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How To Fix Media Asset Standards So They Don't Suck

Standardization can seem like a technical topic but it is simply the domain model (the rules that 'govern' ). In the past standardization seemed difficult because the individuality of media assets created an illusion that a standardized domain model for media assets was impossible.

Some think that applying a standard to media would mean forcing a set of descriptions that everything should fit within. Like the way the IAB created a set of context standards that seek to capture all contexts. But what if the standard is not about restricting what descriptions are acceptable but rather about standardizing the way descriptions themselves are created. In other words, any type of descriptor can be added to a media asset, so long as it is done in a way that the system, can understand. Like Mendeleev’s periodic table, the system has a place for newly discovered elements, even though we never knew they existed.

In Chemistry, 19th century researchers faced the same problem. ‘We have all these elements, but how do we standardize our understanding of their respective relationships?’ To solve this problem in chemistry, a new domain model had to be created to bring rational order. While it may have seemed impossible before the problem was solved, afterwards it seemed completely obvious.  Dmitri Mendeleev solved the problem in 1869. His genius was in building a model that simultaneously defined how the elements are similar to each other and how they are different from each other, in more than one way.

Like Mendeleev, media solutions need to conform to a standard that defines how we order the information in the domain, not limit what information can be contained in the domain. On a side note, some of the marketers making periodic tables of marketing are doing it wrong. They don't actually understand why the periodic table is so brilliant.

Most folks in media that we have talked to question the ability to standardize media assets because they can only imagine domain models based on similarity or difference.  The beauty of Mendeleev’s arrangement is that the relationship between and element and its neighbors to the left and right are always the same. The relationship to the elements above it and below it are also always the same. In other words, the elements are arranged such that they show how they are different from each other by showing how they are like each other. Media standards need the same type of domain model.

Periodic Table trends
Periodic Table trends

To build this domain model we have to understand the relationship between two different media assets (two ‘atoms’) and figure out where they belong in the domain relative to each other (their ‘location’ on the ‘periodic table’).  Most media technology was not build to handle transactions, so it did not need to standardize the domain model for media assets, it standardized the communication of transaction requests, e.g. RTB protocol.  For the exchanges and other technologies that were designed for managing transactions, that part of the system was simply ostriched. Why? Because the second price auction does not need to know what is being auctioned to be successful, it simply manages bids and price floors. This was a design feature, not a bug. Since second price auctions are being used to sell an impression in real time, it doesn’t much matter what the impression is, it only mattered who will pay the highest price.

When we want to trade avails (read media futures) we and the auction itself need to understand what is being bought and sold. Since there is so much uniqueness in the domain, we decided to reverse the perspective. Instead of trying to define what makes one piece of inventory unique, we define how it is different from everything else. We can work by inclusion or exclusion, the results are the same. So in technical terms, each piece of information describing a media asset is a vector. Each media asset is a collection of vectors.

In practical terms the ‘standard’ is a way of ordering the information submitted to the system. This means the system incentivizes conformity without demanding it. For example, there can be two competing methods of defining context, but both buyers and sellers have strong incentives to choose what is best for the market. So, if two competing standardization systems will yield the best outcomes, the domain must support both. If one standard will yield the best outcomes, the domain must support that as well. The standards create an incentive to find the optimal solution, the domain does not define the optimal solution.

Like Mendeleev, media solutions need to conform to a standard that defines how we order the information in the domain, not limit what information can be contained in the domain.

PII issues will never go away with real time bidding

Houston, PII has a problem
Houston, PII has a problem

PII issues have long been a point of discussion among us all.  In all that talking and discussing, we never uncovered the root cause of why PII issues are such a dominant force in the current real time bidding market architecture. I propose that taking another point of view at the problem reveals that it is a direct outcome of the market architecture and not a side-effect of some other economic inefficiency. The current market architecture in real time bidding is a ‘call-and-response’ system. One side, the seller calls, and the other side, the buyer responds. This means that the entire market is dominated by the way sellers define their demand. In simple terms, if no one is selling what I am specifically looking to buy in the market, how do I market my demand?

This means sellers need to express their supply so that buyers will bid. Economics teaches us that in this situation, the seller is best served by providing as much information as possible on this impression, so that the maximum number of potential buyers is achieved. In other words, there is an economic incentive to say as much as possible about the impression.

The problem with this market architecture is that sellers can’t search for buyers before the inventory shows up. If a seller could search for demand and elect to meet some of that demand with their supply, the only information transferred during the transaction is that this audience member and ad placement unit meet the criteria of the buy order. So, if a seller never meets demand that violates PII standards, all transactions will be free of PII issues. In a market structure where demand can be transparent, the incentive is to share as little information as possible. This is the opposite market structure incentive from that of the real time market architecture.

The real time market architecture segregates supply and demand to the ‘call’ side or ‘response’ side, the market self-defines itself as an asymmetric market. For some inventory acquisition strategies like retargeting, this is a great, and most probably the most optimal, market structure. But, for big brands this market asymmetry is bad. We all know that they buy huge swaths of audiences across all media to build their brand. For these buyers, the real size of the transactions ($) they want to make is not accounted for in the second price auction. That auction does not know or care that you have a $25K budget for this line item.

This is a problem. By leaving this demand out of the price calculations we are effectively only looking at the tips of icebergs; and we still have tons of PII issues. If you are a marketer or a publisher navigating your boat through these treacherous waters, no wonder you’re fed up.

The #1 Way To Improve Yield Optimization, Thanks Dr. Laffer

Most yield systems 'think' about a graph of their revenue versus impressions andsee a line going up from left to right. The idea is that every single impression has the opportunity to generate income.

This view can only be true if each additional sellable impression is a real person that gives just as much attention to each new ad impression. With the exception of a microscopic minority, this is impossible. We all know that overloading the user with ads means they actually wind up ignoring all of the ads.

In reality, ethical publishers know full well that jamming your pages full of ads, and playing games and inflating page loads doesn’t last. Increasing supply undermines future pricing power and increases the opportunity for others to arbitrage the publisher.

In part, yield optimization is to blame. The real culprit is the second price auction. It’s baked into that auction method and it can’t be removed.

Let’s take another view. If we apply what we know, we know that the publisher’s revenue curve actually shows that if we keep pumping impression production up artificially, the total revenue we can generate through the market goes down.

Graph 2
Graph 2

So, the real question is what is the minimal amount of impressions that will maximize the publisher’s revenue. The curve illustrates that if there are zero ad impressions, there is no revenue—obviously—to the publisher. But if a publisher had no content and just ads, that won't generate revenue either, as there is no longer any incentive for a person to consume that publisher’s media.

If you’re a bit of a policy nerd like me, that sounds like a theory that came in to legend on a napkin “…officials Dick Cheney and Donald Rumsfeld in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument[1]” This is the legend of the Laffer Curve, an idea that made a big impact on tax policy throughout the 1980s.

To answer the revenue maximization question above we have to figure out the shape of the curve and how close we are to the top. Sounds simple enough right? Now, let’s think about any technologies in advertising that do that? Is there a yield optimization system that does that?

