New York-based Right Media was set to launch an automated online ad exchange Monday that would allow Web sites to auction off display ad space to the highest bidder, rather than having to go through ad networks or agencies that set prices and take a cut.
Right Media offers advertisers the option to bid on non-premium, or commodity ad space, for display or banner ads, said Michael Walrath, chief executive of Right Media.
It serves as an alternative to ad networks in which prices are set, like Yahoo Publisher Network and ValueClick, he said. Right Media Exchange will take, on average, 7.5 percent of each transaction, he added.
After 15 months of building up the platform, Right Media Exchange has 11,000 advertisers and $12.5 million in total revenue changes hands on the exchange monthly, according to Walrath.
Greg Stuart, chief executive of the Interactive Advertising Bureau, said he could not comment directly on Right Media Exchange, but said the notion of an online ad exchange is not new.
"There were three or four pretty big flameouts in this space" over the years, he said. "We have yet to see if that model will actually work for advertising."
For example, there is MatchCraft, which started out as an online advertising exchange more than seven years ago and now offers search engine marketing. Another online ad auction firm that fizzled was Adauction.com.
"What we learned is that to have a many-to-many exchange...you need to get a critical mass of buyers and sellers," said Uzi Eliahou, co-founder and chief executive of MatchCraft. It was difficult to get advertisers to change their ways, he added.
Another problem is that brand advertisers tend to want to keep tight constraints on where their ads are placed, IAB's Stuart said.
"I would agree that the current rate-card model that is typical for online, television and magazines creates a lack of fluidity in the marketplace. It doesn't recognize that different marketers would value things at different pricing," Stuart said. "So, if they can create some liquidity in the marketplace that would be a good thing."
Tim Hanlon, senior vice president of Denuo, the media futures consultancy of Publicis Groupe, agreed.
"There's been a lot of talk around having more open, transparent exchanges for media," he said. "The process we use today is relatively opaque and, you could also argue, wildly inefficient."
Google's popular AdWords auction system for keyword-based search ads shows that it can work, at least for search-related ads, Hanlon said. "Clearly, Google has proven that an open, more transparent biddable marketplace is viable."
Asked why he thinks the market is ready for an online ad exchange now, Right Media's Walrath said there are many more advertisers now than when the previous companies failed. "It's a much more complex market, and because of that the incentive to find efficiency is greater than is was previously," he added. "Also, technology has come a long way in the last 5 to 10 years, and things are possible today (and costs are such) that the comparison to the auction models of that past is not really apples to apples."