Over the last two years, MASS Exchange has been working on the biggest Big Hairy Audacious Goal (BHAG) in advertising, a futures exchange. Not just any futures exchange, one where any type of addressable advertising can be traded. In that time, we have spoken to many of the smartest people in the industry at agencies, publishers, RTB exchanges, DSPs, SSPs, and data providers. One of the most consistent themes we heard was “Futures exchanges have been talked about for decades. Have you looked at ________ ?” The blank was always some company that tried to do something they called a futures exchange that inevitably failed. The first thing you need to know is that contrary to any company in the advertising industry using the term ‘exchange’ to describe their business, in actuality, none of them were actually exchanges. In his piece The First Rule of Advertising Exchanges - There Are No Advertising Exchanges, Ed Montes lays out the realities of RTB marketplaces vs. true exchange. (Well worth the read by the way)
If advertising futures had been talked about for so long and had been tried by others, what makes MASS Exchange different? We approached the problem, and the consequent innovation, from a very different perspective: financial engineering. In the past, attempts to solve the advertising futures exchange problem focused on information technology solutions. The reason these solutions failed is that they brought technology solutions to solve financial engineering and market structure problems.
So, what is the advertising futures exchange problem? Funny enough, the answer can be summed up in a single word: fungibility. Fungibility is defined as the property of a good or a commodity whose individual units are capable of mutual substitution, such as crude oil, shares in a company, bonds, precious metals, or currencies. At this moment, you are probably thinking “advertising is not a commodity,” and you know what? You’re right. You have also applied conjunctive logic to conclude that if the solution requires fungibility and advertising is not a commodity (fungible), than an advertising exchange is impossible. In a context where no real innovation is applied, advertising futures exchanges are impossible.
MASS Exchange’s core innovation enables the creation of fungible advertising units that do not create commoditization. Now things get interesting…