If you are managing media inventory today, can you tell me what dot on the curve above best represents your organization? If you can’t, your organization is managing the world through the lens of the line graph and not the curve.

[1] https://en.wikipedia.org/wiki/Laffer_curve

The Untapped Potential Of All This Data

Originally Published in AdExchanger We’ve all marveled at the new technology solutions entering the programmatic marketing and advertising ecosystems, along with the vast quantities of data produced. Everywhere a business problem could be quantified, in terms of something that can be counted or measured, a solution has sprung up, specializing in things like behavioral modeling, viewability and attribution.

I believe the untapped potential of all this data is to predict the future. If we took the 100,000-foot view across both marketing technology and advertising technology, we find a very interesting pattern. The land of mar tech and ad tech data is divided in to three main areas, but only one is populated with almost zero technology.

Some technologies can be found in the area I call “The Past.” There are lots of technologies that are in “The Present.” There are hardly any in “The Future” – there are very few forecasting technologies.

I predict the third generation of advanced mar tech and ad tech solutions will focus on telling publishers and marketers what will probably happen in the future. Predicting the future is an exercise of understanding how past data about what happened, when it happened and why it happened can be used as the colors to paint a picture of the future.

The Past: What Happened?

Today’s technology for data capture and storage is like a 100-megapixel camera – it provides a super accurate picture of what happened in the past. We have 100% certainty that what we measured happened. It’s not like there are other possible outcomes in the past.

Data storage solutions provide this vast understanding of anything that we chose to measure. If a data point was created and saved, it can exist forever. The evolution of this area of technology is focused on the expansion of what data is measured and captured. The ever-growing sea of data is a beautiful sight to behold for the analytical among us.

The Present: What’s Happening?

The last massive wave of technology innovation in mar tech and ad tech happened in this category, which focuses on the collecting and disseminating data about the present. The technology that collects data about what the present looks like is less sharp than data about the past. To understand the present, we need to pull a lot of data together really fast so we can act on it.

For data about the past, the effectiveness of analytics that bring data together is not limited by the amount of time that it takes. For that reason, the present is a little less sharp. We don’t have time to look at all the data together.

What’s more, as the sea of data being collected grows, the amount we can actually act on becomes an ever-decreasing portion of what we actually have. It’s more like a 20-megapixel camera.

Technologies that work to understand what is happening and take action include yield management, creative optimization and supply-side platforms. This area of technology is evolving with a focus on the expansion of delivering and processing an ever-growing data set to answer a question in less than a second.

The Future: What’s Going To Happen?

In this category of mar tech and ad tech, the fewest solutions exist. There are no companies on the LUMAscape dedicated to forecasting; I only know of one startup. Forecasting features in current technologies are treated the way municipal politicians treat sewage infrastructure: Nobody wants to talk about it, it’s hard and dirty work, but no one can live without it.

The future will never be as clear as the present or the past, but in this space of mar tech and ad tech technologies, innovation and investment have significantly lagged the market. Predicting the future is hard. It’s never like the past – it’s fuzzy and out of focus. Our current tools for predicting the future are, at best, like a 0.5-megapixel camera. It’s really hard to tell what will happen.

This is where a ton of untapped potential exists. Leveraging all this data being collected everywhere to build better modeling tools will help bring the future into focus. No one can predict when this market shift will gain significant traction, but I think we will see the future as an increasingly important topic of conversation for industry innovation and thought leadership in the next few years.

Picking The Programmatic 3.0 Marketplace That Will Make You A Winner

On today’s cutting edge of media trading "programmatic 3.0" are a number of solutions that allow buyers and sellers to make a deal now for inventory that will be delivered in the future. This new technology segment has emerged, in the already crowded field of programmatic solutions. The challenge for publishers and media buyers has been to distinguish the difference among the approaches vendors are bringing to the table to support programmatic deals for inventory delivered in the future. Because these different approaches all seek to address buyers’ and sellers’ pain points, they all present very similar value propositions. In reality, these approaches are very different.

The three approaches that have emerged in the market so far are the marketplace for traditional avails, real-time statistical arbitrage, and biddable impression futures. If we simply looked at the value propositions of each they seem nearly indistinguishable. If we dig deeper to understand what and how they work, the differences become clearer.

A marketplace for traditional avails

This approach is currently the most common and has been adopted by some of the big players that pioneered the real-time space. This approach allows a seller to expose products from their ad server to a marketplace with a “buy it now” price. It focuses on automating the trafficking of media buys and making the media that was sold direct, since the dawn of digital media, discoverable in a marketplace.  This is the approach used by the likes of Rubicon (iSocket/ShinyAds), AppNexus (Twixt/Yieldex Marketplace), and AdSlot

Real-time statistical arbitrage

In this approach the media is not bought from the publisher, but rather from an intermediary that takes on the risk of promising to sell the inventory at a fixed price after buying the impression at a variable price through an auction.  The approach focuses on technology that can forecast what will probably be available in the real-time environment and its estimated auction clearing price. This approach is used by the likes of Media Gamma and was attempted by MetaMarkets and Media Crossing prior to their pivots.

Biddable impression futures

This approach focuses on allowing buyers and sellers to agree to transact media where all the impressions meet a specified set criteria that can include a publisher’s product, 1st or 3rd party segments, context, viewability, or any other criteria the counterparties agree to. This environment is an order management layer that abstracts supply and demand into a separate technology layer to optimize the way in which supply and demand are presented, priced, and matched. This approach does not handle actual impressions or bid requests the way the real-time environment does. This is our approach at MASS Exchange.

In the wild

Let’s look at a concrete example across all the approaches. A publisher is asked to sell a 300x250 unit on the landing page of their automotive section, targeted at males, 18-35, in-market.

In the marketplace for traditional avails, a publisher must manually create the product in the ad server so that it appears in the marketplace via its API integration into the ad server. While doable, selling targeted impressions, not an audience over-indexed inventory, is possible but the efficiency of the marketplace is quickly outweighed by the massive manual process required to set it up. Further, none of the current marketplaces for traditional avails are auction based. So, it’s like Amazon for traditional avails.

Using the real-time statistical arbitrage approach the vendor targets an audience in an open market or may be able to acquire it through a private market, but the negotiation and pricing of the deal between the vendor and the end buyer is handled manually like any other traditional direct media buy. Further, scaling this approach to buy inventory from specified publishers means that yet another technology is inserted into the cost structure of the media and requires the vendor to have PMP deals with each seller so that a specified publisher’s inventory can be resold.

In the biddable impression futures environment, all of the combinations of audience, placement, and viewability attributes that a seller wishes to expose to the market are discoverable and priced with an asking price. In this environment, avails are biddable and transacted through and auction that only clears if the buyer is willing to pay the seller’s asking price.  This approach scales wonderfully as inventory definitions, pricing, availability, negotiation, and trafficking can all be automated. This approach provides tools that can scale across all the part of the transaction process, from start to finish.

How To Spot The Harbinger That Will Revolutionize Media Trading

Its summer, so like every other year, we make our annual family trip to Copenhagen. Strolling down the beautiful old streets I began wondering if the folks who buy and sell media on a daily basis know that real media trading will probably never include a 3-letter technology in the middle. But, the technology is not the primary barrier to this revolution. The current standard terms of media buying contracts are the biggest obstacle to true media trading.

