Part 3: Ad Networks vs Premium Ad Exchanges: The Publisher Perspective

My first blog in this three part series looked at the advertiser’s view of exchanges and ad networks. Advertisers prefer exchanges. Last week’s post discussed how publishers view ad networks as compared to remnant exchanges. This blog will talk about how publishers view a new type of exchange emerging: Premium Exchanges.

Premium Exchanges
In the past, exchanges were focused on taking remnant impressions and selling them off at the best price they could get. Premium exchanges will soon appear. They are private exchanges, open only to high quality, brand safe, content driven, trusted publishers. Many of the private exchanges getting a lot of press about limiting the sites that can join – which is a good step forward.  However, these “private exchanges”, at the end of the day, are simply auctioning off remnant impressions using Real Time Bidding, just like today’s remnant exchanges.

A Premium Exchange is a private exchange that goes even further. As well as restricting sites, it changes the way inventory is sold to better match the way brand advertisers buy.  Brand advertisers want a high level of transparency and control of where and when their ads run. They are willing to pay a small premium for this. Premium exchanges both bring high quality brand safe sites to advertisers and also sell that inventory on a guaranteed basis as required for a brand media plan.

The Publisher Perspective
As I said in the last post, publishers want:

  • High fill rates
  • High percentage of good CPM campaigns
  • Good ad quality
  • No competition with the publisher’s sales reps

Let’s examine how Premium Exchanges stack up to ad networks.

1. Fill Rates
Ad networks rely on sales reps to meet buyers in person or on the phone. Ad exchanges, however, rely on technology, not sales reps, to “meet” advertisers. That usually means that the exchanges will have a better fill rate. However, Premium Exchanges limit who they target: brand advertisers. Ad Networks also sell to performance advertisers. So the ad networks will have better fill rate – though at a lower CPM (see below).
Networks win. (Premium Exchanges 0, Networks 1)

2. Percentage of high CPM campaigns
Ad networks find some high quality advertisers that will pay the publisher good CPMs but sell the rest of the volume to Performance Advertisers that pay low CPMs.  Premium Exchanges are different. They are built to appeal only to brand advertisers.  100% of their campaigns will be sold to brand advertisers who pay the higher price to get transparency and the controlf of when and where their ads run. So, the Premium Exchanges will have a larger percentage of high CPM campaigns (approx 100%).
Premium Exchanges win. (Exchanges 1, Networks 1)

3. Ad quality
Publishers want high quality ads to appear on their site. They love to see Coke or Ford ads on their site but hate to see diet ads. Ad networks won against remnant exchanges because remnant exchanges auction inventory to any low quality advertiser. However Premium Exchanges are designed for premium brand advertisers only. Ad quality will therefore be high.
Premium Exchanges win. (Premium Exchanges 2, Networks 1)

4. Competition with Publisher Sales Reps
Publishers hate seeing a quality advertiser buy from a remnant exchange or network because they found a lower price. Publishers dislike ad networks because of this price competition, as I said last week. Premium Exchanges however will not compete with the sales team. Premium Exchanges do sell the same guaranteed inventory that the sales reps sell. But they sell it at the same price as the sales team. So there is no competition. Infact a good Premium Exchange will allow a publisher sales rep to put his/her inventory into their easy to use, instant gratification, exchange and find more advertisers. So from a Publisher’s perspective they love the partnership of Premium Exchanges rather than price competition of ad networks.
Premium Exchange wins. (Premium Exchanges 3, Networks 1)

Overall publishers will love most things about the Premium Exchanges – except the fill rate. Yet, over time as more agencies and local advertiser see how easy it is to buy from a premium exchange, the fill rates will climb. Premium Exchanges will be a godsend to premium publishers with high quality content. However they won’t be much use to low value UGC inventory sites because they will not be allowed onto the private premium exchanges.

Ad networks may be seriously damaged or killed by the Premium Exchanges. The remnant exchanges took a lot of their high volume low priced business. Now, Premium Exchanges will take some of their high priced, low volume business. They will get squeezed on both ends and will have to fight for survival.