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.