Trading

Buying media via programmatic direct, a la an Ebay style 'buy it now' tile is not trading. Buying impressions via a bid in an Ebay style auction, is also not trading. If you are not buying and selling the same media your are not trading. Real traders make their money by buying and selling, not procuring or producing. Most of today's media buyers are brokers, not traders. The only folks in our industry who actually do any real trading are maligned and ignored by most technology related media types, the media barter agencies.

Real trading in media will look much more like the old fashion and out-of-vogue barter business. Media barter companies make forward investments into goods and services companies such as printers, hotels and hospitality companies to acquire products or services at below the market rate. These are then traded on a $ for $ basis with media owners enabling the barter company to create a margin on media space. Sometimes the barter firms even 'resell' media inventory the agency no  longer has a use for, but has committed to purchase. Effectively, barter agencies buy promises to deliver media with payment in many forms.

promise
promise

Promises Promises

That being the case, it's time to cut out the messy part of paying for media with airline tickets or cars, for simple promises of cash payments. To do that, we don't need any 3-letter ad tech. The technology for buying and selling promises is very different from the technology to buy impressions. But, the technology to deliver on those promises has been around for over a decade, the 1st and 3rd party ad servers.

When agencies make forward investments in promises to buy media, for which they (and not the advertiser) are on the hook, media trading can become a reality. Today, one of the industries most influential media trade organizations, the IAB, promulgates a standard media contract where agencies are not 'on the hook' - "...Agency will use commercially reasonable efforts to assist Media Company in collecting payment from the Advertiser..."

Real Trading

In order to truly trade, buyers need to be liable for the promises they make and both buyers and sellers need a market mechanism to help determine the price of media 'promises,' based on market conditions.

The first step in accomplishing this goal is to provide for a biddable programmatic direct environment where bids and clearing prices are transparent. A market price can not be truly determined without all market participants understanding what others paid or sold for in the past and what they are willing to pay or sell for in the future.

Real trading can happen when the promise of media delivery is specific enough to drive increased publisher revenues, provide profit opportunity to the trader, and provide better performance to the buyer. If buyers know that they are running their campaigns in a brand safe environment, where real people view their creative, and the expected performance metrics are achieved, they don't really care who the publisher actually is. This is where a trading opportunity exists that creates value for the advertiser, publisher, and the trader, and is a win-win-win.

Real trading only happens when everyone believes that they have a fair shot at winning.

What AdTech Can Learn From Bitcoin

Advertising is undergoing a fundamental rethinking. Over the last decade, a set of radical technologies have ushered in massive waves of transformation in the publishing and advertising businesses. New revenue sources for content creation and opportunities to reach audiences in completely new ways have brought fourth many new technologies. That is where most of the focus has been. Given the technology the media industry has in place today, what would we come up with if we started from a clean slate? We are living through that moment in our industry. We are having a “Facebook” innovation moment because of a “Bitcoin” disruption.

The evolution of technology in advertising is shifting because of a focus on new areas of innovation. The last wave of advertising innovation focused on bringing advertising from the old manual-space into a machine-automated environment. But, the processes that we automated were originally designed to be done by people. Now that a majority of processes originally designed for manual human-driven tasks have been automated, the focus of innovation is about optimizing the system in its current state. It’s like the leap from email to social media. Email is just an electronic letter while social media is a communication innovation that could only exist because we have the internet. The “Facebook” innovation.

The technology space in which advertising operates today is very different than a decade ago. But like advertising, the financial ecosystem has also changed so much in the last decade. Innovation now focuses on things that you simply couldn’t do without computers, as opposed to computers being automaters of human tasks. The new space of innovation is focused on a better understanding of a network of advertising transactions. Now that innovators can examine the network, they are rethinking its fundamental parts. In finance, technologists rethought the entire idea of money. Rethinking fundamental parts of the system is where real innovation is happening today. The “Bitcoin” disruption.

We can draw a parallel to money. Money was originally made of a precious metal, to carry its own value. Then paper money was invented, physical value was uncoupled from the currency. Then checks, physical representations of money. Then credit cards, which are debts that represent future checks. Today, bitcoin. Bitcoin is a purely mathematical representation of money, it uncouples money from the government or country whose currency it represents. There is no such thing as a physical bitcoin, it is not issued by any government or body, and it’s just data. To put that in perspective, Satoshi Nakamoto invented a way to move and store value, Bitcoin, that innovated on the invention of fiat currency in China over a thousand years ago. All that happened because of the technology network underpinning finance.

So what does that mean for advertising technology? It means that we need to start being mindful of rethinking the most fundamental ways in which the business works. Should we be buying impressions? Should we be buying GRP? or should we be buying something else? Now that the industry has so much technology built-in, what can we do now that we simply couldn’t do a decade ago? The answer is the way supply and demand get defined, measured, and are made to meet.

Be Prepared for the Great Advertising Technology Tsunami

What is the next big thing out there that is really going to change the media game? I’m talking about tectonic changes. The way the introduction of display advertising really changed the game or what we are witnessing today with mobile. Where is the next big wave of disruption? It is going to be the expansion of markets and trading technologies. That might seem a bit obvious, but I think what is driving the change is very different than what drove it in the past. It is this reason that will make the next wave of media trading so disruptive. The most recent disruption in this space was the ability to buy impressions in real time. The difference is that real time was a bolt on to the existing system. Real time bidding made something possible that didn’t exist in the past, the allocation of an impression based on real time market dynamics. The next expansion will be different. The next expansion of advertising and media technology will not be a bolt-on, it will drive changes at the heart of media buying and selling.

So, how can disruption be measured in our business? For media, disruption is measured in the ability to shift spending on a media plan. Better ways to achieve campaign or media buying goals is the measure by which media products are judged and priced.  The better the product, the more demand it will capture. Looking back, it is clear that the advent of display media really moved a significant amount of budget around in media plans and that mobile is doing the same today.

We saw the first move in the expansion of trading technologies when programmatic direct became possible in display. That small foothold has been expanding into things like print and outdoor media. The new changes are starting to build. The new systems are not the media planning platforms of old. Those were just messaging and ticketing systems that automated the paper process. These new changes bring new processes. Much more efficient processes.

There are literally billions of dollars of opportunity to create value by eliminating fraud and unviewed impressions. To do that, processes have to be better. We all know that the old way of media buying is just not measurable enough anymore. Measuring better means more efficient capital allocation and better outcomes. It means that sellers need to be able to slice, dice, and price their available inventory much better, and buyers need to be able to find it and bid.

This is the next disruption in media. Media transactions will be smaller and more frequent. Buyers will be buying shorter flights and more targeted audience segments. This means buyers and sellers need the tools to help them do what they already do, but at scale. Give people more time to make more decisions by speeding up or automating more of the basic administrative stuff. It’s like the difference between a hacksaw and a Sawzall. They do the same thing, except the Sawzall allows the carpenter to focus on cutting without worrying about powering the saw. The next disruption in media is power tools for buyers and sellers that meaningfully impact how budgets are allocated across and within media plans.

