Soprano's Thekanady says there is a revolution coming in online customer acquisition

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London 26 June 2008

Ad Exchanges, a new medium that could be worth up to £500 million by the end 2010, will revolutionise the way we buy advertising and rival Google's Ad words for accountability, real time optimisation and most importantly ROI, explains Soprano’s Media Consultant John Thekanady.

In these challenging recessionary times it’s even more necessary to justify marketing spends. It’s been apparent for some years now that online marketing has triumphed as being the most accountable, and the advertising investment in the medium has subsequently followed. Key to this has been the rise of search marketing driven by Google Ad Words where advertisers bid on relevant keyword terms which convert to the desired action within a given budget.

This auction style bidding system has proved so successful that advertisers spent almost £1.5 billion – half of all online ad spend - on keyword buying in 2008. Another efficient channel for customer acquisition comes through low cost display advertising on networks. Networks take unsold inventory from publishers, package it up and sell them onto advertisers obviously including a healthy margin for their trouble. These networks have consistently delivered & connected a wide range of advertisers to publishers and also created some efficiency and targeting capabilities.

However, a new phenomenon is about to hit the online advertising market and it threatens to take the industry by storm. Ad exchanges are a relatively new development and they are about to bring to the display ad market what the paid search market has enjoyed for some time: real-time optimisation and transparency.

A new solution that takes its roots from the Stockmarket has emerged which automates the process of buying & selling media and could lead to the publisher receiving more for their inventory and the advertiser paying less for it. The publisher or Ad Networks set the price that they are willing to accept for their inventory and the advertiser or media agency selects the price they are willing to pay for it. All of this takes place on an Advertising Exchange platform which charges a flat fee to both parties for the use of its technology.

As you would expect, current players in the market include the familiar names who have deep enough pockets to be able to develop these complex load bearing platforms. Yahoo’s Ad Exchange is called Right Media, Microsoft has bought a platform called AdeCN and Google have launched Google Advertising Exchanges.

Given the current economic climate it is easy to see why Ad Exchanges could have a revolutionary effect on the online advertising business. Advertisers in theory should benefit from more liquidity in the market by finding it easier to reach their audiences. Publishers and networks should be able to keep a larger proportion of their revenues.

The situation is slightly more precarious for Ad Networks however in the long run as they will need to add more value over and above straightforward aggregation of unsold inventory since the Ad exchange should assume this role. Networks that are backed by exchanges may have an advantage since publishers will no longer need to do deals with multiple networks to shift their unsold inventory if they can use one network that can represent them on the exchange.

For advertisers and media agencies, managing display campaigns will have many similarities to managing search campaigns. They will be able to work out exactly what they are will to pay for specific sites and placements in order to hit their target ROI and optimise their campaigns accordingly, much like paid search.

The future looks brighter, more accountable & profitable for both publisher and advertiser due to the impending arrival of Ad exchanges in the UK. Maybe you should at least be ‘on the curve’ if you can’t be ahead of it and find out how Ad Exchanges could transform your business?

http://www.sopranodigital.com