Exchange Is a Verb

In late 2004, we at Right Media began work on a project called “linked networks.” The idea was that two networks using the same technology platform (which I named Yield Manager) could link their supply and demand into a single auction. As networks around the globe began to adopt the technology, we realized that we had created the modern equivalent of the Wall Street buttonwood tree: an ad exchange.

Six years later we live in a world full of ad exchanges. Companies are trading impressions by the billions and investing millions into improving their algorithmic buying and selling capabilities. I am prepared to call my invention a success!

Yet, in hindsight, I regret calling Right Media an exchange. In the financial world, the New York Stock Exchange is a tangible symbol of an exchange, with paper flying and traders yelling. Right Media would be the online media version of this – a convenient short hand for the trading activities that are happening all around the online media ecosystem. In practice, this isn’t true. The actual trading, just as on Wall Street, happens inside and outside of the exchanges – on private networks, through passbacks and tiered auctions – wherever buyers and sellers can squeeze a penny or two of profit from a dollar of inventory.

Given this distributed reality, it’s time to stop thinking about the word “exchange” as a noun, and instead think of it as a verb. Every time a buyer and seller meet in the digital ether, whether through RTB or a hosted trading platform, a value exchange is happening. In 2011, we’ll see many major publishers launch their own “exchange” businesses – Microsoft launched its exchange in late March.

Over the coming months, we’ll see whether private exchanges can solve some of the concerns major publishers have had about networks and exchanges. I’m hopeful that they will. On a panel at Microsoft’s Imagine 2011 conference, Quentin George, chief digital officer of Mediabrands Ventures, said “It’s ironic that while online is the most automated medium, it’s the hardest and most complicated to buy.” Let’s keep that in mind as we watch big players in the industry add their own proprietary solutions into the mix.

Brian is off today. This column was originally published on April 8, 2011 on ClickZ.