Google-AdMeld Deal Opens Questions

Google’s deal to acquire AdMeld, reportedly for $400 million, is a sign of maturity for the audience-buying landscape. It is an endorsement of both real-time bidding and the need for quality inventory, which AdMeld concentrated on by working with premium publishers. Neal Mohan, vp of display advertising at Google, wrote in a blog post that the yield optimization firm would help publishers get the most out of the world of exchange-based buying and RTB. But the major purchase opens up a host of questions that could determine how the landscape evolves.

What is Google buying? Relationships. In an interview, Mohan stressed that AdMeld has an impressive technology team, but returned again and again to its strength in “revenue management services.” In this he means relationships and the ability to act as a trusted yield-management service for publishers looking to maximize revenue across many channels, including RTB and fixed-price network buys. No matter how you stretch it, the price is hefty — amounting to $4 million per Admeld employee, or over $5 million per engineer. That’s pretty substantial considering the assessment of one publisher: “AdMeld is the jack of all trades, master of none.”
Will publishers bolt? Google needs to walk a fine line when it comes to  publisher sensitivities. The fact is many publishers, particularly the premium sort that are AdMeld’s customers, don’t fully trust Google. Mohan said publishers just want the tools to make more money, and Google’s interests are perfectly aligned with theirs. Maybe, maybe not. Frank Addante, CEO of Admeld competitor Rubicon Project, said, “Google has struggled to get mass adoption with the top 500 publishers because their interests are not aligned, and sometimes competitive, with the publisher.  Further, Google is a closed market that directly competes with many of the most important demand buyers (DSPs, ad networks, exchanges and other mega portals) which do not participate in Google’s closed market.” Rubicon hopes to capitalize on any anti-Google sentiment by offering 90 days free on Rubicon’s platform. Also, unlike ad servers, switching platforms is a pretty easy process. “It isn’t an incredibly sticky business,” said Michael Greene, a Forrester Research analyst.
What’s next for Google? For all the complaints about Google’s dominance, there’s appreciation for its determination when it comes to display advertising. Google was a bit player in the market as recently as 2007. Starting with its DoubleClick acquisition in April of that year, Google has steadily built power in the market to the point where others are saying it is too dominant. It recently passed Yahoo as the top seller of display advertising. Now, with Admeld, Google is on its way to piecing together and end to end solution for both the buy and sell sides in the display market. Google has steadily integrated Invite into DART. It is working on a data exchange out of Invite, according to sources. Mohan wouldn’t comment on how it planned to integrate AdMeld, since the deal hasn’t closed, but pointed out that a big goal of the acquisition was to bring simplicity to the confusing array of technologies needed by advertisers and publishers. “Our publishers tell us that despite the progress we’ve made from at technological standpoint, managing all these types of channels, direct and indirect, and formats still remains mind numbingly complex.” Or, as put by Russ Fradin, CEO of Dynamic Signal: “It means Google owns display, and only Facebook can compete.”
Who will compete with Google? Google clearly has a vision of an end to end solution that’s similar to its search ad system. Rubicon’s Addante compares this to AOL vs the open Web. DataXu CEO Mike Baker sees echoes of Microsoft and Internet Explorer. That leaves open the question of competitors. Microsoft appears preoccupied with Bing, having botched the AdECN purchase and Atlas floundering. The Google move could drive Microsoft to acquire AppNexus, which already has Microsoft as an investor and runs its exchange. Yahoo’s buy of premium-focused ad platform 5to1 indicates it is still in the game, although few believe it has the commitment of a Google. And it could provide the impetus for other players to make their move. Likely candidates: Adobe (it has Omniture and Demdex), IBM and SAP. There are also rumblings of a private equity firm-led bid to cobble together a few players to provide a compelling alternative. The M&A activity would appear likely to heat up, but then, there were the same predictions that would occur in the aftermath of Google’s acquisition of Invite Media. It didn’t happen.
Does this mean RTB is taking over? There’s a school of thought this means that RTB has arrived as a force to be reckoned with. Baker shared this view on Twitter. “Deal is driven by RTB,” he tweeted. “AdMeld did a good job on that, signed solid publishers, and Google is a big believer in RTB growth.” It’s certainly growing fast, by all indications. But let’s not get ahead of ourselves. This market is still a tiny sliver of the ad world. “Nobody’s doing huge business through these,” Greene noted. The AdMeld move is clearly aimed at premium publishers, an acknowledgement from Google that it needs to improve the inventory quality available via RTB. The perception still exists that exchanges offer mostly bottom-of-the-barrel impressions. As deal advisor Luma Partners put it in a blog post, “Now that various targeting and optimization technologies are being perfected on remnant inventory (the only inventory publishers initially made available for experimentation), its time to focus on improving premium guaranteed inventory monetization,” the investment firm wrote.