How Should We Measure Media Value?

Originally published on AdExchanger

Measuring the comparative value of media inventory has been a longstanding challenge. For both sides, the relative value of media inventory is the most important measure to determine price.

At the heart of the problem is the fact that each buyer measures value differently. While that is true, the questions each buyer asks to find value are the same. Being able to answer these questions about available media inventory means that the optimal mix of targeted inventory, given current market conditions, can always be found.

If a media-buying team can answer all of these questions about all if its inventory sources, it can confidently say that it is always buying the best-performing inventory at the lowest price, given the condition of the market.

Since guaranteed deals set the price before the deal is done, the exact value of each possible deal can be compared to determine which will provide the greatest amount of value in budget.

How did the media I bought from this source perform on each metric?

In media, value is measured by the amount of performance achieved. Since performance happens along multiple measures, viewability, click-through rate and conversions, we can think of each of these as a measure in the value space.

Simply put, the best answer that a targeted inventory source can provide is that every impression is viewable, every impression results in a click and every impression converts.

The worst answer is when viewability, clicks and conversions all total zero. When everything converts, every last bit of value was captured. When nothing converts, no value was created.

How efficiently was this source’s inventory moving prospects through the funnel?

The next challenge in measuring value has to do with how steep the sides of the funnel are. In other words, how efficiently does the audience of this inventory source move from the top of the funnel to the bottom? Low viewability and a high conversion rate are just as inefficient as a high viewability and a low conversion rate. The efficiency of the funnel measures both. The wider the funnel is at the bottom, the better.

How much performance and efficiency am I getting from this inventory source at this price?

In the end, it is about effectiveness. Inventory that delivers high value may be important, but if the price is too high, it might actually be less effective than something cheaper. So when comparing different media inventory, it is the combination of value and price that drive the decision.

How much audience scale does this inventory source have?

Having fairly priced and efficient inventory is great, but there is still another piece missing: the amount that is available for sale. Being able to achieve campaign goals with the least number of sellers is important in keeping down the cost of the media buy and ensuing administrative costs.

If the media-buying team can answer all of these questions about all of its inventory sources, it can confidently say that it is always buying the best-performing inventory at the cheapest price, given the condition of the market.

Without viewability price does not measure value

While much discussion of viewability has taken place, there is still room to discuss viewability in the context of media markets. The true price at which something will sell in the market contains a very important bit of information. Pricing and market data within media are like the DNA building blocks for our understanding of the market. You need to have all the pieces to understand what is going on. True price is the most important piece of information. For buyers, not having the ability to understand the unit price of inventory, which will be viewed by real audience members matching their targeting, means there is a missing piece in the DNA that makes up that buyers’ understanding of the market. Without the knowledge of price, a significant amount of decisions cannot be made with certainty. An impression that is not known to be viewed has a price that has little information buyers and sellers can glean from. Viewability measurement is so important because without it, price cannot be used to compare the value of different media inventory. In turn, that means that a real negotiation is more difficult.

Buyers and sellers want to know that they are doing business ‘on the level’. Viewability is not about higher or lower prices, viewability is about finding the right price. For those hiding in the shadows, lack of viewability hides true quality, artificially raising effective price, and can be used as a negotiation bludgeon to artificially lower price. In the end though, all the good folk of the media market just want fairness.

In media markets, buyers know ‘a price’, the problem is that the price they know is not exactly for what they are buying. Some media buyers will read the previous statement and disagree. I argue that the only price the buyer cares about is the CPM of all the real impressions. If a buyer knows how many impressions were shown to their specified audience of real people, in a viewable manner, and the real unit price of what they’re buying, before the purchase, they can proactively select the inventory that will perform best.

Media is not a commodity, the viewability of each publisher is unique and the mix of real and bot impressions is unique. Moreover, two buyers who buy the same inventory at the same price will not achieve the same ROI. So, every publisher is different and so is every buyer.

Let’s work through an analogy. Imagine you’re a contractor building houses. You have an opportunity to build houses that you know will sell for $1000 per square foot. What should you build to maximize your profit? Well, if you consider all the materials and labor, you can mathematically figure out the most profitable size house to build. But what if you had no idea what the price of the real materials would be when you need to build the house? What if the amount of defective materials varied by store and manufacturer and you had no way to measure it? Viewability is exactly like that. Without viewability you don’t know the actual price of the product that you need to buy.

Today, the data landscape is rich with solutions that help separate the wheat from the chaff when it comes to impressions. This data powers buyers’ ability to look past the amount they paid and into the price of target audience and media.

Using that data to power media buying decisions, the ability to measure substitutability begins to emerge. Figuring out “what to buy instead” is a very important function of the buy side. Houses are not commodities, but we all know that when you have to choose a place to live you figure out how to balance the good, bad, and price. The second choice at a lower price can quickly become your first choice. Without viewability, you cannot accurately measure price, and without price you can’t make good decisions to balance the good, bad, and price.

The Programmatic Catalog

As the process of media transacting becomes increasingly streamlined, the number of buyers a publisher interacts with continues to increase. While many are hidden behind the real-time technology stack, publishers have many more counterparties buying their inventory than ever before. The increasing presence of technology and complexity of the media transaction process  has created a new need – product information management. The recent acquisition of Yieldex by AppNexus for its forecasting capabilities and programmatic direct platform is a clear indicator that the big players are beginning to recognize this need. Ad Ops and Sales teams need an electronic map of the inventory landscape. What is on the map? How much of that inventory do they have? At what price should it be sold? In which channel? Publishers need an “app” that can do all of that by automatically collecting and analyzing data. Remember Programmatic Inventory Has A 'Yellow Pages Problem'? Folks have been talking about this since 2012

With that in mind here is a simple question: do publishers manually update their audience data? Are there analysts that update cookie profiles? We all know that the answer to that is no. So why should publishers have to manually create all their placements, ad units, products, and guaranteed targeting in the ad server. Publishers should have tools to scale up that process using technology.

Today, solutions construct a single view of the future. In reality, there is not one future, there are a bunch of possible futures each of which has a different probability of becoming reality. The future is uncertain but understanding the landscape of things that will very likely happen, will probably happen, and might happen can be clearly defined.

Obviously there are too many ways to sell and too many prices for today’s manual processes to address. The problem is that you can’t just update the current process. Almost all of a publisher’s new buyers have a very specific set of buying criteria for media. None of these criteria exist on the rate card and none of them has a price someone can just look up. It’s just too complex to sell that way. In the real time environment, data companies have filled the need for near instant classification of impressions for sale and pricing is solved for via auction. What has not changed is how publishers classify forward inventory.

Fortunately, these problems have been faced by other industries and has been solved for them by some of the best technology companies in the world, Oracle and IBM to name a few. It’s called a Product Information Management System (PIMS):

Centrally managing information about products, with a focus on the data required to market and sell the products through one or more distribution channels. A central set of product data can be used to feed consistent, accurate and up-to-date information to multiple channels such as sales teams, marketplaces, and direct deals. - Modified, from Wikipedia

Some will contend that they have such a system. While that may seem true, almost all the information in their system is created, maintained, and updated manually. Again, do publishers manually update their audience data?

