Question: Will DSPs (demand side platform) and RTB (real time bidding) Ad exchanges wipe out Ad networks in 2011?

Answer: No way. Especially not when you consider that some of the largest “ad exchanges” are actually really “ad networks” at heart (see my piece on AdExchanger.com about why 2011 is the year of the ad network!)

“DSP,” “ad network” and “ad exchange” (and perhaps “agency” too) as terms may need to be redefined this year as the lines will continue to be blurred. Today, let’s face it, ad networks are still making a lot more money than agencies or DSPs. And still, today, everyone needs everyone else in this space – the symbiosis between agencies, ad networks, dsp’s, publishers and advertisers is still high. That won’t be the case forever, but is still the rule now.

The other thing they (smartly) realized is that the two products in the example above are different. For the most part, the xyz.com inventory they are selling directly is not the same as that which I get in the exchange. For those who find it constructive to think in simile/metaphor, you might think the correct analogy is the outlet store – - those Hugo Boss pants I might find in their outlet if I want to drive 45 minutes outside of the city vs. going to Bloomingdales and paying 200% more — but that’s not correct. While sometimes you find slightly damaged goods selling for cheap in the outlet, often it’s the exact same merchandise for sale more cheaply in out-of-the-way locations. To be sure, this certainly happens, but its more often akin to an airline metaphor (I like those):

Think of the publisher direct, guaranteed inventory as a seat on a full-price economy ticket to fly on a plane, and think of the remnant ad exchange inventory as a standby seat. In the first case you know what you’re going to get, it’s a published fare (perhaps you got a discount, perhaps not), you are first in line, eligible for and might get upgraded to first class, and you have an assigned seat. The remnant standby guy is only going to get a seat if there’s space available (sometimes there’s a lot, often not so much as I recall “you missed your flight on a sunday morning out of las vegas? what were you thinking” gave up and stayed sunday night) and will if they do may be one of the last to get on board, won’t have room for their rollaway and will have to check it etc. They get a lesser product; it might be very similar but there’s also a degree of uncertainty involved meaning it might be nothing.

In remnant display, the first impression you see might end up being the 8th ad impression the user saw. And you have no way to know. See my piece on AdExchanger about why real-time bid prices are overinflated.

Our job here at XA.net is to help the advertiser or agency place their (or their client’s) inventory across that priority/price curve in the locations that drive the most ROI for them, in a creative- and campaign-specific way. It’s a tough job, but we’re having fun doing it!

Given the opportunity to speak about remarketing/retargeting, XA.net CEO Rob Leathern, was pleased with the crowds and session attendance and had this to say:

“People across online advertising disciplines are committed to learning all they can – to incorporate best practices and new technologies for improved campaign performance. Remarketing connects search and display advertising efforts like no other technology, and, when used correctly, can drastically improve conversion metrics for both mediums. It was good to see so many people engaged on the subject.”

Rob’s portion of the panel presentation focused on case studies that showed the best practices XA.net has used implementing retargeting/remarketing for clients’ display campaigns.

Check out Rob’s Introduction to Remarketing presentation slides.

In the piece, Ad Age mentions that the two largest social networking sites, MySpace and Facebook, represent more than a fifth of all advertising traffic, but are only drawing an average $.56 CPM compared to the $2.43 CPM average for the internet at large. In fact, the averages for the largest player, Facebook may even be lower than that.

I don’t believe that thinking about the “average” CPM is that helpful – because as we know, impressions are not commodities (if they were,  our lives would be a WHOLE lot easier!). Instead of considering how a handful of large social media sites are pushing down the average CPM, we think social media represents a very exciting opportunity for advertisers for the following reasons:

• There is a low initial starting point in terms of budget to get started with these systems
• Connection-based targeting opportunities offer an intriguing targeting prospect
• Social media ad systems like Facebook’s allow for easy demographic-based buying
• Conversion tracking is now directly possible on some of these social media sites (earlier one had to use redirects)
• Text plus image ads are easier to iterate than graphical banners, meaning many more tests can be run in parallel, more quickly
• Perceptually, low CPMs on social media sites appear to be a good opportunity to start testing ad concepts, and lower some of the barriers for advertising

Tools like XA.net’s Text Ad Creator (with our Facebook advertising API integration) can help automate the creation and optimization of tens or hundreds of different creative/landing page combinations, to allow for more efficient and effective advertising. Contact us to learn more. In terms of connection-based targeting, XA.net can target (with your permission) the fans of your pages or applications using our system — so definitely let us know if you would like us to do that for you!

It’s kind of like the Miss Wisconsin beauty pageant. Lots of young women who meet the organizers’ criteria enter the pageant. There is a judging process which ends in the selection of a Miss Wisconsin. Miss Wisconsin (MW) then qualifies to go the Miss America pageant. There is travel, lodging, rehearsals and activities but eventually the big day arrives where MW gets to take the stage in her quest to win the Miss America crown. There can be only one winner but along the way ladies like MW have experienced intermediate glory.

So think of Wisconsin as our real-time bidding system, and what happens there as the Miss Wisconsin pageant. For every impression in an ad exchange or aggregator (Miss America pageant) there can be only one winner, and so every bidder (state) puts forth their absolute best. California, Arizona and Delaware all want to win that pageant – and they’ve all held their own pageants ahead of time to put forth that one winner to go through to the final. Now some might argue that California is bigger and better than many of the other states (budget deficits notwithstanding) and should get more entrants into the Miss America pageant, but hey – this isn’t a representative democracy! One entrant per state only please!

Now think of 10,000 pageants a second and you’re starting to get the idea.

For RTB each bidder is conducting some kind of real-time assessment before deciding which bid to place on a given impression. It could be a complex or simple assessment, but more complex internal real-time decisions (local pageants) mean less time to prepare and compete at nationals.