The Future of Private Exchanges

This guest blog submission is from Scott Roulet, president of BBN Networks.

For an industry built to on the basis of driving efficient advertising performance, it should be no surprise that programmatic buying represents nearly half the digital display advertising spend. The acceleration of buying and selling automation has exceeded even the most aggressive forecasts at more than $10 billion in 2014 in the US, according to a recent survey by eMarketer. However, the long term viability of the growth of open-auction exchanges has been recently put into question by both buy-side and sell-side market influencers. Major media buying organizations including WPP’s GroupM have announced plans to abandon open exchange investment and turn to trusted media partners to form private marketplaces.

Website display advertising models have been built for volume, efficiencies and accountability. The open ad exchange paved the way to for the evolution of an interconnected ecosystem of digital media commerce that met the volume and efficiency criteria. Publishers have exposed their inventory to an expanded universe of advertisers while advertisers have uncovered unique media environments that drive value to their brands. However, that system has also enabled unintended consequences with inventory secrecy and malicious attacks that compromise the integrity of the entire market. The bot activity has plagued the industry has interfered with progress toward accountability and led to advertiser skepticism. Solve Media estimates bots accounted for 40% of the web traffic in the US last year and Incapsula reported up to 30% of the global web traffic was malicious non-human activity. Additionally, the lack of transparency and misrepresentation of inventory by some media suppliers have perpetuated suspicion. The result has been the growth of an unhealthy wedge in the supply and demand chain. But, that dynamic will shift as media companies offer walled garden inventory that can be verified and purchased within the automated buying platforms.

The walled garden private marketplace (PMP) will create a renewed partnership spirit between media buyers and sellers when they are integrated into the streamlined programmatic systems that eliminate the traditional labor intensive buying process. The PMPs are analogous to quality products on a store shelf. The advertiser demand side platform is the fastest growing store front for digital media buyers and your media must be on the shelf. The location of the shelf-space is critical for maximizing sales, therefore, media suppliers must build relationships with buyers to put their products on the “end-caps”.

The reporting analytics from the AppNexus, Rubicon and other exchanges provide publishers a window into their customers’ media buying activity. Media buyers are in the business of buying media that translates to success for the brands or clients, regardless of the success measurements. The private marketplace plugs into demand side platforms which unveil important insights about advertiser intentions as well as the actual media purchases. Those insights can foster important conversations that enhance that relationship between buyers and sellers.

The race to gain access to current and developing private exchanges is happening as marketers continue to reallocate and expand digital advertising investment. Major media buyers that historically connected to stockpiles of inventory through open exchanges are now stitching together private networks with premium media brands. The programmatic market is prime for premium publishers with unique, quality inventory. However, the current pricing models cannot currently cost justify the infrastructure implementation for publishers with limited inventory. As a result, many specialty publishers are turning to supply-side platforms (SSPs) with common domain expertise. Our company recently launched a private marketplace to ensure our member B2B publishers are represented to large-scale media buyers within this buying environment. While programmatic buying is still rare for many endemic B2B media buyers, it is an inevitable model that will quickly evolve. BBN and other SSPs are connecting the pipes for their inventory partners that will have them prepared to accommodate programmatic demand from publisher-direct advertisers.

As programmatic buying becomes the dominant engine for digital media commerce, advertisers and premium publishers will rely on private exchanges. It is important that marketers and publishers alike continue to build relationships of trust and accommodation to ensure viability through the age of advertising automation.

Scott Roulet is a digital media entrepreneur, and publishing veteran. He is a Co-Founder and President of BBN Networks, a B2B digital marketing company connecting marketers with business decision makers. For more information, please visit: http://www.theb2bnet.com

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