Explainer: Private Ad Exchanges

How it Works: Private ad exchanges give publishers the ability to restrict which advertisers can bid, the minimum price and data used. They may offer new premium inventory or leftover inventory that advertisers are seeking at bargain prices. Quality controls embedded in the RTB platform permit a high-degree of customization as well as transparency regarding pricing and ROI.

Why it Matters: Publishers, online and offline, are creating private exchanges because they are able to attract higher CPM rates than on traditional ad networks because of greater transparency around quality and the degree of control offered to advertisers. They also offer a degree of control that publishers feel they’re unable to get through broad exchanges like DoubleClick’s and Right Media’s. According to Forrester Research, CPM rates for some exchanges have gone from $1 to $5. Advertisers are often more comfortable with ad exchanges than ad networks because inventory being purchased is restricted to specific publishers, often with premium inventory.

Who is Doing it: New exchanges seem to be popping up everywhere, ranging from mini-ad exchanges like that of Technorati, to large-scale online and offline publishers such as those in QuadrantONE, which includes the New York Times. Some leading private exchanges from publishing, digital and cable are Forbes.com, CBS Interactive, IDG and NBCUniversal.

Assessment: Private ad exchanges have become the new flavor of the industry. Publishers naturally want higher CPMs and brands want better access to premium content with a closer relationship with publishers. They could prove to be a key part of making brands comfortable with programmatic ad buying in ensuring buyers they won’t be in undesirable places. They could also increase the supply 
of high-quality inventory available via RTB.