A product information management system for publishers should be designed to be integrated with all sales channels, provide an accurate and constantly updated catalog of all the things that you can sell, how much inventory is available for each, and its price. Synchronized systems allow publishers to increase prices as inventory is selling out or decrease it if it is going unsold. It keeps sales teams, marketplace offers, technology partners, and ad ops teams all on the same page. Publishers can present any package they could possibly sell, with an appropriate price, to any sales channel, at any time through a single synchronized platform.

We Need To Rethink Marketplace Fees If We Want Better Liquidity

Originally posted in AdExchanger We can thank the long struggle between advertisers and agencies for the fee structure used throughout today’s online advertising industry. Agencies have always wanted to pass marketplace fees on to advertisers, but advertisers only want to pay media costs.

As a result, a significant portion of the industry hides transaction costs in the media price. Transacting environments nearly always charge the publisher by deducting a fee from the buyers bid. It is unclear if any transaction business in the industry has been able to layer its fee on top of the bid.

This struggle between agencies and advertisers has hamstrung the whole industry by forcing the use of a fee structure that fails to yield the best result for anyone. I believe that moving to a make-or-take model can fix this and improve market liquidity for everyone.

In the end, everyone seeks to get the most value out of any transaction, even when that transaction is buying services from a marketplace. The most obvious strategy is to maximize our own outcomes. Given that we know we will all act this way, does every fee structure for the services of a marketplace have the same result? No. The best model is one in which everyone’s interest are aligned, including buyers, sellers and the marketplace itself.

‘Going First’

There are two types of participants in a market, and I’m not talking about buyers and sellers. We need to look at the participants of a transaction in a different way.

In every transaction, there is someone who “goes first.” More specifically, they are the first party – it could be either the buyer or seller – to state the price at which they are willing to do the deal. That information creates liquidity. The marketplaces in which lots of buyers and sellers are willing to broadcast their price need far fewer transactions to be liquid. In contrast, the markets where the price at which buyers and sellers are willing to make a deal are secret need many more buyers, sellers and transactions to be liquid.

That being the case, it doesn’t matter if you are a buyer or a seller, “going first” is clearly a benefit to everyone in the market. So, the side creating the benefit should be rewarded and the side consuming that benefit should pay. In a marketplace, a fee structure that accomplishes that objective is called a make-or-take fee structure. In other words, if a buyer puts in a buy order before there exists a sell order to match with it, the buyer gets the reward. It is also true the other way: If the seller puts in a sell order that must wait for a buy order to match, the seller gets the reward.

This way you can always choose to go second and keep your desired price secret until you see someone on the other side that wants to make a deal at your price.

Make-Or-Take

This strategy makes for a business model where buyers and sellers are rewarded for participating in the creation of a crowdsourced “book” of supply and demand that all participants have access to. In stock markets, the side that is “going first” is referred to as making liquidity, while the side that is “going second” is said to be taking liquidity. Hence the name: make-or-take model.

In real terms, this means the current financial exchanges, such as the New York Stock Exchange or NASDAQ, charge market participants who “go second” about $0.30 for every 100 units, of which they pay the participant who chose to “go first” about $0.27. The difference, $0.03, is the exchange’s revenue. The implication of this model is that those who choose to “go first” in the market actually get paid to trade.

For a long time, folks in the industry have dreamed about a central repository that enables buyers and sellers to understand at what price inventory will clear and how much is available. But if buyers and sellers receive no benefit from listing their intentions in this repository – meaning there is no payment for “going first” – no one will do it.

That is why the dream of a giant catalog of available inventory has not materialized. There is no mechanism in the market to create that incentive.

For Guaranteed, 2-Sided is better than 2nd Price

Hal Varian, Chief Economist at Google once said “All of the major search engines use auctions to price ads. The reason is simple: there are millions of keywords that need to be priced and it would be impossible to set all those prices by hand.” Hal’s thesis was the underlying rationale for using the same auction model for search and display advertising. That is why today’s exchange technologies all operate using a second price auction. The problem is that you can’t use second price auctions for guaranteed. Which is why no one is doing it. There is a better way to trade guaranteed media. We can’t leave the best guaranteed inventory to sell through technologies which ecommerce figured out 20 years ago.  We need a market driven, technology powered, negotiated marketplace to buy and sell guaranteed media.

At first, it is easy to think that the focus of Hal’s statement is about labor. But if you look more deeply, you find that the key action in Hal’s quote was ‘set all those prices.’ If you can’t calculate and set prices as a seller you need the buyers to set them for you. Or in Google’s case, if ‘can’t’ is because it is too complex or expensive, you let the auction do the heavy lifting for free.

What if the problem of ‘set too many prices’ is already solved? What if there was already a way to automate it too? If that were true, the seller would want to have control over setting the ask price of their sell orders. The nature of guaranteed is that we have much more time to buy and sell it. If the seller has no bids, they can wait. If a buyer sees no inventory they can leave a bid. This type of trading works much better in two-sided auctions.

The fundamental difference is that two-sided auction transaction prices are set by both sides. Neither side has to do the deal right now. Guaranteed media is a negotiated media transaction, there is no negotiation in second price auctions. The auction decides. In a negotiated environment, each side has the power to change the price at which they are willing to do the deal. Negotiation is all about change.

Two-sided is different:

-Auctions match bids and asks, they don’t determine clearing price. -Resting orders. Buy and sell orders stay open. -A continuous auction where a buyer describes demand so it can be understood by any seller, to identify if they have matching inventory they may want to offer in reply, and vice versa. - Depth of forward supply and demand liquidity can be measured. - Supply competes for demand and demand competes for supply in the same auction. - Buyers can search for supply and Sellers can search for demand. Buyers can query sell orders and sellers can query buy orders; each can query the price and amount required to fulfill their order. - Market data is deterministic.

For this, orders have to be kept in a ‘book’ and every market participant needs to be able to see this book. If you know what the supply and demand in the market is, you don’t need to guess what it will be. Negotiation of all those prices is possible because the problem of ‘set too many prices’ is already solved.

As an industry we need to have a new conversation about technology for guaranteed. Current guaranteed models that use the ad server as if it was designed to be the back-end for an ecommerce platform for guaranteed media buying don’t meet the needs of buyers or sellers. There is a much better way than ‘add to cart’ and ‘proceed to checkout.’

We can’t rely on auction models designed for substitutable real-time keyword searches to trade inventory that is not substitutable. We need innovation.

Illiquid Media Markets Leave Industry Flying Blind

First publisher on AdExchanger January 26th, 2015 Markets and exchanges are now an everyday part of life in the media industry. Like all businesses, they seek to maximize value for customers and create the best possible incentive for buyers and sellers to participate. Since exchanges and markets are two-sided business models that bring buyers and sellers together in transactions, they must incentivize both sides to come to the table to the greatest degree.

In other words, markets and exchanges succeed when the opportunity to transact is maximized for both sides. This happens when markets are as liquid as possible. Unfortunately, today’s media markets and exchanges are just the opposite, which leaves buyers and sellers playing a guessing game.

