The Crowded Buy Side

There’s been a lot of buzz about Terry Kawaja’s keynote at the recent IAB NE event. AdExchanger has posted the presentation and the video, “A few good DSPs” in case you’ve missed it.

The most interesting slide in that deck is the ecosystem map that Terry has worked out. We already knew how bad it is, of course. There are a lot of players in the marketplace. It’s a complex value chain where margins will be inevitably get squeezed. Too many players going for the same pie. Etc.

What’s striking in this map, however, is the imbalance in the number of companies being started on the advertiser side versus publisher side.

So why is this? Why is it that most ad technology companies are being started on the buy side? Is it because the greatest value to be created for advertisers resides in how media is bought and sold, and how precise the targeting is? Surely all these companies can’t all believe that given any 300×250 or 728×90 the client throws at them, they can make sense of it and create value for the brand, simply by adding targeting options and making inventory cheaper to buy?

The main reason is very simple. You can change the actual terms and start talking about DSPs, SSPs and whatnot, but at the core of all this is still good old ad serving. And when it comes to ad serving, the barrier to entry is much, much higher to work with publishers. A provider of buy-side technology can approach any client or agency, ask for a small budget to try out their “buying platform” (whether or not it even exists), and they can make it successful on a small scale with relative ease. The agency can include this new placement as an additional line item in an already long media plan.

If something goes down, it’s really not a big deal. In the case of RTB you simply won’t serve and no one will incur any cost. In the case of direct third-party ad delivery, you can make appropriate arrangements with publishers to take you out of rotation.  Failing is really not that bad. The big guys such as Yahoo! certify you and make you sign SLA agreements but for the most part, it’s not a problem.

Compare this to working with publishers. Even taking into consideration how bad the legacy platforms they run are, convincing a publisher to change first-party ad serving technology is incredibly difficult.  It’s mission-critical stuff. There are a lot of people to train.  You simply cannot go down. If you do, money is being lost, literally. On the technology side there is a huge complexity of pacing and scheduling campaigns given their delivery objectives. As a publisher, you need to deliver on your commitment of volume. Data aggregation is also crucial and is very complex to manage on a large scale (see this post by Mike on Ads for more on this).

On the upside, despite the complexity, working directly with publishers really allows to create value for advertisers. It brings you closer to formats and site layouts, user profiles and data. It brings you closer to participating in the creation of new ad products that advertisers and agencies actually buy. It allows you experiment with them and showcase your value.

With AdGear we took the approach of starting with first-party ad technology, spending the time it took to work out the hard stuff. Fortunately, in this new RTB world first-party technology is also a huge asset for advertisers and agencies as well, since you essentially end up scheduling and pacing campaigns over a huge pool of inventory (albeit with more targeting and filtering).

No matter the number of players in that ecosystem map, chances are that at the end of the ad serving chain, it’s still the good old Atlas, DFP or OAS making the scheduling decisions and stopping delivery once the volume objective has been accomplished.  These legacy platforms are still the backbone of what we consider to be the new value chain.  The good news it that there is an increasing number of companies that are taking a stab at first party ad tech, too.  And that is a good thing for the quality of advertising in the medium.