Disintermediating Ad Exchanges, Publisher Ad Auctions

On January 27th, Brad Berens wrote in iMediaConnection about Right Media Exchange’s new Right Media Direct in his article, Right Media Direct Ad Exchange Launches.  


“While the larger Right Media Exchange boasts 50 ad networks, Right Media Direct has nine — Accelerator, Active Response Group (ARG), Adtegrity, Banner Connect, CPX Interactive, Directa Network, Oridian, Remix Media and Rydium — that compete for a publisher’s inventory in a real time auction” – Brad Beren, iMediaConnection


The short-version of this is that Right Media is empowering advertisers with the ability to buy all of a publisher’s inventory that is available from all of the participating networks in Right Media Direct as opposed to just the inventory available through one network, as with Right Media’s traditional auction-based system.  This becomes a lot more like a direct-selling model for publishers and advertisers except for there being two intermediary players, the networks who take their cut and then Right Media who takes their 7.5% piece.


So why don’t publishers bypass the networks and just dump their inventory into Right Media directly?  Well a lot of them do.  But what about publisher’s whose inventory is landing there through a network, will they ever know about it?  Probably not.  At least not for a while.  The inventory that they give to the networks that the networks will give to the auction will be chopped up so badly that the pubs will see such small dollars in return that they probably won’t even look into it.


But it doesn’t have to be that way.  And there could be more revenue there to be had.


“Greg Stuart, chief executive of the Interactive Advertising Bureau, said he could not comment directly on Right Media Exchange, but said the notion of an online ad exchange is not new.” – C|Net’s Right Media Launches Online Ad Auction.  But there are some inherent differences here.


Right Media is a mediated exchange between publishers and advertisers.  Forget about the networks but the publishers that are participating directly are of greater interest.  Personally, I think that the major publishers whose inventory that is landing on Right Media will become aware of the two-player intermediaries and will cut the networks out and go to Right Media directly.  Eventually.  Auction-buying is getting more popular and while networks is a great why to dump excess inventory, advertisers are also looking at auctions now too as better inventory is starting to show up there. 


Auction-revenue represents greater potential to publishers if they go direct.  Obvious-man.  But then this is not just an auction system.  Right Media is putting the buyer and seller together.  Or are they?  Buyer and seller never meet.  Right Media is in the middle.  So I guess there is a final step missing here.  Buyer and seller come to RightMedia and conduct a transaction.  Only those publishers that use Right Media will be available to advertisers that come to Right Media.


What if you eliminate the middle man.  How do you make it so that any publisher can reach any advertiser and vice versa? 


What if you could do it on any web site directly?  What if you could log in to a publisher’s site and participate in an auction and buy their inventory that way.  Set a max, your budget, your ad specs and let the auction run.  The publisher could input their available inventory and whatever they don’t sell directly would run through their auction-tool. 


What am I getting at?  Publisher-direct auctions.


Obviously some third-party audit would need to come into play here to verify the validity of the tool (think I/Pro or Neilsen), but how cool would that be.  Forget the auction network model which is limited by those sites or networks of sites that participate.


Yahoo!, which has a minority stake in Right Media has its auction-based search advertising model on its search engine.  Sponsored Search is an auction-based pricing model.  You can go in and do the same thing with search as you can do with Right Media – buy search on an auction system.  But you can only buy on Yahoo!.  You can only by on Google through Adwords.  Same with MSN through AdCenter.  And so on.


In the past I have talked about LookSmart’s AdCenter which will allow a publisher to take on the search CPC sale directly, so that they can step out from under a network.  This allows for the capability to sell direct to advertiser with an auction system.  Advertisers can go to ASK.com directly and buy contextual search without having to go through a network.  Imagine being able to do the same with The Wall Street Journal, WebMD or C|Net.  Go and login to an auction tool, set you min/max, your budget and keywords and let it run. 


So there is an example of a publisher auction selling tool for search.


LookSmart has it for search.  I also think Quigo does too.  You would have to check it out because their Web site does not give much information.