The most visible symptoms in this illiquid market are massive volatility in several areas, including the second price, across all platforms, in open and private exchanges and the supply in open-market inventory. In financial markets, a 5% or greater spread between bids and what is asked is a sign of illiquidity. In media exchanges, the bid/paid spread averages 50%.

For sellers, this means that price floors are not effective in creating bid tension, which hurts aggregate revenue and has driven the recent shift to private markets. For buyers, supply is sporadic and unreliable as higher priority environments, such as guaranteed and private markets, intermittently siphon off supply, which increases price volatility even more.

The price volatility and lack of reliable supply make it nearly impossible to understand what the market thinks any impression is worth. We’re all flying blind. While there are market models that solve for these problems, none of the major players use them.

One Market, One Buyer

Currently, each bidder in an impression auction is likely bidding on a different set of attributes with a different ROI forecast. There are negative economic side effects when impressions are put into auctions designed for perfectly substitutable  goods. In reality, each bidder is in their own micro-market with the publisher. A market with one buyer is not liquid, even if combined with many other buyers in a single auction.

When Google introduced a one-sided auction for search, it was, and still is, the right auction structure for that type of media. If all you know about an impression is the search string, such as “Hawaii flights,” all searches are equal. But when that market model was introduced to display media and used beyond bottom-of-the-barrel inventory, funky stuff started happening.

In the current auction models, buyers have no idea at what price sellers would be willing to sell. Sellers have no idea what an impression is worth. The auction model is designed to figure that out. But does the market model make sense if buyers and sellers already knew what an impression is worth before sale? Not always.

Illiquidity

While many refer to the opportunity to transact or the availability of impressions in a market as liquidity, like all things related to media trading, there is a subtlety when talking about the opportunity to buy actual impressions. The classic definition of liquidity is something that can be sold rapidly, with minimal loss of value and a continuous supply of willing buyers and sellers.

In a real-time delivery market, such as classic RTB and private markets, there is clearly a lot of speed, but what about the loss of value part? Selling an impression for some amount of money is better than nothing, but if the sale drives down the price of future transactions, value has been lost even if the sale generated revenue.

For example, airline seats, like impressions, yield nothing if left empty. But if a plane is half full, you couldn’t buy that seat for $10 at the airport counter and there would be no second- or first-price auction to determine the price of that seat. That would teach airline customers that seats could be bought very cheaply, at the last minute, which would drive incremental revenue and sell seats quickly but at a loss in the value of future sales. Eventually, customers would expect to pay less and would wait until the last minute to buy cheap seats.

A market is liquid if assets can be rapidly sold with little impact on value. The precipitous decline of media prices since the introduction of RTB and private markets, regardless of the number of bids, indicates the market has little liquidity.

A Willing Seller?

A 2013 study by Yuan, Wang and Zhao contains a visualization of auction liquidity by mapping bid price and price paid from 12,965,119 auctions, 50 placements and 16 websites of different categories.

In each auction the spread between the bid and price paid is the same as the gap between the first and second price. The spread is used to measure liquidity. This data indicates that the impression auction bid/paid spread average about 50%. In most financial markets, the bid/ask spread is less than 1%, while anything greater than 5% is considered illiquid.

That may sound like heresy to many media professionals familiar with ad tech. In reality, the essential characteristic of a liquid market is that there are always ready and willing buyers and sellers.

In real-time markets, sellers do not know if there are willing buyers until they offer the impression for sale. Sellers can guess what buyers may be willing to pay based on historical data, but there are no buy orders in the market for them to act against. For buyers, the lack of a “buy it now” price, with only price floors, means they don’t actually know if there is a willing seller.

All of this carries big economic implications, including the fragmentation of display media into billions of individual and illiquid micro-markets. The historic decline in publishers’ pricing power since the introduction of real-time markets has been driven by the creation of illiquid markets that have the illusion of liquidity, not the oft-repeated industry myth of infinite inventory.

Programmatic Direct Is Automatic Not Programmatic

It's time to clear up some of the marketing doublespeak that has surrounded the growth of programmatic direct. There is a distinct group of folks who are working hard to muddle what programmatic direct does and apply what people have learned from real-time-delivery markets, by over emphasizing the intelligence of the automation.  The strategy to do this is based on leveraging all the hard work  real-time and private market technologist have done to develop fast and smart technology. Marketers of programmatic direct are equating the cruise control feature of your car to Google's self-driving cars. One is automated and one is programmatic. One just does while the other is 'thinking.' That's a big difference.

In short, real-time and private market technologies work really hard to allocate each impression so that it will yield the highest revenue to the publisher and to sift through billions of impressions daily to find the right audience for advertisers. These systems do a lot of 'thinking.' They work to understand what is actually happening in the real world and automate choosing the best decision to make. In short, exchanges, markets, SSPs, and DSPs, leverage lots of data and technology to make lots of decisions really fast. That is the promise of programmatic.

To draw comparisons to other technologies, programmatic direct is the grubhub of ad tech. Customers can see your menu and put in orders that are trafficked right to the kitchen. The difference is that real time technologies help to optimize transactions for buyers and sellers in terms of both pricing, performance, and the application of audience data. None of this happens in programmatic direct. The real-time stack is like a technology that helps a restaurant figure out if they should use the ingredients in their fridge to make Vegetable Chow Fun, Pasta Primavera,  or Bún Chay to get the highest revenue from the ingredients in stock. For buyers the real-time stack helps them to figure out what is the best veggy noodle dish to buy in the market at the moment.

So, yes the programmatic in programmatic direct means automation, but it is not the same programmatic that is in real-time markets. It is not as good and it is not as smart. The trick was to co-opt the meaning of the word to make things seem better than they actually are. There is a reason why  we have two separate words for programmatic and automatic. If it is the same, why didn't the ad tech marketers choose to call the technology automatic guarenteed? The reason is that programmatic has a 'sexy' that automatic does not have.

Our friends over at AdSlot seem to agree. They built this nifty graphical illustration titled Automatic Guaranteed.  Nice to know that we agree.

In that context, let's clarify how MASS Exchange is unique:

  • A unified view of price and depth of supply and demand for future impression inventory.
  • A programmatic system that drives transactions by 'thinking' through market conditions, not an ecommerce platform for media.
  • An environment where bids to buy and offers to sell are matched by a rules-based matching engine in real-time, but impressions are delivered at some time in the future.
  • Analytics that provides sellers a better understanding of their inventory in the context of market demand.
  • Siloed markets seamlessly connected via a unified market interfacing technology.

The Mystery of the Impression Auctions

There is more than one way to auction impressions. Understanding that difference is something that can best be explained with a simple story. Let's imagine for a moment. You are walking down the street and someone hands you a box. It is heavy, so you hold it with two hands. Surprised that some random person handed you a box in the middle of the street, you stand there for a moment, confused.  You think to yourself "what the..."  and start to play-back in your mind the hand-off that just occurred.

