Major UK Ad Networks Lead Adoption of Exchange for Online Advertising

WebKnowHow
Friday, February 2, 2007; 08:20 AM

Ten online advertising networks based in the United Kingdom met Monday evening in London to form the AdECN (UK) Consortium, the first exchange for online display advertising. Established in partnership with AdECN, Inc., a California-based company that developed the auction exchange technology, the AdECN (UK) Consortium is a not-for-profit entity that will allow its members to buy and sell advertising inventory for their advertiser and publisher clients on an automated, neutral exchange analogous to those regulating the stock market.

Currently, advertising networks buy and sell inventory amongst themselves much the way stock brokers of unlisted equities traded before automated exchanges: they call each other on the telephone and make deals. This is slow and time-consuming, the fixed pricing models make it nearly impossible for an ad network to get the highest price for its publishers’ inventory, or sell out entirely (up to 50% of the inventory of the larger websites goes unsold). It also makes it difficult for the ad network to find the most effective “reach” or distribution for its advertisers’ campaigns.

The online advertising market in the UK is the second largest in the world, and is the fastest growing, having increased 40% over 2005 to £120 million in 2006. "The advertising spend online with UK ad networks grew tremendously in 2006 because of increased recognition that they give media buyers the chance to reach millions of users through a single point of sale,” said Linus Gregoriadis, head of research at E-consultancy.com, one of the UK's leading online publishers of internet-marketing research and reports, "Any initiative designed to make the buying and selling of inventory more efficient is to be welcomed. The launch of the AdECN Exchange in the UK is an exciting development for this space.”

With the AdECN Exchange, member ad networks buy on the exchange for their advertisers and sell on the exchange for their publishers. When selling inventory, members place their publishers’ ad spots in the exchange, defining allowable content and often a minimum price. When buying inventory, members specify the amount their advertisers are willing to pay for their online campaigns based on a wide range of targeting factors, and can bid on a CPM, CPC, or CPA basis. When a visitor lands on a webpage, an automated auction occurs in 12 milliseconds among all interested advertisers — for every single ad impression. Publishers from one ad network may be matched with advertisers from within the same network, or from another network. AdECN plays a neutral role in the transaction, collecting only a flat fee for serving as the clearing-house for all transactions.

With AdECN’s targeting (including contextual, behavioral, and profile targeting) and an automated auction for every impression, the member is more likely to get the best possible price for its publishers’ inventory, and to sell it all. The member can also assure its advertisers they are getting what they pay for and only paying what the ad is worth to them. By limiting membership on the exchange to established ad networks as opposed to all members of the online advertising ecosystem, AdECN is able to better regulate auctions and guarantee payments while allowing its members to focus on serving their advertisers’ and publishers’ individual campaign needs.

“The key to the AdECN exchange is its neutrality,” said John Cole, managing director of MediaRun (www.mediarun.net), one of the charter members. "This is the first time that we will have the opportunity to buy and sell display advertising in an efficient way. The present system is nowhere near efficient enough and attracts all sorts of middlemen. The closer an advertiser can get to the source, the better the results; this is the perfect system for eliminating chain-buying.”

“We all know that an exchange is coming,” said Urschel. “Efficiency is inevitable. The question is who will be nimble and smart and benefit from the change – and who will get left behind.”