Following on my previous post, here I am going to write about the third group of companies now emerging. These guys place themselves between publishers or advertisers and the ad networks and help the former deal with all the different networks and optimize across them.
They fall into two groups: those targeting publishers and those targeting advertisers.
1) Publisher intermediaries - These are companies like Rubicon Project and Pubmatic. They realized that publishers (especially small ones) are having a hard time dealing with more than a few ad networks and most are probably not maximizing revenue (and don't know how). This is because, as mentioned in the previous post, there are a ton of networks out there, each with their own focus, strengths and weaknesses. So these guys step in and manage/optimize a publisher's remnant inventory by interacting with a bunch of different networks and giving the inventory to whoever will pay the most. Essentially, these guys are bringing efficiency to the overall market and making it, in aggregate, move towards that vision of one single huge exchange. They will also increase the pressure on the ad networks to be more open and transparent with how they do matching and how much revenue they pay out.
2) Advertiser intermediaries - On this side, things are not as developed although there is also room for a similar role. Also, the problem is much more pronounced for small/medium advertisers. Large advertisers have access to enough technology and help (agencies) that it isn't as big an issue. But small guys have less options, starting with the fact that its not easy to come up with the creative for display advertising. Companies like AdReady and AdMission are addressing the ability to easily develop display ads for small advertisers. And I believe AdReady takes the next step and allows for management and optimization across networks in order to maximize ROI. So here again we have a set of intermediaries/optimizers (and in this case also enablers) that add efficiency to the market and are building it into a network of networks, or mega-exchange.
The interesting thing about these intermediaries (on both sides) is that if they get a critical mass of users, they will develop their own ambitions of becoming uber networks/exchanges. Today they talk about how they also provide networks with value, but in reality they are a small step away from being direct competitors.
So an interesting question is how all this will shake out. There are a couple of potential scenarios:
1) We continue to have a bunch of different ad networks, exchanges and intermediaries, but they get more interconnected as time goes on (driven in part by the intermediaries). Some intermediaries themselves could become sizable networks. Eventually we end up with a massive network of networks that is functionally equivalent to the huge exchange mentioned earlier, but is distributed across many companies and owners.
2) The current big ad networks consolidate the market (we are already seeing significant activity here) while smaller ones lose critical mass and go out of business. This leaves us with only a few massive networks/exchanges (3-4?), perhaps with one significantly bigger than the others (Google). In this scenario there is a decreased need for the intermediaries/optimizers and those that did not get acquired become irrelevant.
Whatever happens, it's pretty obvious there will be a lot of activity over the next 10 years. And there is clearly a lot of opportunity still in developing companies that complement the existing players, enable new entrants (e.g., small businesses) and create new scenarios. This of course, will also occur across all media (e.g., audio/radio, video/tv, online) and ad types (text/display/rich media, CPM/CPC/CPA).
Would love to hear what people think and what opportunities they are seeing (that is if anyone is reading this blog yet... ;)
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