GroupM Plans to Ditch Open Ad Exchanges
By JACK MARSHALL, WSJ CMO Today
WPP’s media buying unit GroupM will stop buying online ads from open ad exchanges entirely by the end of the year, according to its chief digital investment officer, Ari Bluman.
Open ad exchanges are the automated online marketplaces through which large quantities of digital ads are now sold. They are designed to provide marketers with an easy way to purchase advertising across a wide range of websites, as opposed to striking deals directly with multiple publishers individually.
But according to Mr. Bluman, GroupM is concerned about the quality of ad inventory that’s available in these marketplaces, and the lack of transparency they provide. As a result, the agency group now aims to buy ads directly from publishers and media companies only, although it will still do so using automated buying technologies commonly referred to as “private” exchanges.
“We spend a lot of money and our clients are large. With GroupM’s level of spending we can get everything we want right from publishers. Instead of buying through an exchange we can just buy it from the source,” Mr. Bluman told CMO Today. He first mentioned the plan during a recent interview with digital video site Beet.tv.
GroupM’s decision could affect the wider online advertising ecosystem. The unit is widely considered the largest ad buyer in the world in terms of dollars spent.
The decision was driven by a range of factors, Mr. Bluman said, including concerns about the level of ad fraud associated with exchanges, and the commission fees GroupM has to pay both exchanges and other middle men when it doesn’t buy directly from publishers. Even though ads purchased through open exchanges are sometimes very cheap, the cost savings are regularly negated by quality issues, he explained.
“There’s a lot driving this, but overall accountability is a big factor. If the stats are right and 30% of traffic in exchanges is fraudulent and 50% of ads are not viewed, then ad rates are irrelevant because anything is too much,” Mr. Bluman said, adding, “We’re looking at accountability overall. It’s one big massive cleanup for us.”
GroupM isn’t the only WPP unit that says it’s veering away from open exchanges. Xaxis, a division of the holding company that specializes in targeting ads to specific consumers on behalf of GroupM and other companies, said it plans to take a similar approach. Currently Xaxis still purchases ads through exchanges for some of its campaigns, but it’s hoping to rely on them less by striking more deals directly with media owners.
“We share [Mr. Bluman’s] views. We believe our clients should sit above the open exchanges,” said Brian Gleason, managing director of Xaxis’s North American operations. “GroupM is making this announcement, but we’ve been moving towards this for three years. For us it’s about taking advantage of technology but doing so in a controlled and protected environment,” he added.
Xaxis also resells advertising to GroupM agencies, however, so GroupM agencies could wind up purchasing ads sourced from exchanges if and when they buy from Xaxis.
But long-term both GroupM and Xaxis said they believe direct relationships with publishers are preferential for clients, and could end up putting more ad dollars in publishers’ pockets.
“We think we can gain back some efficiency this way. We don’t need middlemen as much as there are middlemen. If private deals take some of those players out of the game then more money ends up with the publisher,” Mr. Bluman said.
In the interim, however, GroupM must go through the complicated task of integrating its buying technologies with hundreds of publishers in an attempt to make its vision a reality.
“It will take several hundred deals for this to happen, but we’re on the way,” Mr. Bluman concluded. “I don’t see many holes in our thinking here. There’s no brand we work with that’s looking at [open exchange inventory] and saying ‘oh my God, what will I do without that?”
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