NBCU Builds Private Exchange, Reducing Use Of Third Party Networks

NBC Universal

NBCUniversal’s year-old Universal Audience Platform is morphing from an online ad network into a private ad exchange powered by supply side platform AdMeld that’s intended to serve as a direct line to the major ad agency trading desks. “We still use ad networks and open ad exchanges, but we plan to dial the use of those third party services down as we dial up our private marketplace,” said Peter Naylor, EVP, Digital Media Sales for NBCU (NSDQ: CMCSA), in an interview. “It’s all about being able to access buyers through exchanges, but without giving up the kind of control over our inventory that we have with direct premium sales.”

There’s been a lot of attention being paid to SSP’s “private exchanges” or marketplaces. In addition to AdMeld, which is the object of a pending $400 million sale to Google (NSDQ: GOOG), the other major SSPs, Rubicon Project and PubMatic, for example, have launched over a dozen private marketplaces over the past few months.

For many major publishers, the concern about ad exchanges is that real-time bidding platforms and exchanges are viewed as an advantage to agencies and marketers, who primarily want to bid down the price of ad inventory in a variety of ways, including automated buys. Although the amount of dollars going into RTB is still relatively small versus the total $26 billion U.S. online ad market, more and more dollars are being funneled through exchanges. It’s growing rapidly, as a recent Forrester study, commissioned by Admeld, offered what can be considered a conservative prediction that spending on RTB will rise to $823 million in 2011 for a 130 percent increase over 2010.

To many premium publishers, RTB is half-jokingly referred to as “race to the bottom.” But as advertisers’ dollars increasingly flow into exchanges, publishers have been amenable to private exchanges, which promise to protect publishers’ relationships with advertisers and agencies and allows them to set specific terms with specific buyers, as opposed to just opening their inventory widely for any agency to bid on one.

“Like most publishers, we have an opportunity to do get the most out of our non-premium inventory,” Naylor said. “Initially, the answer was, ‘Why don’t we outsource it to third parties?’ But we’ve been unimpressed with the CPMs we’ve gotten. We’ve had a relationship with AdMeld that goes back a few months, so we thought we have them build an exchange that allows us to connect with the major agencies. There are some publishers who are nervous about the exchange busienss. It’s inevitable that this will be transacted this way. I don’t want to be on the outside looking in.”

In terms of defining what he means by maintaining “control,” Naylor noted that each sale is “pre-emptable” by the NBCU sales team, which will a group dedicated to monitoring the exchange on a day-to-day basis. “I was hopeful that you could just plug it in and the process would just take care of itself,” Naylor said. “But for a private exchange, there has to be a degree of hands-on sales to make sure it’s working right.”

Naylor wouldn’t say how much inventory would be placed within the private exchange, saying that the amount will fluctuate depending on how much unsold inventory there is. For example, Q4, typically a time of heavy demand for the holiday shopping season, is likely to be a slow period for the exchange.

He was adamant that AdMeld is simply providing the technology, but that NBCU is in complete control of the sales strategy. “The best analogy that I can come up with is that we make TV shows and we use cameras to film them — but we don’t make the cameras,” he said.

UAP inventory is sold solely by targeting audiences and not by specific websites, which is how an exchange works. It will rely on data providers including BlueKai, Nielsen and Quantcast to create the audience profiles, which can include demographic composition, behavioral patterns, geographic location and purchase intent. That data can also be supplemented with additional data from the marketers.

The UAP network will cover inventory from all of the NBCUniversal Entertainment sites – bravotv.com, nbc.com, oxygen.com, syfy.com, usanetwork.com – as well as cnbc.com, accesshollywood.com, mun2.com, nbcsports.com, the 10 NBC Owned Television station websites, telemundo.com and mun2.tv.

The private exchange will also handle sales from outside publishers. Reuters (NYSE: TRI), for example, recently began contributing inventory to the UAP, making it the first non-NBCU property to do so.

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