CPX Interactive: The Standalone DSP: A Ticking Time Bomb for the Online Advertising Industry - Rob Rasko

I have been in the online ad network business for over five years now When I started in the space the market was complaining loudly about the networks and how they were a 39ticking time bomb39 waiting to explode online advertising Conventional wisdom was that ad networks would lead to a complete lack of transparency and artificially drive prices down and margins up as they commoditized online inventory I even remember a certain comment that got quite a lot of attention about the danger of quottrading banner impressions like pork belliesquot What no one counted on however was that the ad network39s position of working with both advertisers AND publishers gave them huge incentives to watch out for the interests of both sides Now while I am certainly not an alarmist it is worth noting that the real danger of inventory commoditization could easily emerge as a reality if there was a model developed to solely benefit the advertiser even at the expense of the publisher This model I fear has come to exist as the standalone DSPWhy Publishers Should Be Up in ArmsThe standalone DSP phenomenon is a private equity funded effort that promises scalability and transparency for advertisers and publishers But 39transparency39 is such a loaded word in our business If a publisher is using a third party to sell its remnant inventory does that publisher want the client to see the exact CPMs they are paying for those outsourced placements How about exact source URL information for the placements they are getting By making the system completely automated and 39transparent39 DSPs are applying strong downward pressure on a publisher39s desire to make its remnant inventory available at all Summing up a comment by the CEOFounder of a standalone DSP during a recent conversation on this topic he said quotWho cares about the publishers they are just a means to an endquot Why aren39t the publishers screaming about this kind of treatmentWhy Advertisers Should CareSo who is benefiting from this automation Well as a result of the shrunken profit margins promised by the DSPs more on this below and the ever shrinking cost of media advertisers are thrilled with how this is all progressing Agencies are happy to keep their clients happy and so they continue to blindly funnel budgets into the standalone DSPs But what happens when publishers DO get fed up being treated like commodities and they simply decide not to give remnant inventory to the DSPRTB model We will have erased from online advertising one of its real advantages cost efficiencyThe Standalone DSP is UnsustainableIt is a fairly well known fact that ad networks consistently work at margins in the 35 45 range It is also a fairly well known fact that DSP39s boast of 39fees39 in the 10 15 range It is a lesser known fact that most of these automated inventory manager businesses which are now mostly two to three years old have yet to turn a profit And yet you read in the news all the time that DSP39s continue to raise financing or seek acquisitions This is critical for them of course because a business without positive cash flow cannot survive without outside capital Still they could change their business models to allow for higher margins but that would mean doing three things that standalone DSPs can not possibly allow themselves to be seen as doingamp82301 caring about the publishers 2 offering value added services in addition to technology and 3 acting like an ad networkDisarming the BombWe have an opportunity to bring a balance between the needs of the content ownercreator and the buyers in the online advertising space As publishers look at scaling their businesses they should stop and think about who their partners are going to be To me the word partner symbolizes a relationship where both parties get something valuable in return for the effort In order for a partnership to exist there needs to be a relationship It can be tempting to look to technology to make things easier As my company has grown in this industry we too have embraced the idea of building our own platform in order to eliminate waste from the system But for us it is important that the technology be a tool and not the goal itself We have of course integrated DSPRTB functionality into our offering But we see RTB as a part of a healthy campaign integrated with more premium inventory and targeting strategies I just believe that ultimately we are still a service business and the longer we ignore that fact amp8230tick amp8230tick amp8230tickRob Rasko is the President ampamp COO of CPX Interactive a global online ad network Following a career in finance with companies such as Dean Witter and Oppenheimer Rob joined the CPX team in 2006 as the companyamp8217s 7th employee Rob can be reached at RobcpxinteractivecomCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerMediaBizBloggers is an openthought leadership blog platform for media marketing and advertising professionals companies and organizations To contribute contact Jackmediadvisorygroupcom The opinions expressed in MediaBizBloggerscom are not those of Media Advisory Group its employees or other MediaBizBloggerscom contributors Media Advisory Group accepts no responsibility for the views of MediaBizBloggers authors

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CPX Interactive: The Standalone DSP: A Ticking Time Bomb for the Online Advertising Industry - Rob Rasko

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