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.