Ad Network Platforms vs. Demand Platforms

Lets define before we begin.

Ad Network Platforms:  platforms being built by current ad networks to service agencies and brands directly
Demand Platforms:  meta platforms that sit on top of multiple inventory sources

There seems to be a battle brewing between ad network platforms vs. demand platforms.  The trend I’ve spoken about on this blog for a while now and is now picking up at a faster pace are the ad networks we’ve all known to love (or hate) that are creating their own “platform” for brands and agencies to pull the levers instead of the people in their services group.

There are three types of ad network platforms that are being built out and non of them are mutually exclusive to the other:

  • Platform for buying audience segments & data
  • Platform for buying media
  • Platform for creative optimization

In theory and at first glance, these seem directionally right to where the industry needs to go.  Why wouldn’t brands or agencies adopt an ad network platform for their own use in their VMM/VivaKi/Cadreon/Adnetik/B3/ATOM group?  This is the major question and note, I can only speak for myself (VMM), but because this blog is of personal nature, I am voicing my own views, not the views of my employer (disclaimer).

The macro hypothesis that is being tested is:  agencies or specialist agency groups want to bypass the managed services part of ad networks and build the capacity for audience selection/procurement, optimization, and insights/analytics internally under the umbrella of whatever holding company they are employed at.

This post does not go into the reasons as to why this may or may not be smart but rather talks about why ad networks should not focus on building their own platform.

If you agree or can assume the hypothesis above, then continue reading.

The first iteration of ad network platforms (not to be named, but if you want a list, contact me) still are a closed loop system.  The reason why you would use a demand platform unit on the buy-side is that you want access to as much inventory as possible in order to make the smartest decisions for your clients (open).  By using one or even four different ad network powered platforms, you are making the job of inventory & data procurement and optimization harder than it needs to be.

Multiple platforms means multiple log-ins.  Apples to apples comparisons are not easy to make as each platform is slightly different.  Universal cookies are tough to pull off.  Biforcating data.  Duplication of bidding leads to artificially inflated pricing.

There needs to be a layer that plugs into the networks – i.e. a meta platform that can plug into as many inventory sources (networks, exchanges, sites direct, etc) as possible in order to aggregate as much data and media inventory.  I do not foresee a company like AudienceScience allowing X+1 to plug into it or vice versa in the near future.   That 3rd party layer is going to be crucial and that’s where the buy-side demand platforms sit.

I do not foresee agencies using multiple ad network powered platforms in the long run which means there is a forthcoming (and current) land grab to be the agency side demand platform of choice.

My friend Fred Wilson who blogs over at AVC likes to post entries on his blog that have his “wants” and hopes that people take note and action them.  I’m going to borrow that idea from him and try this here.  This is what I want within the demand platform and ad network platform space:

  • Ad networks to scrub their data and make it available for purchase without the media attached
  • Ad networks to plug into as many demand side platforms as possible (i.e. Invite Media, Media Math, Turn, etc)
  • Figure out the issues around appending cookies visa vi multiple vendors (universal cookie?)
  • Data should not have ‘minimums,’ if it works, we’ll buy more, if not, we’ll be back again to test another data set
  • Let the market price media and data as the real value will rise to the right buyer
  • Regulation/restriction/firewalls between the same company who sells/licenses/rents data and whom sells media

Anything else I’m missing?

  • http://www.attentionmax.com maxkalehoff

    Great breakdown. What’s missing?
    - Stronger privacy standards: That’s an underlying risk in this big mess.
    - Simplification: You’re very articulate, but boy…this is a tough ecosystem for anyone to follow.

    • http://www.darrenherman.com dherman76

      Yes, a very tough ecosystem to follow and even tougher when you dig deeper into each holding company.

  • http://www.attentionmax.com maxkalehoff

    Great breakdown. What's missing?
    - Stronger privacy standards: That's an underlying risk in this big mess.
    - Simplification: You're very articulate, but boy…this is a tough ecosystem for anyone to follow.

  • http://www.darrenherman.com dherman76

    Yes, a very tough ecosystem to follow and even tougher when you dig deeper into each holding company.

  • Michael Katz

    I think the biggest difference is that the guys from the demand side platforms don’t actually work. You guys just show up on every panel, answer every interview, and blog all day.

    Kidding, this is good stuff regardless and always interested in what you have to say…thats why Im here in the first place.

    Good clarification.

    • http://www.darrenherman.com dherman76

      Thanks Michael – appreciate the comments. It’s amazing how much attention it gets, but I guess since most of the platforms are being adopted by big agency holding companies that are public entities, they get alot of attention because of the markets.

  • Michael Katz

    I think the biggest difference is that the guys from the demand side platforms don't actually work. You guys just show up on every panel, answer every interview, and blog all day.

