DSPs Stir Up Drama

MTV Networks has yet to sell inventory via a “demand-side” platform. Neither has AOL, CBS Interactive, NYTimes.com or Weather.com. Meanwhile, for now Turner and Dow Jones are officially saying no thanks to DSPs, i.e., the divisions or stand-alone businesses run by agency holding companies designed to purchase online ad inventory using technology and data—rather than directly.

DSPs, such as VivaKi (Publicis) and Cadreon (IPG), were a hot topic last week at the Interactive Advertising Bureau annual confab in Carlsbad, Calif., with publisher sentiments ranging from wariness to downright paranoia. And conversations with publishers revealed a sentiment that premium sites should opt out of selling this way. Said Brian Quinn, vp/gm, ad sales for the Wall Street Journal Digital Network: “If people want to buy from us, we want them to call us.”

On the flip side, many agency execs doubt that publishers can hold such a tough stance as online buying becomes more automated.

Publishers are mainly concerned with pricing and data. Sellers fear that advertisers may pay a decent CPM to cherry-pick a specific target on their sites but may not buy much else, resulting in smaller purchases overall.

“We love technology and would love to use more,” said Huffington Post CEO Eric Hippeau. “But what’s happening here [with automated selling] is absolutely the opposite of what is supposed to happen. CPMs have dropped.”

That drop is inevitable with the abundance of Web avails, whether sites fight DSPs or not argued David Moore, chairman of 24/7 Real Media. “The ability to maintain pricing for these premium properties is going to continue to decline,” he said. “They are asking for $20, $30 and $40 CPMs, which are four- and five-times higher than [what DSPs can yield]. There are no must-buys anymore.”

The other big worry is that agencies will use DSPs to execute a buy, collect a publisher’s audience data and never come back. “That would be like buying a page of a magazine and then getting rights to the magazine’s subscription list forever,” said Walker Jacobs, svp of Turner Sports and Entertainment Digital. Jacobs said that DSPs require publishers to give up far too much leverage. “They want an open window into our cookies, our data. There are so many fundamental problems with that.”

For one, he explained, what do you tell the advertiser who paid for a premium sponsorship, when a competitor comes on via a DSP and skims off a site’s best audience for a much lower price? “My best advertiser ends up getting a diminished product,” said Jacobs.

Not every ad seller is as concerned. “We are approaching this as complementary to our direct sales,” said Peter Naylor, svp of digital media sales for NBCU. “If somebody wants to sponsor the iVillage food section, and then buy foodies across the rest of the site, that makes sense.”

But to date, he said the dollars being spent have been purposefully modest, and NBCU has been deliberately cautious. “We’re taking this campaign by campaign.”

Some believe that much of the DSP fear is a byproduct of the recession. “There are a lot of misconceptions over DSPs,” said Michael Barrett, CEO of the yield optimization firm AdMeld.
Barrett, who previously ran sales at AOL and Fox Interactive Media, said that DSPs were primarily aimed at improving efficiency, not appropriating data, which could happen during any ad buy. He acknowledges that some sites could see order sizes shrink if DSPs isolate the most desirable visitors. “But the question then becomes, ‘What are you going to sell them—stuff they don’t want?’”

Bryan Wiener, CEO of 360i, asked why some publishers use ad exchanges and networks but react “emotionally” about DSPs. “At least the ads that are going to appear from a DSP will be premium ads,” he said.

Indeed, whether they are using ad networks, exchanges or DSPs, publishers are giving up control when they don’t sell directly, argues Russ Fradin, CEO of Adify, who during a lively keynote at the IAB event urged publishers to either sell their entire inventory directly or outsource sales entirely. Otherwise, “you’re addicted to a hybrid strategy that is ruining your brand,” he said.

Still, Wiener and other ad execs doubt that publishers will be able to fight off the DSP trend for one simple reason. “As long as the agency controls the budget, they have the most influence over how the marketplace will evolve,” said Alan Schanzer, chief strategy officer at Undertone Networks.

Particularly when so many agencies are pushing hard to eliminate complexity from the buying market. “Any publisher that takes inventory and makes it less liquid—they’ve got to think very carefully about that,” said Quentin George, managing partner of Cadreon, IPG’s DSP.

George said that Cadreon has already worked with 27 different ad networks. But more than 50 percent of its business has been done directly with publishers.

Yet many publishers doubt just how much inventory is flowing through DSPs beyond small tests; some contend that the entire trend is overhyped, and not something they need to worry about right now. Said one prominent online ad seller. “These businesses don’t have a sliver of the market. At best they aspire to be a sliver in 36 months.”

Some have speculated that publishers may even form some sort of organized alliance—though others dismissed whether that could be possible, given how competitive the business is.

Said another seller: “That’s just cocktail conversation right now.”