DSPs and Exchanges - Future Trends 2010

8/8/2019 DSPs and Exchanges - Future Trends 2010

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Todays program is about DSPs, Exchanges, and Ad Networks, and over the

course of our two hours together were going to cover all of those topics.

But Im going to focus my opening remarks specifically on DSPs and

Exchanges, because they represent the new forces of change in the category.

Let me also say that my point of view isnt completely objective Im coming

to all of this with the perspective of a buyer.


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I love this space.

Im someone that has great respect and admiration for entrepreneurs, and this

space is filled with an amazing group of people that are unleashing a wave of

passion and creativity on the advertising industry.

At the same time, its a difficult category to get your head around as a buyer.

Theres lots of buzz, and clearly something important is happening, but

information is hard to come by.

That means its hard to make decisions about what to do.

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I think there are three big reasons for the lack of facts.

The first has to do with publishers.

This space came into being because of the imbalance of supply and demand in

online advertising.

There is just too much ad inventory available online.

There wouldnt be exchanges is publishers could sell their inventory, or even ameaningful portion of it.

Clearly its not in the best interest of publishers to make public statements

about how much inventory they are moving into the secondary market.

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The most specific data Ive seen on the subject is from Think Equitys research

piece thats now about a year and a half old.

And if you go about 20 pages deep into the report, and do the math on this

table, it suggests that 90% of all online impressions arent sold by the

publishers themselves.

BTW I said this space wouldnt exist without oversupply. Thats how it came

into being, but I dont think the future depends on it.

Now that the infrastructure for machine to machine media buying has been

built, I think it can work even when there isnt abundant supply.

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Second reason: Google

Google is now the dominant player in the market now. If not in volume, in

import.

Google has moved the industry toward RTB as a standard, and they are the

player that the entire ecosystem is looking toward for cues.

And the people in the industry will tell you that there is less hard data to be

had now that adx is so important. Not knowing what is happening volume-wise within adx is a big blind spot given its importance.

Google has made some very specific predictions about the market 5 years out,

but much less about what is happening right now.

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In a presentation on the exchange space I feel obligated to refer to two things.

The first is Adexchanger, the de facto eyes and ears of the space.

And I think John Ebbert captured the Google challenge really well in a piece

he did a couple of weeks ago, when he went through Googles earnings

statements to try to find some clues about adx and really couldnt get

anywhere.

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So if publishers and google are being tight-lipped, on the other end of the

spectrum we have the opposite problem.

The one group that does want to talk are the agencies and holding companies.

If you read their statements closely theyre probably factually true, but they

certainly give the impression that thee is lots more hands-on technology work

happening than is actually the case.

My understanding is that there is only one holding company is building theirown technology. The rest sit on top of dsps.

Which is how it should be, and nothing to be ashamed of. But the public

statements can give casual observers the sense that there is some agency

technology arms race happening, and I dont think thats the case.

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So my goal was to get some real data and insight for this presentation.

And with the tale about the blind men and the elephant in mind, I spoke to a

group of people that each have a view into the marketplace, with the hope that

I might be able to piece that together into a more comprehensive view.

So based on the homework I did, and lots of exploration over the past 18

months, let me share 4 observations with you.

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#1: This is a really big deal.

And I say that not based on speculation or aspiration, but based on the

numbers.

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Lets start by looking at the DSP marketplace by spend today.

Im not going to include the actual numbers that were shared with me, but one

of the DSPs told me how much spend is flowing through their system on a

monthly basis. So thats a fact.

Then they told me what % of the DSP market they think they represent. So

thats an assumption, albeit an informed assumption.

If you do the math, it suggest that about $850m is being spent through DSPs

on an annual basis currently

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OK, so 800m is a big number, but what does that figure represent?

If you use 8b as the figure for the total US display market, which comes from

JPM, that means that DSPs account for 10% of the total spend in the US.

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Lets look at this another way, on an impression basis.

Not limiting ourselves to DSPs, but the total availability of RTB impressions

across the key exchanges.

That number is 5b per day. Zach at Triggit told me that. I asked him if he was

sure. He said, I have the log files.

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Again, 5b is a big number, but what does it really mean?

According to Comscore, there were 417b ad impressions served in the US in

September.

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Which means that 35% of total impressions are RTB.

Which doesnt even represent the total exchange market because there are

many more impressions that are exchange traded but not RTB.

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So I said I think its a big deal.

This has all happened in about a years time.

Agencies havent yet figured out their approach.

And its not on the CMOs agenda.

Not like social or mobile, which clients ask about.

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Observation #2 its not actually that complicated.

And here I will get to the second reference that one is duty bound to make

when discussing this topic, Terence Kawajass landscape.

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When TKrefers to complexity and crowding hes talking about it from an

investment pov.

But this slide has taken on a life of its own and turns up in all kinds sales

decks, usually making the point that the space is overcrowded and overly

complex.

When it comes to what buyers need to understand in terms of exchange-traded

media its not complicated at all.

In fact, Id argue that if you are a buyer there are only 6 logos that really

matter.

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The six DSPs that are built for RTB are the only logos that matter.

They make all of the complexity go away.

Doesnt matter how many sources of inventory or sources of data there are, the

buying platforms will incorporate them.

When I say its not complicated, let me qualify that.

Its not complicated because there are too many companies and its notcomplicated because its unclear what to do. Its complicated for reasons that

have to do with culture and operations and skillsets, which brings me to the

next point.

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Again, I come to this from the buy side, thats my bias.

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Technology is the instigator of the changes were talking about, but the bigger

issue is a cultural shift.

Some significant portion of online advertising is being transacted in a new +

disruptive way.

What it means to plan media is radically changing, and that means what were

really talking about is people.

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Think about how online media has traditionally been planned, bought, and

optimized.

Campaign timeline, beginning to end, with launch here.

The vast majority of the value that the media people added was here.

Tools and activities included RFPs, scoring models, relationships and

knowledge of the marketplace.

Fundamentally it was about being smart before launch.

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In an exchange-traded, platform-based environment the model flips.

Now the value exists almost entirely here.

The tools and inputs are different: DSPs, auctions, data, and speed.

In this world, the job is fundamentally about being smart after a campaign

launches.

This means it will take time for agencies to get up to speed. Need to re-trainexisting staff and bring new types of analytically-driven talent into the

industry.

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Ill close with some thoughts on where things are going in the short and

medium term.

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Two big things are happening right now.

The first is that the composition of exchanges is changing. No longer justdisplay.

Were now seeing video and mobile coming into exchanges. The notion of a

platform becomes more interesting when you can start to buy different types of

inventory.

And Google is expected to bring video and mobile to adx in q4 of this year,

presumably adding lots of inventory.

The second is that quality is going to continue to improve.

The knock against adx is that it has two types of inventory DFP inventory

(the good stuff) and then all of the adsense sites and the impression volume

is skewed toward adsense.

But thats going to shift, for two reasons.

One is economic. Theres starting to be a lot of evidence that RTB benefits

ubs. The re ettin more in an exchan e environment than the would b25


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Predictions I heard from the folks I interviewed, in order of boldness.

For what its worth, the planning assumption Im working with is the half ofdisplay through platforms in two years.

I think the composition of a (paid) digital buy in the near future = some

premium/custom direct thru pubs + a big portion that is platform + a small

handful of differentiated networks that can bring something to the table that

cant be done independently thru the platform.

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The rest of todays program

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DSPs and Exchanges - Future Trends 2010

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Transcript of DSPs and Exchanges - Future Trends 2010