Tuesday, February 23, 2010

Kicked to the curb

The Honolulu Stock Exchange, 1910-1976I'm a believer in publisher's agents (also known as publisher brokers or--the dreaded TLA*--SSPs.) I think it's pretty obvious that they are a necessary precursor to a reasonably efficient marketplace**.

But a lot of people don't agree with me. Important people. Like Google, and Microsoft.

I've written before that I think publishers showing up in a data-driven marketplace without an agent risk getting ripped off. The value to publishers is pretty clear: if you don't have a good idea what each piece of inventory is worth to buyers, you risk mispricing it. Having an agent with the technology, data and information flow to more accurately value your inventory is critical. Publishers I know who implement the simplest of information/data-driven pricing strategies see an immediate uptick in CPMs. Right now it's easy because so few are doing it; it will get harder. As it gets harder, publishers will need better and better agents.

But the publisher agents are also critical to the marketplaces. The pub agents provide a crucial service to the exchanges: they vet publisher quality (a huge problem at the smaller exchanges), facilitate the back-office functions and will, eventually, act as credit assurance. Right now the big exchanges are reluctant to work with smaller publishers: Google, for instance, pushes them into AdSense--this looks to me like an internal political problem, in part. Microsoft, reportedly, views the pub brokers as skimming margin that is rightfully theirs. That is, they view others making money on services MSFT doesn't offer to customers they don't want as illegitimate, even though MSFT would make more money thereby.

In my opinion, Google and Microsoft are impeding progress in display. Google has a franchise to protect and Microsoft is just plain ambivalent about success. Impeding progress is a good way to get yourself disrupted.

Publishers are realizing the value of publisher agents. At some point, a critical volume of inventory will flow through pub agents and then an interesting thing will happen: the pub agents and marketer agents will all decide, en masse, to join or form an exchange--one that excludes retail buyers and sellers--and the other marketplaces will become illiquid backwaters.
* Three-letter acronym.
** Full disclosure, I'm an advisor to PubGears.

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