Ad Exchange 2020: What’s on the Radar?

Although the traditional ad exchange model is designed to bring the utmost benefits to each party, there are still pitfalls and gaps to be resolved.

Digital marketing is propelling all but very few industries today. It pertains to both ecommerce and offline businesses. Digital marketing comprises numerous elements and online advertising is a cornerstone. There are more than 4.5 billion users in the world today which makes it possible for almost any company to find its target audience there. Naturally, demand creates supply, hence, the number of publishers is growing exponentially.

Advertisers are eager to reach out to their prospects online, and publishers use this opportunity to generate ample revenue streams. An ad exchange is a place where they come together to achieve this goal. Although the traditional ad exchange model is designed to bring the utmost benefits to each party, there are still pitfalls and gaps to be resolved.

So what are they? What are the trends for an ad exchange? Is there any way to avoid the already mentioned pitfalls, and what should an ideal ad exchange look like in 2020? This article will supply answers to these questions.

Supply-Side and Demand-Side Platforms’ Posture

Supply-side platforms (SSP) and demand-side platforms (DSP) aren’t newcomers to the world of programmatic. Both possess capabilities to help publishers and advertisers perform online advertising automatically and accordingly. However, not everything is going swimmingly here. Today, the global economy faces a crisis that affects businesses around the world and across all industries. Thereby, a lot of companies have abruptly ceased their advertising campaigns. Such a turn of events has cut down a bunch of DSPs, including Sizmek, IgnitionOne, Eyeview, and Audience Science. Eventually, other tech vendors are puzzled by having to refine their own financial security to avoid the same scenario, and supply chains’ transparency is also on the agenda. Therewith, COVID-19 is just an extra challenge to withstanding fraud schemes like counterfeit inventory delivery via spoofed domains.

Back to the SSP, it’s also fizzing with its own issues. This side is divided into two basic groups which are “walled gardens” (a.k.a. GAFA) and regular players. Possession of jillions of first-party data by GAFA companies gives them monopoly status. With such a market grip, these closed ecosystems are acting in an opaque manner, as they don’t provide detailed reports on costs for their services to advertisers. Other providers, vulnerable to the upcoming cookie-less environment, are thinking of alternatives. For the time being, the main idea is to create an expansive SSP network where advertisers will be able to find relevant audiences with the help of hashed emails in there.

As to the publishers, one of their scourges is bid shading, which is significantly cutting their potential ad revenue down. As Google has switched to the first-price auction model, some tech vendors are offering advertisers a price-reduction mechanism. Guided by historical trade data, they calculate a minimum bid rate necessary to close the deal and charge a fee for that. As a result, publishers suffer losses. Such a situation pushes them to look for a new trading model.

Workarounds

As the situation in the ad tech industry is leading insiders to revise workflow concepts, the community is therefore discussing possible solutions. Transparency is a major principle of the concept. And for now, it is partially compromised, since most SSPs are veiling their pricing policy on ad impressions. In this regard, advertisers and publishers should work on expanding their one-on-one connections. By omitting SSPs and partnering directly with each other, market players can take the bull by the horns. 

Advertisers want more insights, data, transparency, and fewer middlemen that always mean extra fees, while publishers are looking for ways to increase the guaranteed budget via programmatic pipes. They should shift to more programmatic guarantees against the open marketplace. But brands can use public ad exchanges to look out for a suitable publisher and then work on establishing a direct partnership.  

Although there are some great initiatives released such as ads.txt-series protocols and seller.json files, agencies and brands need to be more involved in the process of choosing a partner and cooperate with an ad exchange which is sticking to the transparent approach within online advertising. They should pay more attention when working on whitelists and blacklists of domains or apps to cooperate with. For this purpose, most DSPs are partnering with unbiased fraud verification vendors. Such a service helps to detect potential fraudsters, check out the viewability of the source, and see the content category that is crucial for brand safety. 

Running advertising in an open exchange environment will always contain a risk factor for advertisers, so all that can be done here is reducing it but not eliminating it. It’s getting knotty to navigate throughout the ad market as the number of mediums, applications, and vendors is swelling exponentially. On their way to a better and safer operating model, advertisers and publishers may eventually cast anchor in a private exchange domain. 

Advertisers here can get more bang for their marketing buck. They can negotiate all the operating costs with shortlisted PMP supply-side agents/representatives and prevent possible “ghost” fees as may be the case in public marketplaces. Direct communication allows one to control financial settlements more accurately, and thus, reach more viewers for the same price. As to publishers, PMP also zests their business activity. They can get demand facilitation as brands are considering PMP as a new fashion for their business and looking for a one-stop-shop to get their ad messages in front of global CTV audiences.

Takeaways

Just like any other industry, ad tech is facing the impact of the pandemic crisis so marketers and publishers are adjusting to new realities. Choosing a new model of interaction between ad tech players isn’t just a matter of financial optimization for both sides. It’s a matter of their business survival. A trusted partnership based on a transparent supply chain is a foundation that market players are more actively trying to implement today. For this reason, we can expect they will focus on direct partnerships and one-on-one ad inventory acquisitions. Such a migration of business values and approaches is signaling an emerging model of private marketplaces and its expansion in the nearest future.

This content was originally published on NEXT|TV