Blog Post

Ad Exchange Market Gets More Crowded But Future Still Uncertain

In a matter of months, online ad exchanges have gone from relative obscurity to a “must have” component for major internet players. As we’ve noted when online ad firm DoubleClick was looking to make itself into a more attractive acquisition target, it began work on setting up an online ad exchange, which helped ultimately justify its $3.1 billion purchase price to Google. And although completed after that purchase, Yahoo’s $680 million buyout of established online ad exchange Right Media following its 2006 investment in the company would seem to put it in the lead. Whether it does or not, the space is likely to get increasingly crowded, as the WSJ reports that Microsoft, fresh from its pending $6 billion acquisition of digital ad shop aQuantive, is working on its own online exchange and may purchase some smaller players.

At the moment, however, ad exchanges are still in the nascent stages. Typically, these exchanges let advertisers see what competitors bid for particular ads, and it will let publishers try to ensure that they sell their ad spots at the highest possible price. It’s seen as a way to sell the vast amount of unsold ad spaces by automatically matching potential customers with marketers. And while there is concern that with the internet giants dividing up the market, the exchange model may be stifled because marketers won’t be able to choose one distinct platform (it’s as if there were several competing Nasdaqs). But some argue — usually those with a stake — that there will be more than enough ad inventory to go around; DoubleClick CEO David Rosenblatt estimates exchanges could eventually handle 50 percent of all display ad sales.

Not everybody is jumping on the bandwagon, however, as Publicis Groupe’s Digitas, which tends to concentrate on large clients still looking for a degree of mass, contends that its clients will continue to demand that kind of hands-on negotiation its human ad sellers can provide.