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Ad Exchange Faces Uphill Climb

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NEW YORK The race to establish a viable, stock market-like selling venue for online advertising is heating up, as two smaller players have landed commitments from several well-known Web publishers to sell ad inventory via their fledgling exchange products.

ContextWeb, a network in the vein of Google AdSense, plans to announce this week that it signed 94 new sites in July and August to use its still-in-beta exchange ADSDAQ. New clients include SI.com from Time Inc.'s Sports Illustrated, AEtv.com from cable-network A&E and Local.com, bringing ADSDAQ's total partners to more than 1,000.

Meanwhile, the startup TRAFFIQ, after testing for several months, opened to all publishers last week. It has deals with 350 sites, among them Wenner Media's Rollingstone.com, Gemstar-TV Guide's TVGuide.com and Tribune Co.'s LATimes.com.

Digital buyers believe landing big-name publishers with significant inventory is a must for these exchanges to get anywhere. "It's not an exchange if there isn't traffic," said Allen Stern, media director at San Francisco-based Agency.com.

TRAFFIQ and ADSDAQ face competition from some of the biggest players in digital media, including Yahoo, Google and Microsoft, all pushing the exchange concept. Exchanges like Yahoo's Right Media are typically used for low-cost-tonnage buys from direct-response advertisers. But both ContextWeb and TRAFFIQ argue they are going after brand dollars.

Jay Sears, ContextWeb senior vp, strategic products and business development, said ADSDAQ's unique content-targeting technology should appeal to brands seeking placement control, while its manual pricing option will be attractive to publishers.

"Floor pricing plus content make them different," said Harry Case, managing partner, director media analytics and technology at MindShare Interaction. "It allows the publisher to shop around."

According to TRAFFIQ CEO Mark Kahn, his product's point of distinction is that it is "hypertransparent," as it allows publishers to cherry pick specific bundles of ad inventory with set start and end dates.

Stern wondered whether such a model may be too transparent, leading to higher pricing. "At some point, you'll pay the extra 50 cents to negotiate on your own and get what you want," he said.

Other buyers say the exchanges have yet to gain any real traction, and spending has been limited mostly to test buys.

"I think there is excitement," said Roger Barnette, president of SearchIgnite, which provides technology for search advertising and other auction-based online media. "But what you are seeing in the market is that nobody has figured out the exact model."

Alan Pearlstein, founder of Flying Point Media, said exchanges eventually will have their place, but he doubts that brands will ever take to them in a meaningful way.

"Every day that passes, brand guys want to do unique things, not commoditized things," he said.