    Kidding, this is good stuff regardless and always interested in what you have to say…thats why Im here in the first place.

    Good clarification.

  • Pete Kim

    Comments:

    1. Though mentioned, I think the role of the various exchanges will be larger than seems to be implied, if only because it’s easier for the various DSPs to integrate with a handful of exchanges than dozens of individual networks.

    2. The role of creative optimization in the DSP stack should be examined. (I posted about that the other day: http://www.petekim.com/?p=20)

    3. What’s the pricing model for DSPs? Should they take a percentage of the media buy? Or should they take a flat fee to ensure incentives are aligned?

    4. What happens in the end? Let’s fast forward 10 years and look around. How many DSPs are left standing? What would it take for a single dominant DSP to emerge? What would it take for the DSP landscape to be wildly fragmented? What controls where we land between these two extremes?

    • http://www.darrenherman.com dherman76

      Pete, thanks for stopping bye. Great comments. Would love to engage in an offline conversation.

  • Pete Kim

    Comments:

    1. Though mentioned, I think the role of the various exchanges will be larger than seems to be implied, if only because it's easier for the various DSPs to integrate with a handful of exchanges than dozens of individual networks.

    2. The role of creative optimization in the DSP stack should be examined. (I posted about that the other day: http://www.petekim.com/?p=20)

    3. What's the pricing model for DSPs? Should they take a percentage of the media buy? Or should they take a flat fee to ensure incentives are aligned?

    4. What happens in the end? Let's fast forward 10 years and look around. How many DSPs are left standing? What would it take for a single dominant DSP to emerge? What would it take for the DSP landscape to be wildly fragmented? What controls where we land between these two extremes?

  • jassimali

    Darren,

    Great breakdown of an increasingly complex and ever evolving side of the industry ……

    Do you see this trend being adopted in other markets such as europe and asia soon enough where the ad inventory trading platforms are atleast a generation behind ?

    • http://www.darrenherman.com dherman76

      In some cases, it is being adopted in markets such as Europe and Asia. Our friends over at Havas have been live oversees for some time now.

      I would say the market is most technologically sophisticated here in the US however as of right now.

  • jassimali

    Darren,

    Great breakdown of an increasingly complex and ever evolving side of the industry ……

    Do you see this trend being adopted in other markets such as europe and asia soon enough where the ad inventory trading platforms are atleast a generation behind ?

  • http://www.darrenherman.com dherman76

    Thanks Michael – appreciate the comments. It's amazing how much attention it gets, but I guess since most of the platforms are being adopted by big agency holding companies that are public entities, they get alot of attention because of the markets.

  • http://www.darrenherman.com dherman76

    Pete, thanks for stopping bye. Great comments. Would love to engage in an offline conversation.

  • http://www.darrenherman.com dherman76

    In some cases, it is being adopted in markets such as Europe and Asia. Our friends over at Havas have been live oversees for some time now.

    I would say the market is most technologically sophisticated here in the US however as of right now.

  • http://www.rocketfuelinc.com/ Richard Frankel

    Good discussion, as always, Darren.

    As I see it, the real differentiator in the marketplace will be value creation. It’s not about ad networks vs. demand platforms. It’s about which players (whether they are ad networks, platforms, ad agencies, publishers, etc.) can create more value. This can be done in a lot of different ways — technology, people, process, great ideas.

    As agencies start to build tools that aggregate demand on top of the efficient supply mechanisms, they will still need to stay competitive by taking advantage of whatever value-creation mechanisms exist in the ecosystem. The business models of these companies don’t really matter, what does matter is who creates value.

    One of the biggest barriers — and opportunities — as the environment develops is that every player will be running a closed garden. The agency platforms you mentioned are by nature closed, ad networks are closed, portals are closed, publishers are closed. The exchanges are closest to being truly open, but they all have their own limitations and business model drivers that lead them to block off data.

    Fundamentally all the different kinds of structures — as long as they create value — can exist. Look at financial markets. It’s not a great analogy but it’s helpful. The stock markets are kind of open, but there is a huge diversity of valuable organizations (trading houses, mutual funds, hedge funds, brokers, day traders, etc. etc.) that co-exist in the marketplace on top of the markets. I see the display space being potentially as vibrant.

    • http://www.attentionmax.com maxkalehoff

      A big question for me is whether agencies will succeed in building technology that can scale across diverse client needs. Historically, agencies have had a difficult time building technology and making it scale like a product. In fact, many advertising-technology initiatives retreated into agencies when they failed as scalable products — we’ve seen that happen a lot in the SEM space.

