More On WPP-Yahoo Exchange Deal: Walrath: ‘We’ve Reached Scale’

Although WPP CEO Sir Martin Sorrell used the term “frenemy” to describe Google’s (NSDQ: GOOG) relationship to the ad industry, to a lesser degree the the word was often applied to Yahoo (NSDQ: YHOO) as well, as it too was viewed as encroaching on agency territory with every interactive marketing acquisition. It would seem that at least as far as Sir Martin is concerned, the issue of crossed boundaries on the part of Yahoo is a thing of the past as the two companies agreed to partner on the sale of display ads through Yahoo’s Right Media exchange.

I spoke to Mike Walrath, SVP, Yahoo Advertiser Marketplace Group, about the deal (shameless plug: he’ll be appearing at our EconAds Seminar on June 3rd). With WPP now on board, Walrath, the former CEO of Right Media, is now concentrating on signing up other ad-holding companies. “We’re talking to everybody,” especially all the major ad firms, Walrath said, though he declined to drop any names or offer a timeline as to when the next agreement might close. The most likely agency company to follow WPP is Publicis Groupe, which has been almost as aggressive as its UK rival in building up its digital capabilities through acquisitions and partnerships over the past year. More details from my conversation with Walrath after the jump.

The pitch: So what have Walrath and Yahoo been saying to convince agencies to join them? Agencies have realized that the ad exchanges, which offer auction-based, automatic targeting for ads across thousands of websites, still don’t represent much of a threat to traditional media buying. The idea is that exchanges can extend the advertisers’ reach on the web, supplementing the usual functions of media buying and promising greater efficiencies. “The real benefit here to WPP’s clients is that they can be more precise in what they target and, obviously, create more return for marketers’ ad spending.”

Learning curve: Publishers may still be concerned that exchanges and ad networks treat ad space like a commodity, but advertisers don’t seem to mind. “There is still a lot of confusion about ad exchanges and ad networks, mostly on the part of publishers, but really, it’s akin to the differences between the New York Stock Exchange and Merrill Lynch. We’re starting to see, and the partnership with WPP represents this, companies are embracing new ways of managing their digital ad spending. The only concerns advertisers have – which stem from publishers’ wariness – is whether this will ever be a liquid enough market for this to be really beneficial, will it ever get to a large enough scale. But with 6 billion ad impressions a day being traded among 5,000 participants in the marketplace, I can say that we’ve reached that scale. And this is where the tipping point comes.”

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