As you focus your thoughts on what just happened, you hear a voice calling out. You can't quite make out what it is saying. You shift your focus to find that voice is actually yelling at you, yelling $51.07. "Wait, what $51.07?" you think to yourself.  And then it dawns on you, that the person right in front of you on the street just offered you $51.07 for the box. So you look down. "What's in this box?" As you look down, you notice that the flaps of the box are closed using one of those self-folding interlocking methods. Still. there is a gap. One big enough for light to shine through so you can see inside.

Inside the box, you see a bunch of stuff. Some things look cheaper and some more expensive. You think to yourself, "Huh, sure, I'll sell this." At this point you are sure that this box was destined for the trash, but you could sell it.  So, you take the $51.07. Before you have a chance to put your money in your pocket it happens again, another box, this time at $95.06.

You're happy, you just got a bunch of cash for something that was about to get tossed out. You turn to make your way back and you realize that right behind you stood an antique store. One that is closing up shop and moving. In fact, today. The movers are bringing boxes out of the store. Suddenly, one of the moving guys hands you another box. And just then, you realize that those boxes were not about to get tossed out.

That is the story of information asymmetry and that is what is happening in many auctions today. What just happened to you on the street was a perfect example that there is a key piece of information missing from the sellers decision, that the buyer has. The people on the street offering money could see where the boxes were coming from. In fact, they also had their own information about what was inside the box. Now, let's compare that to how that closing-down antique store use to sell and auction its wares. Before shutting down, the antique store would post their prices on the merchandise and allow potential customers to come in an inspect it. When they needed to move some inventory, they would hold auctions. The key similarity between both is that the antique store would tell you exactly what you were about to buy and let you inspect it.

In this situation, the antique store is making a transaction based on a good price. The decision here is simpler, it is just "what is this worth?" In the boxes situation, the decision is much more complicated "what is this thing and what is it worth?" If the definitions and sources of that kind of information lack a common and agreed to standard, buying and selling can only be like the boxes situation and never like the the antique store situation. Value and price are very important decisions that need to be made by both buyers and sellers. If those two elements are determined separately, than both sides have a better understanding of transactions and potential transactions.

In  the broader worlds, there are many ways to buy and sell, and many ways to manage risk. The greatest value is created for buyers and sellers when they can choose the  best way for themselves to buy or sell. In some situations one way is superior, in others, another way is . The diversity of methods is a critical part of a healthy and vibrant market.

The Frontier Of Innovation In Advertising

The evolution of advertising technology innovation is shifting. It used to be pipes. Now it is something else.  In the last few years, technologists have been hard at work building an interconnected network for delivery and bidding across the media industry. Now, the network has reached critical scale. This is when things change. There are many day-to-day technologies that we take for granted because the networks they built have already reached scale - credit cards, telecommunications, and social media to name a few.What good is a phone if there is no one to call? Why would you use a social network if nobody that you knew was on it? What use is a credit card if you can't find somewhere to buy stuff with it? Networks are awesome! Networks create a whole new set of value propositions to their users. The value of the network isn't just that it provides a simple way for members of that network to communicate. Does a traditional phone call between two people have the same value proposition as a conference call, just smaller? No. One conversation among many people is not the same as many conversations between two people. That math has no power here.

The evolution of advertising technology is shifting to the "conference call." The reason that you have seen fundamental innovation in our industry stall is that the basic rules of the media plumbing are set. Innovation among  the major players now focuses on scale, speed, and cost of operation. That's cool, but those are not fundamental problems facing the advertising and publishing industries. Media buyers and sellers just don't have enough communication in the market about what is going on. Communication in the market can bring about amazing outcomes.

CLOB.jpg

In an AdExchanger article, members of the Facebook technology team discussed 'the"people-based" marketing opportunity.' The idea being that Facebook is scaling targeting resolution across the entire internet. In an environment with this level of complexity, everybody needs to be talking to everyone else so that there are enough 'conversations' being had. A single 'conversation' only tells you price. A conference call tells you value. Would you rather be a buyer and know the price of something or what it was worth?

What if publisher Somethingsnappy.com decides that they want more money. The Somethingsnappy.com management team undertakes to monetizing their platform by buying bot traffic and other such shenanigans. Over time, as the buyers of Somethingsnappy.com media realize that there are problems, they start to pull media buys and reduce the demand in the market. In a "conference call" market the change in demand is seen as fewer buy orders and lower bid prices on the order book. This process sends a very important signal to Somethingsnappy.com buyers who are still in the market, something may be wrong with Somethingsnappy.com inventory; the price is dropping. This kind of value can only come from  "conference call" market innovations. The "conference call" identifies poor value faster. But, this is a fair market, so the pendulum swings both ways.  If Somethingsnappy.com's media performs really well, outstanding in fact, then more bids and or higher bids will creep into the market. The "conference" call identifies better value faster too.

In a second price auction, only the winner knows when demand is dropping, and they only know it if it happens at the second price. That is a pretty blunt instrument for measuring broad demand.

If powered to do so, a network can be its own built-in policing mechanism. The price of an item in the market is a reflection of demand. In a "conference call" market you know something is good because it sells for a premium. The price is the voice of the market and the collective expression of the members of the network. Quality in the market is much easier to identify. Intrinsic policing is just one of the many benefits of the "conference call" market.

While that is all true, there is one caveat. Price, or any other signal from the market is the result of data, lots of data. This is where the network actually is. It is not the pipes, because the members of the market act through the pipe, the activity of buyers and sellers is what  flows through those pipes. It is the information communicated across the network, not the network itself. The market is our understanding of historical price information and the representations of future supply and demand. Together this data forms our view of the market. This is where the next wave of ad tech innovation will take place. There are a few companies in this space, but I'm not sure that even they know that they are in this space...

Creating New Media Markets

What is at the edge of a market

If something has never been traded before, how do you start trading it? How do people go from not selling something to becoming buyers and a sellers. That is where the edge of the market is. The place where each side has something they are willing to exchange. When people decide they would rather own a product than own a $20 bill, buyers are created. When people decide they would rather have someone else's $20 than the product they own, sellers are created.

That means the buyer gave $20 and got at least that much value and that the seller believes this is probably the most they can get for this product. How do you encourage people to understand that there is value in the market that is up for grabs?

Show it to them. Teach them how to grab it.

Let's try a real world example. Meet Alice, Alice loves to bake. She makes lots of cakes and all her friends love them. In fact, like any good friend who recognizes a good thing, Alice is told by her friends "you could totally sell these, they're awesome." So, Alice starts trying to sell her cakes. Did you see what just happened there? Alice's friend showed her that there is demand for the product she is making  - "you could totally sell these." Alice's friend showed it to her and taught her to grab it. If Alice would rather have more money than the cost of the brownie she just baked, we have a market.

The Implications for media

Now that we have that behind us, let's talk shop. What does that mean in terms of trading advertising? Well, every buyer in the attention markets industry would love to buy audiences at scale from publishing partners. They do, through private markets, but at what scale? Are private market deals searchable across the market? No. Is there pricing and market data? No. So basically, real-time markets don't consider the future in how they price. Supply and demand only exist in the present. A bid you see in one auction has no influence on a bid in a different impression's auction, now or in the future. Did you see what just happened there? I showed that there is demand for a product, future impressions, that does not have a reservoir of buy and sell orders.

