SSPs like OpenX are eyeing direct ties to advertisers

Independent ad exchanges, which historically focused entirely on the publisher, are now pouring resources into serving advertisers directly. They know that 2019 will be a year when marketers consolidate their budgets into a shorter list of trusted exchanges, and it is mission-critical to be among that group.

OpenX is moving its ad exchange over to the Google Cloud Platform in the hope that it can withstand the commodification of ad tech vendors now that it can secure lower take rates as a result of not having large operating costs. Spiraling costs took its toll on the business last month when it revealed it would ax 100 jobs.

Working with advertisers is so important to OpenX that it hired Carol Chung, who joined OpenX earlier this month from Digitas, as svp of buyer development. The new role will serve as the face of a flurry of new products and services that will be developed for advertisers, which are being powered by Google’s ad tech.

“It’s no longer about competing on price. It’s about how can we leverage our own data to help marketers plan their programmatic campaigns better and make their spend more effective,” said Tim Cadogan, CEO of OpenX. “We needed new technology to allow us to invent products faster at a lower cost across a broader area.”

Being able to see and process more bids via Google’s cloud will only grow an ad exchange like OpenX so far. Other vendors are competing on the same premise, which is why the business is working on products that will use the unlikely union to try and differentiate its exchange on value, not solely price. Some of those products will help advertisers develop their own custom bids for specific exchanges. The features will be pitched to advertisers as complementary supply path optimization services to DSPs, not direct competition, said Cadogan.

Data transparency is on a short list of points of sustainable differentiation for independent players like OpenX, said Chris Kane, founder of programmatic consultancy Jounce Media. “Google and Facebook are both highly restrictive in the data they share with marketers and publishers about auction pricing,” said Kane. “By contrast, independent players take an “it’s your data” philosophy and are striking data-sharing agreements that give them preferred status with the biggest ad buyers and ad sellers.”

Most DSPs can’t offer the level of customization needed to funnel spend through exchanges that are the most efficient route to certain publishers. Technical complexities aside, customized bidding and SPO are hard for larger DSPs to offer unilaterally when they represent such a diverse pool of advertisers with different goals. It’s easier for those vendors to curate their own supply and minimize the costs of losing certain prolific exchanges regardless of the needs of individual ad buyers.

“An exchange can be a much smarter pipe that’s offering more value to the programmatic puzzle,” said Cadogan.

OpenX has a lot riding on deal’s ability to carve out a unique proposition on a larger rival’s ad tech.

Last year, several SSPs came clean to the supply-side on their take rates to buyers. The largest ones also gave up their publisher margin in a bid to persuade advertisers and agencies they aren’t taking hidden fees. This year, the SSPs are competing to attract increased investment from buyers through lower transparency margins, while trying to maintain their services to publishers.”

But not all SSP are made equal, said Dan Larden, partnerships director at Infectious Media.

Some of those businesses invested in their people to better service agencies through features like private marketplaces and DSPs with better reporting and more efficient integrations, said Larden. Whereas other businesses were built on an ethos of high-tech investment and lean headcount, giving a natural advantage in a low-margin industry. “It’s inevitable that we will see both announcements of investment in leaner tech, and more businesses losing headcount this year. It’s going to be interesting to see which model wins out,” said Larden.

If OpenX can’t use Google to grow as quickly as it hopes, then the independent exchange could become a casualty of a larger tussle in ad tech. Google and Amazon are OpenX’s biggest competitors, but they are also OpenX’s biggest partners. Google’s DSP is likely OpenX’s largest source of demand, while Amazon’s DSP is the fastest grower in the category, said Kane. Maintaining collaborative partnerships with both of these companies is essential for OpenX’s long-term success, he said.

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