First there were ad networks (Advertising.com, BURST Media, Tribal Fusion).

Then auction models (Google Adwords and Adsense).

And now here come the “exchanges”…. Google buys DoubleClick for $3.1 billion. Yahoo! buys RightMedia for $850 million.

Are these solutions true exchanges or glorified ad networks—places for remnant inventory where the large portals, large ad networks and large publishers will take whatever the advertiser offers? Where the only “trading” is for the remnant of the remnant—the land of the unloved inventory?

Is all this exchange talk just a bunch of “ad networks in exchange clothing”? Is the advertising business hijacking our web vocabulary in the name of company valuations?

What is a true exchange?

It’s all about the “Bid” and the “Ask”. Just look at the NASDAQ or NYSE markets. One trader wants to buy at a set price, another trader wants to sell at a set price. When the price matches, there is a transaction.

To date, the online advertising market and all of its marketplace solutions—networks, auctions, exchanges—have only ever delivered pricing control to advertisers and only delivered publishers a share (a revenue share, sometimes of unknown percentage) of what an advertiser has paid.

What the web advertising market needs is a true exchange—where both advertisers and publishers are able to control pricing and the exchange carries the burden of making the match. A true exchange should be open to all publishers and advertisers large and small; short, fat and long tail.

Allowing the publisher to put an “Ask” price means the exchange will always be the first stop before less attractive remnant solutions. In its “Bid” the advertiser maintains the same pricing control as always but now gets to play at the top of the mountain among premium inventory instead of the dark, dank remnant yard sale so many networks have become.

Tags: google, yahoo, contextweb, rightmedia, doubleclick, tribalfusion, valueclick

This entry was posted on Monday, April 30th, 2007 at 8:14 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.