A unique value proposition: How exchanges can survive the publisher-DSP direct relationship

By Dan Fennell, vp of publisher development

A handful of publishers are taking a novel approach to selling ad inventory: using fewer exchanges and SSPs and forging direct connections with DSPs. In doing so, they’re anticipating the needs of brands looking to cut out the middleman. It makes sense, but publishers need to be careful not to cut ties with the SSPs and exchanges that offer real value.

The logic does seem sound: With fewer SSPs and exchanges, there are fewer fees — which means more cash to put toward bids. “Advertisers will say, ‘This way more of my dollars are going toward my bid in the auction,’” explained Phil Bohn, svp of sales and revenue at the ad management firm and online publisher Mediavine.

Another expensive problem is that buyers often receive the same impression from multiple exchanges being used by a publisher. This costs DSPs extra money since they have to listen to duplicative bid requests. With fewer exchanges representing the same impression, both buyers and publishers could save money.

It’s not just about saving money. Advertisers and publishers covet transparency, and worry that exchanges and SSPs create layers of murkiness between the initial bid and the eventual placement. Then there’s the issue of trust: Some SSPs have set unnecessarily high price floors, and some exchanges have trafficked in fraud and low-quality inventory.

Many advertisers are starting to take the path of “supply-path optimization,” a trend that involves buying through as few exchanges and other middlemen as possible. And some publishers, recognizing the value of a select few exchanges and SSPs, are leaning toward a middle-ground approach known as “demand-path optimization” — i.e., working more directly with advertisers and with a smaller group of SSPs and exchanges.

But advertisers and publishers looking to trim the Lumascape face pitfalls. First, there are huge obstacles to forging direct DSP connections at scale. While mid-level DSPs might be up for partnerships with mid-level publishers, major DSPs are different. “A major DSP may not be willing to work with a mid-level publisher right away,” explained David Park, senior director of publisher partnerships at GumGum.

Given that such DSPs already boast an abundance of existing partners, they may have little incentive to devote resources and manpower to such a partnership. Things aren’t likely to change until individual publishers are able to dedicate resources to direct integrations with DSPs — and until DSPs create tools that allow those integrations to take place. The integration process could be especially onerous for publishers if they’re left to do all the heavy lifting; publishers and DSPs alike need to make organizational changes for direct relationships to be less costly and laborious.

And it’s not just a question of operational challenges. Even amidst a landscape littered with untrustworthy and ineffective platforms, some exchanges and SSPs bring unique value to the table. Culling the field makes sense. Torching it doesn’t.

How exchanges can stay in the picture

Some less-than-reputable platforms have already folded or lost influence. While SSPs and exchanges aren’t about to go the way of the dodo, the market continues to consolidate around a handful of providers. The ones that want to stay relevant need to bring unique value to the supply chain.

First and foremost, they need to offer unique demand. “Publishers often simply maximize their current relationships,” explained Park. “So it’s important for exchanges to bring unique demand sets into play.” Exchanges need to offer publishers unique brand partners, and they need to offer advertisers unique inventory.

Some exchanges also offer unique formats. GumGum, for example, uses an “In-Screen format,” which keeps ad placements in view even as users scroll, as well as an “In-Image” format, which places contextually relevant ads within the bottom third of an existing image. Those are powerful differentiators from traditional display ads.

Exchanges can also differentiate themselves by offering unique data — for instance, data that aids in brand safety. No airline wants to find itself next to a news story about a plane crash; no soft drink company wants an ad appearing next to that of a competitor; and nobody wants an ad appearing next to violence or hate symbols. Many brands worry that an overreliance on automated exchanges weakens their control over such matters.

That’s why directly integrating safety protections that combine contextual, video, and image analysis can set an exchange apart. Advertisers are likely to pay for third-party brand safety tools one way or another. Folding the technology directly into the exchange cuts out an extra step. It also provides reassurance that brands can access the unique demand provided by the exchange without risking their reputations.

Brands and publishers are eyeing exchanges and SSPs with distrust, and the market is shrinking. DSP-to-publisher connections may be rare, but advertisers and publishers are already paring down their slate of partners on the path to optimization. If DSPs create easier ways for publishers to integrate (and if publishers find the necessary resources to dedicate to those integrations) the trend could accelerate.

But there will always be a place for exchanges that provide unique value — whether that means unique demand, unique ad formats, unique safety protections, or a unique level of transparency and control. Publishers would be well-advised to take a hard look at the marketplace; they’ll find that some of those platforms are still essential.


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