Ad Exchanges Bid to Open the Marketplace

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The Right Media Exchange, an open marketplace for online advertisers and publishers, saw rapid growth in 2005 as monthly transaction volume rose from $3 million last May to its peak at just under $12.5 million in January and around $12 million for March.

Right Media, New York, launched the exchange in April 2005. It began as an exchange for ad networks to improve their reach, among them Right Media's own ad network, but has begun to attract advertisers and publishers independently.

"The focus has shifted to bringing large advertisers and publishers directly to the exchange," said Mike Walrath, Right Media's CEO. "This is why revenue growth has tapered off [since January]. We expect to see growth as investment from the advertisers and publishers directly takes off."

Right Media's exchange serves 11,000 participants including publishers, advertisers and ad networks that buy and sell 2 billion impressions daily. Companies on the exchange include LookSmart, Tribune Interactive, 360i and Efficient Frontier.

The exchange works on the principle that bidding for an ad impression increases ROI for advertisers and profit for publishers. It emphasizes direct interaction between advertisers and publishers with no middleman. Right Media receives a fee for each transaction.

"We provide the transactional platform for these things to take place," Mr. Walrath said. "This isn't about being in the middle of every transaction. The question that publishers ask is, 'What value are the ad networks adding to the marketplace?' [Ad networks] add value by being there but some of them go to great lengths to keep their ecosystems closed."

AdECN, Santa Barbara, CA, launched a real-time auction platform in October. Ad networks and brokers auction each ad impression in real time.

"We're not out to change the way the retail end of the business works," said Bill Urschel, CEO of AdECN. "The biggest offering we have for the ad networks is liquidity and efficiency."

Along with hosting the auction, it provides matching technologies, ad serving and accounting for its seat members, ad brokers and networks, which all pay a flat fee to be in the exchange. AdECN works mainly with Expericlick, an ad network in Carpinteria, CA. It plans to sign on five more seat members in July.

For Right Media and AdECN, the trend is toward facilitating more efficient online ad spending.

"You can't be part of the impression exchange if you're not adding value by being there," Mr. Walrath said. "There are some companies that may not like what we're doing because we are raising the level of accountability in the marketplace."

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