Back to banner advertising.  Challenge to the industry: Offer publishers an auction tool to sell their own remnant space.  Maybe LookSmart’s tool could be tweaked to do this.  Maybe one of the ad servers can be enhanced to do this.  Maybe they need to buy an auction tool and integrate it to bring this capability to publishers.  But it would seem to me that if publishers could wrap this in, advertisers would jump all over it.  Eliminate the middle men and publishers can capture more revenue, undercut the current cost models and advertisers can take control over exactly where their ads are running. 


Your thoughts?


Reactionary with Insight. 

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Search Advertising with Publishers, Time to Oust Google?

What is it about Google?  Why do so many Publishers look at the contextual search space and throw up their hands and say, “here, you do it.”  Why is that market so entirely dominated by the Goliath?  Okay, so maybe there are about 10, 11 maybe 12 players in the space – networks if you will like Kanoodle or Go.com – who provide contextual advertising for publishers.  But why haven’t the publishers bothered to sell the search advertising on their own?  How much money is thrown over the fence to the networks?  How much money is lining Google’s pockets. 


Google has dis-intermediated the space.  They control the advertiser and the publisher.  Unique position.  The publishers are dependent upon them for both the traffic and the ad revenue.  But now Google is developing content and channels which means it will start to compete with its AdSense partners.  Will the publishers be prepared?  Will they step up and start to examine the concept of selling their own search advertising?  Can they even do that?  Technically? 


If they have the internal sales staff selling display advertising they have the capability to sell the search advertising, but what about the infrastructure to deliver the contextual search advertising?  What about Advertisers?  Would they be willing to buy from a decentralized market?


Let’s look at the display advertising space for a minute.  In 1996 I worked with a small group of people to kick off Zacks.com.  It was one of the first advertising-supported web sites and the fastest growing financial web site on the Web.  We quickly grew our network for co-branded web inventory and sold advertising like mad.  We had a model and scaled it.  But that was just it.  We were leveraging content with other publishers (BIG Publishers like Dow Jones and CNN and AOL) to create co-branded pages that we owned and sold advertising on.  We were creating more and more inventory and continued to sell out.  But our partners were not creating scalable models.  They had content but had not figured out the advertising model yet.  They were turning to networks instead.  Networks – we’re talking the early days like DoubleClick and 24/7 (actually it was Petry and Katz back then and ClickNow! and they were still all separate).  There were some more but who remembers anymore which were the first ones (that will generate some comments!). 


Anyway big publishers were throwing their inventory over to these early networks while they got their acts together.  Zacks became the reseller for some of these sites back then as well.  And even today they continue to act as a reseller with their ad network of financial sites.


So the progression is clear.  Display advertising was born.  Early adopters began to sell advertising and for those who were slower to get on board, there were the networks.  So what about search?  Now of course, publishers sell their own premium inventory and give the remnant space to the networks.  And of course some networks even get some not-so-remnant space.


For search there are only networks.  In fact, for a long time there was just Google.  Now there are more players but Google still has the massive piece of the pie.  And what is their share of the revenue when you participate in AdSense?  More than the other networks –  sometimes a lot more.  But still, they also push more ads through at higher rates so it can net out. 


Contextual search revenue has been like free money for publishers.  But there is money being left on the table.  And the amounts may be significant.  Technology exists for these publishers to be selling and managing their own search advertising.  As promised, I try to find technologies that offer compelling opportunities in the space.  LookSmart is one of them.  Their AdCenter is a private-label search advertising manager for publishers.  It is tied to the LookSmart network so you don’t have to completely sell your own inventory, they will backfill what you don’t sell. 


AdCenter is a search ad server for publishers.  It enables a web site to sell its own contextual search and retain a much higher margin while still allowing for the use of networks for unsold inventory portions.  Quigo also claims to private label its solution as well but I haven’t verified that.


So this might just well be the next generation.  If publishers can direct-sell search to advertisers and retain a greater share of revenue, they can also under-cut the rates of a Google and make it more compelling to advertisers.  Large publishers can really make a go at this while the niche sites could still make a solid run at it.  Let me know your thoughts.


Reactionary with Insight.

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