footprint. The industry is moving forward, and it is important that we take the time now to think ahead to what additional capabilities we’ll need in order to ensure that open exchanges and private exchanges can co-exist and thrive.

In its first phase, the private exchange was a direct sell relationship between the supplier and the buyer. AOL, Yahoo or any big inventory providers were building direct relationships with advertisers. To do this, an organization needed both a direct sales and business development team. Although this worked well for large publishers, for many mid-size to smaller publishers, this was a challenging undertaking. At the same time, the open exchange providers built technology platforms to buy and sell via a programmatic model to reduce friction and bring better liquidity to the overall marketplace. The open marketplace provided a platform for any buyer and seller to complete a transaction at an impression level without a prior agreement.

In phase 2, exchange platform providers created private exchanges so that inventory providers could sell to a select list of advertisers to enhance transparency and control. Today, if publishers are unable to sell the entire inventory via the private exchange, it can be sold in the open market without having to worry about the fill rate. This can also be done anonymously. This is beneficial on several fronts:

  • a) Brand publishers who do not want to participate in an open exchange can build private exchanges and maintain the control of who buys their inventory;
  • b) As a buyer, you can participate in the private exchange without any impression volume commitment (unlike direct relationship), and ;
  • c) There is more liquidity to the marketplace.

Although the private exchange has helped, it still requires a human to build the relationships. Most buyers receive an email or call from the exchange talking about specific inventory providers. This has been sufficient so far, but that won’t be the case for long. Currently very little information about the private exchange inventory is available online (in the exchange console) and basic information such as creative sizes, floor price and daily impression volume vary from provider to provider.

As we look ahead to the next phase where private exchanges and open exchanges harmoniously co-exist, what needs to be done to make the private exchange more scalable and reduce the integration friction? This is by no means an exhaustive list, but here are a few ideas:

  • Programmatic Interface: Exchanges should provide programmatic interface (protocol) to discover private exchanges and establish relationships. The manual approach is a good start, but it is essentially going backwards. The buyers and sellers should be able to discover each other through an exchange specific repository, which needs to be exposed via programmatic APIs. Currently information about the private exchanges inventory is static. Any additional capability provided by the private exchanges requires a manual information exchange.  A programmatic model can help the discovery of new capabilities, and buyers can act much faster. The IAB could take a lead on defining the protocol to establish an industry standard.
  • Richer Metadata: Both the buyer and seller need to provide richer information on the inventory and buying patterns.  The private exchange should provide information on inventory categories, brand safety and viewability metrics (certified by a vendor) and more details about the inventory. A well-defined common inventory of attributes and metrics needs to be created.
  • Fine-grained Customization:  A buyer may only be interested in a piece of 300×250 inventory in the Food category, however in the current model, this is difficult to set it up; the sellers ends up in creating multiple exchanges and this proliferation makes it hard to manage.   What is needed is for the seller to create one private exchange and and customize it based on the buyer’s interest.  What is needed here is better management tools for both buyers and sellers to manage within the private exchange domain.

As the number of private exchanges explodes, the need to establish a common vocabulary is increasingly important. At the same time, the industry needs a well defined protocol to reduce the friction points. Whether it’s the IAB who takes the lead, or an industry consortium, the goal is to ignite a discussion around building a great private exchange platform that can co-exist with the open exchanges, ultimately creating a programmatic environment that is scalable, transparent and open while still delivering on the benefits of private exchanges.

Prasanta Behera is VP of Ad Products at ShareThis and leads a team of data scientists and engineers to build a highly scalable platform which leverages ShareThis social data and machine learned technologies to maximize campaign performance. He is a seasoned online advertising professional with deep experience in programmatic buy and building scalable platforms.

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