ChasNote

In his Sept 6 column at iMediaConnection, Brad Berens interviewed William Urschel of AdECN, Michael Walrath of Right Media, and yours truly of Federated Media on the topic of ad exchanges. For Urschel, they solve the biggest problem in online advertising today, liquidity:

“A real-time trading exchange solves that liquidity problem. Imagine a world with lots of stock brokers, but no stock exchange. If you went to your stockbroker and asked to buy 1,000 shares of Microsoft, he would look to see if any of his own clients wanted to sell 1,000 shares of Microsoft. If not, he would call his buddy at another brokerage, who, if he didn’t have a selling client, would pass the deal in turn to his buddy, and so on and on, until someone came up with those 1,000 shares. The problem is that: a) this is slow, and b) every stockbroker in the daisy chain takes a commission, increasing the price for the buyer and decreasing the price for the seller. Would we put up with a 500 percent spread between the purchase and sales prices for a share of stock? Hell no. But we do, billions of times a day, in online advertising.”

I like the idea of an exchange or marketplace for the commodity end of the advertising spectrum — direct response campaigns or low-priced CPM campaigns that care more about price and less about placement. And there’s room for this kind of transaction at every online publication. But allowing this to be the only conversation between a publisher and a marketer limits marketing opportunities to standard, cookie-cutter programs, and leaves money on the table for publishers who might otherwise capture premium pricing for a unique marketing partnership. Here’s my contribution to the piece:

“The bulk of the online ad-buying/ad-selling discussion is still guided by a discussion of effective CPC. Because we can track it, we often forget to talk about any other value that comes with advertising a brand. And when the conversation gets stuck on CPC, advertisers stop paying a premium for innovative, integrated opportunities that entail partnership with a particular publishing brand, voice or conversation. Federated Media (FM) pulls together leading authors, community leaders and sites, and it hopes to bring marketers into those specific conversations.”