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.

Part 1: Exchanges vs. Ad Networks: The agency perspective

A big question for me and the industry is whether exchanges are better than ad networks. What do you think? Let me start by comparing the two from the advertiser perspective. I am focusing only on brand advertisers, and ad networks that sell high CPM brand advertising on good quality, brand-safe sites.
When I first started talking to agencies, I was unsure whether they truly preferred buying from ad networks or exchanges. This is what I discovered: ad agencies prefer buying from exchanges. This is what they told me:

1.     “Chasing network sales reps is frustrating.”
When buying from an ad network, an agency buyer must call his sales rep and ask her for a proposal. The sales rep is usually out of the office at meetings and asks for a day or two to develop the proposal. After reaching 3-5 ad network sales reps, the agency buyer has to sit and twiddle his thumbs. Finally, he gets two proposals, but then has to chase the third ad network for the last proposal. This is frustrating. Meanwhile, the agency’s client is waiting for the media plan so that they can get internal approvals for it.

2.     “Comparing proposals is difficult.”
When he gets the proposals he has to compare them. But the proposals are submitted in different forms and list different sites.  You can’t compare apples to apples.  To compare prices and decide which proposal(s) to go with takes time and effort. Creating a media plan that looks good means one format for all the inventory. And still, the client is waiting for a media plan.

3.     “Ad networks don’t offer the transparency that my brand advertisers require today.”
Ad networks still list good sites — and lots of other sites. They usually don’t break out impressions per site. This means that agencies cannot be sure where their ads will run. True, they can use AdXpose or DoubleVerify to check what sites they are on when the campaign is live. But they prefer knowing the options up front and choosing the sites themselves.

4.     “With exchanges, we get more control over creating the plan.”
Many of my team thought that agencies would prefer ad network sales reps to do all the work, rather than have to go online, find sites and look at prices and availability themselves. They asked why an agency would bother doing the work when an ad network sales rep is ready and willing?

Curiously, it turns out that agencies want control. They like to have control at their fingertips. They like to build up their own plan piece by piece and feel proud of what they do. If someone else does it for them, it takes them less time but they lose control.

5.     “Ads go live faster on exchanges.”
Ad networks can often get a campaign live within a day or so of the final approval from the agency. But agencies say that clients give them final approval at the last minute, just hours before the campaign is supposed to go live —  then call again, hours later to find out if it is live and how it is doing. Exchanges have an advantage: they can go live instantly, and data comes back instantly. Networks often do not provide instant real-time ability to go live or instant data.

6.     “We want to do optimization on our own.”
In my experience, I have found that agencies prefer seeing all the data in the exchange with their own eyes, and then doing the optimization. They don’t trust that the ad network understands or cares about their campaign goals well enough to optimize well.  Some worry that the ad network may even put them on poor sites because they have committed a certain dollar spend to those sites. They are keen on seeing performance data per site, per creative, and optimizing campaigns themselves. And I think that they probably do a far better job because they care more and they have more time.

7.     “I want up to date reporting at any time.”
Most ad networks don’t have the sophisticated technology to do real time reporting. They provide reporting for yesterday and send it once per day. Agencies prefer exchanges where they can go online at any time of the day or night and see up-to-the-minute data.

Remember, I am talking about two things:

  • Agencies that buy brand advertising
  • Ad networks and exchanges that sell high-quality, brand-safe sites

I believe that if agencies can buy the same sites from an exchange that they can buy from an ad network, they prefer buying from an exchange. It’s easier, they maintain control and less can go wrong. Exchanges win. I think that from the advertiser point of view, exchanges win and high end brand networks may just die.

In my next post, I’ll discuss the publisher side of this debate.