      • http://www.darrenherman.com dherman76

        I think there are very few agencies who can build the technology. While we can all write checks, I do not think that many people want to own the technology at this point up and down the entire value chain. There are certainly parts of the value chain we do want to own and we’re building that capability out. As for the hardcore tech portion – I’d agree that most holding co.’s not only won’t succeed building the tech but do not have the right type of management in place to understand how to run a tech company.

    • http://www.darrenherman.com dherman76

      Richard, thanks for dropping by. Great comments. I can’t speak for all agency platforms, but the ones that we are building the capability for is fairly open – we want to plug into as much as possible in order to have access to as much data and media as possible.

      It’s all about value creation.

  • http://www.rocketfuelinc.com/ Richard Frankel

    Good discussion, as always, Darren.

    As I see it, the real differentiator in the marketplace will be value creation. It's not about ad networks vs. demand platforms. It's about which players (whether they are ad networks, platforms, ad agencies, publishers, etc.) can create more value. This can be done in a lot of different ways — technology, people, process, great ideas.

    As agencies start to build tools that aggregate demand on top of the efficient supply mechanisms, they will still need to stay competitive by taking advantage of whatever value-creation mechanisms exist in the ecosystem. The business models of these companies don't really matter, what does matter is who creates value.

    One of the biggest barriers — and opportunities — as the environment develops is that every player will be running a closed garden. The agency platforms you mentioned are by nature closed, ad networks are closed, portals are closed, publishers are closed. The exchanges are closest to being truly open, but they all have their own limitations and business model drivers that lead them to block off data.

    Fundamentally all the different kinds of structures — as long as they create value — can exist. Look at financial markets. It's not a great analogy but it's helpful. The stock markets are kind of open, but there is a huge diversity of valuable organizations (trading houses, mutual funds, hedge funds, brokers, day traders, etc. etc.) that co-exist in the marketplace on top of the markets. I see the display space being potentially as vibrant.

  • http://www.attentionmax.com maxkalehoff

    A big question for me is whether agencies will succeed in building technology that can scale across diverse client needs. Historically, agencies have had a difficult time building technology and making it scale like a product. In fact, many advertising-technology initiatives retreated into agencies when they failed as scalable products — we've seen that happen a lot in the SEM space.

  • http://www.darrenherman.com dherman76

    Richard, thanks for dropping by. Great comments. I can't speak for all agency platforms, but the ones that we are building the capability for is fairly open – we want to plug into as much as possible in order to have access to as much data and media as possible.

    It's all about value creation.

  • http://www.darrenherman.com dherman76

    I think there are very few agencies who can build the technology. While we can all write checks, I do not think that many people want to own the technology at this point up and down the entire value chain. There are certainly parts of the value chain we do want to own and we're building that capability out. As for the hardcore tech portion – I'd agree that most holding co.'s not only won't succeed building the tech but do not have the right type of management in place to understand how to run a tech company.

  • sahilg

    Great read. Sometimes it seems like a real CF, so I appreciate your wide angle perspective.

    The Ad Network landscape is fairly balkanized. Is it inevitable that the same fate awaits DSP’s? Is that necessarily a bad outcome for DSPs? If not why and how can it be avoided?

    When we talk about adding value, what do think the smart ad networks and DSP’s need to do together so that 1+1=3

    Where do you see ad optimizers. Are they considered an ad network in your worldview?

  • sahilg

    Great read. Sometimes it seems like a real CF, so I appreciate your wide angle perspective.

    The Ad Network landscape is fairly balkanized. Is it inevitable that the same fate awaits DSP's? Is that necessarily a bad outcome for DSPs? If not why and how can it be avoided?

    When we talk about adding value, what do think the smart ad networks and DSP's need to do together so that 1+1=3

    Where do you see ad optimizers. Are they considered an ad network in your worldview?

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  • Ram

    For anyone to setup a new ad network platform, its not too tough as people think and would have thought. It has been made very easy. Just choose an open source like OpenX and have dJAX Adnetwork Package to it and that is what all you would need and it has all the options what you have require. 

    This has been most liked and recommended by many in recent times. 

  • http://twitter.com/dreamajax_ram Ram Kumar

    Also, look at the ready made platform like this and it would help anyone to setup an independent adnetwork from the scratch with all options.

    http://www.openxservices.com/openx-installation/ad-network-modules/djax-ad-network-for-openx.php

  • Ram

    For anyone to setup a new ad network platform, its not too tough as people think and would have thought. It has been made very easy. Just choose an open source like OpenX and have dJAX Adnetwork Package to it and that is what all you would need and it has all the options what you have require. 

    This has been most liked and recommended by many in recent times. 

  • http://twitter.com/dreamajax_ram Ram Kumar

    Also, look at the ready made platform like this and it would help anyone to setup an independent adnetwork from the scratch with all options.

    http://www.openxservices.com/o

  • Wendy

    Software platform to run an Ad network 
    AdServingSolutions