About 2 years ago we witnessed the birth/rebirth of ad exchanges and much of the press, myself included, touted them as the next big thing for online marketers looking to take control of their campaigns. The promise was that of a self-service platform which provided unparalleled access to management of your efforts, however its now two years later and they haven’t delivered on the promise and have become just another way to launch an ad network.
The ad exchange model really started back in 1996 with Flycast but Flycast was far too early. It promised a self-service platform for agencies to manage their own network buys and people took note. I tested it back then and it was a great solution, but it never saw the widespread adoption that one would have hoped for. This second act of the exchange model promised the same level of access and control on a broader scale but the simple fact was that exchanges are not that simple. They’re complex and they require training and they require just as much, if not more, work than the current model for online buy management. As a result, the exchanges have not taken the foothold that they’d hoped.
There is so much work upfront to understand and fully utilize all of the intricate details of the ad exchanges that most agency people have pushed them aside. They require the creation of relationships in the system, management of the relationships and leg work to make sure they are effective. They should be as easy as AdWords and AdSense, but unfortunately they aren’t. In many cases we’ve seen ad exchanges hire sales people to pitch the product and manage buys for agencies, which means they’re no different than a traditional ad network. I was told a long time ago that an idea which saves time is worth money, and in theory the ad exchanges do that, but the promise of the experience didn’t match the actual experience, and therefore we aren’t seeing the value.
One reason that ad exchanges missed the boat is because they’re not filled with premium inventory. I know this statement will generate some angry responses and some defensive stance from people reading this who work at an exchange, but the simple fact is that premium inventory does not make its way to an auction based model. The inventory is class 2 or class 3, and in many cases its being run from one network or exchange to another, getting passed around more than the donation basket at church. Too much of the time, when you buy the inventory on an exchange you lose control of where it may have originally come from; most advertisers, and especially brand advertisers, are uncomfortable with that level of intangibility and stay away from advertising on these platforms.
What’s interesting is that some agencies have been using the exchanges to power their own ad networks, but the development, launch and management of these programs takes time, requires lots of legwork and may not provide a strong enough ROI to be valuable to them in the long run. Just because its built by the agency doesn’t mean the media buyers will be buying it, and if they are pushed or prodded to be buying inventory on those platforms then that becomes a conflict of interest and potentially an issue that affects their ability to be objective in evaluating overall media opportunities.
The ad network and exchange space is quite cluttered and the consolidation is definitely taking place as advertisers are focusing their efforts on key partnerships, but rarely do I hear of an exchange as a valued partner. They are interchangeable and expendable in the view of most brands, and not valuable to many others.
Maybe stage 3 of the ad exchange will be more like Google AdWords; a truly self service, easy to use platform where marketers can test out messaging and manage their buys in an effective manner. Either that or the pendulum is going to shift back to fully integrated, fully customized solutions that require the depth of relationship to manage. I predict the latter as this is still a relationship business and no matter what technology comes to the forefront, marketing is about people.
Don’t you agree?