When I first thought about an ad futures exchange, my first reaction was who would be crazy enough to try that. “Advertising is not bought and sold on an exchange and publishers have resisted the commodification of their ad space,” I thought to myself. I quickly realized my knowledge of how advertising is bought and sold was a stumbling block to seeing how it could be done. The internet has been a transformative force in our culture but it is interesting how transformative forces meet practical resistance from the old ways we do things. The infrastructure that has been put in place over the last decade and a half has given us an incredible amount of data about how people interact with information. It has allowed us to finally have better insight into media consumption. The increased granularity of audience demographics has given advertisers and publishers new opportunities for targeting customers and potential clients. The problem is that none of these transformative forces produced the revenues that were promised.
As the amount of sharing of content rose exponentially with the development of the internet, it came as no surprise that publishers have freaked out. First of all, I think we can all agree that many in the publishing industry got caught with their pants down; the entertainment industry has had a hard time adjusting. When people changed how they consumed media the business model also drastically changed. Even with all the accusations that the industry is calcified and slow, it is no wonder that they struggled with this change because the ideas and solutions offered to major publishers lost them revenue in the long term. The idea that sharing is more valuable in an information economy may seem obvious but how that is monetized is not quite as clear.
Many people have been trying to solve the issues in advertising as an information problem rather than a financial engineering problem. Many of these solutions failed, even though some were visionary or on the right path, because the infrastructure wasn’t quite there due to poor timing. Many of the tools to solve the problems of how to monetize advertising have existed in the fin-tech space, but the idea of decentralization has led to many different solutions for the same problem. Ad-tech has been trying to reinvent the wheel with complex technology for a while, and in my humble opinion, has failed to produce anything truly innovative. This is why publishers have failed to jump at “the great opportunities” technologists have offered them.
Some of these solutions have slowly been making their way into ad buying and now everyone is talking about programmatic direct being the next big thing. As popular and interesting some of the RTB solutions are, many of them have driven down CPM rates for premium publishers. RTB has been an important step in the development of how ad buying works, but it has been interesting that there is not a better way to provide some form of portfolio insurance in the ad buying space. It is even more interesting when we consider that last year online ad spending surpassed print and that there have been serious attempts at selling television advertising using programmatic tools
When I really sat down and thought about all of this I was a little blown away at how arcane much of the ad buying/selling space is. The internet has promised new ways of doing things and I feel like I can see them on the horizon. I think that a real futures exchange for advertising will be a huge step in creating a new ecosystem that will radically organize and change the space. I can see an environment that should be a win-win for both advertisers and publishers.
The culture shift that has happened in ad buying has changed some of the tools but it has not transformed the industry yet; old school direct ad buys are still a much larger slice of the pie than programmatic ad buys. MASS Exchange is the missing piece of the puzzle that has come at the right time. It solves the problem of how to have a fungible asset that can be traded without taking away the pricing power from publishers. It allows publishers to optimize the yields from their portfolio of assets. By buying advertising on an eCPM basis, advertisers will spend less to purchase the inventory they want and simultaneously produce better revenue streams for publishers by growing the market.
A real exchange for futures paves the way for better implementation of standards and better metrics. It decreases the exposure to fraud that makes some advertisers hesitant to using programmatic platforms. In short, I believe MASS Exchange holds the solution to the problems that have eluded the industry for both publishers and advertisers.