Buyers would much rather have a market where they can freely and continuously manage their flow of capital. Sellers would love to allocate guarantees quickly and dynamically. Private marketplace deals take some time to put together, they require a commitment from both sides, are a small universe onto themselves, and provide no way to understand pricing throughout the market. If I don't like how my money or assets are put to work, how long does it take to fix that? how much work does it take? Electronic markets are designed so that it takes minutes or seconds to manage transactions.

If you can find value, a market participant has media that they are willing to sell at some price and a media buyer willing to buy at that price, you have crossed the edge and entered the market. In media, there are a lot of buyers and sellers on the edge making deals and trading media. What does not exist for reserved and guaranteed media is an exchange, a reservoir of buy and sell orders.

What is past the edge of the market

Sure, there is programmatic direct, but that is like needing to have a separate phone line for every person you call. Programmatic direct systems can only support two-way conversations. Transactions do not represent the outcome of many overlapping supply and demand interactions. Programmatic direct provides a platform for a specific form of communication: "Hey, I want to buy/sell your stuff?" What buyers and sellers really need is a much more complex web that stretches across the edges of the market. It is not about the buyer telling the seller or vice versa, that is a two-way conversation. It is about the buyer or seller telling the market that they have supply or demand and letting the market find the other side for them: "Hey, does someone want to buy/sell this stuff?"

They way a market is designed makes all the difference when it comes to finding buyers for sellers and sellers for buyers. In illiquid markets, buyers and sellers find each other one by one. In liquid markets, supply is matched to demand by the market itself, the exchange.

Where Is The Sabre Systems For Media

If you have been around the media and advertising industry for more than a few months, you have probably heard people throw around the name Sabre Systems.  Why do so many people in the industry throw this name around? What does it actually mean?

Like most non-media terms bantered around our industry, most people who refer to Sabre Systems, really have little understanding of what Sabre actually is or does. Understanding the value of such a system in media is really important to a full understanding of the challenges facing media buyers and sellers. So, lets start with the problem Sabre was designed to solve. As Wikipedia defined it "In the 1950s, American Airlines was facing a serious challenge in its ability to quickly handle airline reservations in an era that witnessed high growth in passenger volumes in the airline industry. Before the introduction of SABRE, the airline's system for booking flights was entirely manual."  Sounds awfully familiar. Sounds like the reason every programmatic direct technology has for their existance.

For a quick review of the players, we have Twixt (Appnexus), 49BC (Rubicon), Yieldex Direct, Adslot, iSocket (acquired by Rubicon), and Shiney Ads (also acquired by Rubicon), PubDirect (PubMatic), and Mediaocean's Prisma.

In reality, the value of the automation Sabre provided was to overcome the issues of scaling the airlines booking workforce. There were simply too many flights, too many seats, and too many queries to manage with a people-based system. Now let's think about that in the context of direct media sales. How many media companies have you heard complain about lost revenue opportunities associated with the inability to handle the number of direct deals? Is direct sales experiencing 'high growth' like the airlines of the 1950s? The answers to those two questions are: exactly zero and no, in that order. While the efficiency of having less paperwork, emails, and calls to deal with in booking media is important, it adds very little value. Sabre was created because automating the ticket buying process for airlines in the 1950s was critical to enabling them to drive significant growth.

So how does Sabre actually create value? This is how Sabre describes itself today "...through improved forecasting and decision support. This includes a hybrid pricing environment that looks at real-time data from across the enterprise as well as external sources. This provides the most accurate information on customer choice-based forecasting, network revenue optimization, competitor pricing data and configurable business rules automation." Does that sound like anything that any of the above companies do? No, no, and no. None of the current programmatic direct systems actually solve for any of these problems.

For a bit more depth on that, "Improved forecasting accuracy and overbooking optimization with advanced modeling at the segment and fare class level... The forecasts provided include spill estimation and time-based as well as event-based seasonality adjustments. According to forecasted demand, the system overbooks and sets authorization levels higher than capacity by compensating for customer cancellations and no-shows."

Today's media companies face a very different set of problems than the slowness of excel, phones, and faxes. Yes, it is labor intensive. But, that's like saying that the limiting factor in the growth of human construction was the labor intensive work of the stone mason. Yes, cutting stone by hand is very slow and inefficient, but what changed our society was not the electric chisel, but concrete. Even if we have robots cutting stone, building with stone is simply not a scalable method. Building with concrete is. Media sales faces the same problem. The old process simply is not scalable. The current batch of programmatic direct solutions may enable publishers to do it cheaper and faster (stone cutting robots), but no one is claiming to help them do it better and drive more revenue (concrete).

What Are Attention Markets

Let's start with a challenge. Think about 'programmatic'... now stop. The term  is no longer a good description of what is going on in our industry. We challenge you to stop using that word to describe the industry. It's inaccurate and confusing. It's holding back the entire industry by misrepresenting the value propositions of advertising and marketing technologies. The word programmatic is defined as "of, relating to, resembling, or having a program." It means automation. Now, let me ask a simple question, is anyone using real-time bidding doing it primarily for reasons of automation? We would argue that not a single one does.  Automation  is probably last on a list of reasons that includes targeting, impression level decisions, and market driven prices. In today's advertising markets automation is not the cause, it is the effect. Having a place to buy and sell that reflects the wills and desires of market participants is the end-goal. Why are we collectively naming the industry 'automation'? This industry is about the time and attention people are willing to give to a message, it is about understanding economic decisions people need to make and providing them with suggestions.

In reality, something very real is traded in these markets. Its actually not even really media. In the end, it is all about what the advertising stands for. It stands for the time an attention of people you want to reach, that's it. Its about getting your message in front of people. It's about attention. Real-time bidding (also a poorly conceived name), programmatic direct, video, the nascent TV markets, and everything else from digital out-of-home to audio ads, are all members of the larger Attention Markets ecosystem.

Attention markets are what all the significant buyers want and, in many ways, it is also what the sellers want. If both sides can easily understand the value of an advertising opportunity, now and in the future, it is much easier to figure out what the 'markets' think things are worth. The markets are simply the entire collection of all buy orders and sell orders. This is where people's attention is bought and sold. We've all heard the adage "if  you're not paying, you're the product.' Well, these are the exact 'products' that are being traded in Attention Markets.

An impression is a unit of attention, a view is a unit of attention, a click is a unit of attention, and action is a unit of attention, even reach is a unit of attention. In market terms real-time bidding is a spot market, cash and carry. The larger environment is a broader fabric of technology to transact attention assets. Not all are automated.

There is a great report from McKinsey&Company (download link) that helps to put this in perspective. In short, McKinsey & Company estimate that the entire advertising industry is about $1.5 Trillion (with a T) dollars global. That's one and a half million millions! That's 2% of global GDP! And we don't trade this stuff in a market like all the other major parts of our economy? Yep.

So what does all that mean to you right now? Well, buckle your seat belt, the next decade may be the largest technology gold rush since the rise of social media. Let's add a little more perspective, all global oil production in 2013 was $3 Trillion according to research from BP. The entire global oil market is only twice the size of advertising. Stop and think about that for a moment.