Understanding the Value of Ad Exchanges

As the debate over the value of ad networks—third party services that sell ads in bundles on behalf of multiple online media clients—continues, the discussion of the value of ad exchanges for Web publishers also is being explored. Ad exchanges, where online ad space is bought and sold in an open marketplace, require more publisher involvement than ad networks, but offer the advantages of transparency, buyers' bidding for available ad space and exposure to individual clients without having to prospect on a case-by-case basis. Well-known networks include adCenter, owned by Microsoft, and Right Media, owned by Yahoo. Iggy Fanlo, CEO of ad-exchange platform adBrite, offers his take on why ad exchanges are valuable to publishers. Before coming to adBrite, he served as president and chief revenue officer at Shopping.com (later acquired by eBay for more than $650 million). Prior to his technology career, Fanlo spent 15 years on Wall Street with Morgan Stanley and J.P. Morgan. INBOX: Why do you think ad exchanges will be increasingly important to publishers? IGGY FANLO: With the rapid growth of advertising exchanges and real-time bidding over the past two years, many ad networks are now purchasing their inventory using exchanges. Publishers need to understand that ad exchanges can serve the same purpose as networks while also offering full transparency into advertisers' activities and ensuring price protection [for publishers] with floor CPMs. INBOX: How do ad exchanges work? FANLO: Ad exchanges allow publishers to sell their advertising inventory using a real-time auction that identifies which advertiser is willing to pay the most for that particular impression. In just tens of milliseconds, an ad exchange identifies the type of person visiting the publisher's site, finds which advertiser placed the highest bid to reach that type of person, and delivers a relevant ad in that slot. Publishers are then provided with a treasure trove of data to identify what's working, and can partner closely with an exchange to analyze how to continue improving their approach to drive more revenue. The adBrite exchange gives publishers full control into how ads are delivered, including the ability to approve/reject specific advertisers to avoid channel conflict and preserve brand integrity. Publishers receive access to real-time data such as click-through rates across their properties, ensuring an optimal user experience through highly relevant ads, while monetizing their inventory to the fullest extent. INBOX: How can publishers and other media sellers capitalize on the growth of ad exchanges? FANLO: As media sellers and publishers adapt to shifting success metrics through their online properties ... advanced analytics [can] give publishers more opportunities to adapt without overhauling their yield management operations. By minimizing arbitrage, exchanges provide the clearest representation of fair market value for ad inventory, attracting advertisers to shift more dollars online and cultivating a robust network for publishers to draw from. This clear value proposition has propelled adBrite's growth; we now serve more than 1 billion ads per day across more than 120,000 publishers. Exchanges like adBrite provide click-through algorithms and other estimations to bring the largest and broadest amount of ads into consideration for any particular spot. It's very easy for publishers to join exchanges and tap into the marketplace they support, in order to start reaping these benefits across their properties. INBOX: What does the recent publisher-as-agency trend (Hearst buys iCrossing etc.) mean for services like yours? FANLO: Consolidation will be a fact of life for all members of the online ecosystem, and the ability of ad exchanges to determine fair market value for each participant will ensure our continued growth.

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Understanding the Value of Ad Exchanges

Jim Sturdivant

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Jim Sturdivant