‘Demand-Side’ Networks Give Agencies a Boost in Display

Wednesday, 08. 5. 2009  –  Category: Enversa Companies

Demand Side Ad Exchanges

The business world is dynamic and ever changing, and this is certainly true in the online advertising sector. New methods for buying and selling are emerging rapidly so that agencies can realize greater sales and profits.  Traditionally, advertising agencies and networks work together to bring buyers and sellers together.  But, in order to curtail a drop in rates, agencies are boldly moving to capture more of the display market dollar.

The economic difficulties of these agencies are well documented. As the networks have captured more of their profits and they have seen their margins drop by as much as ten percent, they are becoming more active in the buying process to offset this trend. Ad agencies have entered into the demand side with the hope that this will improve their revenues.

How does demand side ad exchanges work? They buy inventory in large quantities at low rates and, by using their advertising expertise, target it to a specific market and sell it for a profit.

Many will argue that this is monopolistic or a conflict of interest. Doesn’t this give the ad agencies an unfair advantage?  And is it good for the client to be tied to this type of network rather than having their agency find the correct mix of advertising partners to run their message?  While accusations abound, it is the framework of the system that has promoted this change. In order to be effective, inventory must not only be easy to review, easy to track but also easy to obtain; which are issues that currently exist in today’s market.

It is not known how this trend will translate to business in the future. Who will ultimately benefit and who will lose is not presently evident. Will the ad agencies realize more profits and keep them for themselves or will they use their added leverage to benefit their clients?

What is known is that ad agencies now have a great deal of clout in this market. They have the marketing expertise and the money to buy inventory and, make no mistake about this, they are being aggressive. Understandably, the ad agency executives view this development as a great benefit to both sides.

The demand ad exchanges are still in the infancy stage. 2009 will be the year that the systems are incorporated into each other and their usability will be proved. Then, in 2010, the demand platforms will really begin to evolve and begin to include the supply markets. The supply market, up until now, has been extremely fragmented so analysts are carefully watching to see how this will develop.

There are some ad exchanges that are in a much better position to deal buying and selling than others. They are typically the middle man between the buyer who offers a price and the sellers who will either accept or reject the offer. If a mutual price can agreed upon, then the sale can move forward. However, the networks will still be needed and they won’t be eliminated.

There is a tremendous amount of work being done in this area.  Ad agencies’ demand platforms are under development with both large and small companies involved. Many companies are developing technologies and systems that specifically will be used to further promote these demand side exchanges but, once this is certain, this trend will continue to grow. Who will benefit from this change in business remains to be answered.

Marc Pickren is the President of Enversa- a performance-based marketing agency.

Tags: advertisers, agency, Demand Side Network, Display Advertising, Marc Pickren