Everybody's a DSP? Everybody's a marketplace.
There's this confusing moving about in the marketplace. AdECN was a pure exchange, and is now part of a publisher. Right Media, same thing. OpenX was a publisher tool, and is now running an exchange. AdMeld similarly. AppNexus was an exchange and is now a DSP (I think.) Same with Turn (who was first an ad net before raising money to become an exchange.) Glam and FIM are publishers and now have some features of an exchange. Several of the ad agency holding companies are making unlikely noises about building their own tech. And AdEx, well... they're doing pretty much everything.
It was so confusing I made a picture of companies moving about.
A good entrepreneur will change strategies as they learn the lay of the land. But some companies who weren't exchanges are becoming exchanges and some companies who were exchanges are becoming something else so, um, how does the land lay?
Here's what I think:
- The ad exchanges know that running a marketplace should not command what they are charging, and lie awake at night fearing that their customers might someday come to the same awful conclusion.
- The customers already have.
Why is everyone becoming an exchange? Because it's just not that hard to add exchange-like functionality and escape the 20% transaction fees being levied by Google et al. An exchange is a low marginal cost, high fixed cost system. Once you've built the system, you just need to amortize the cost over a sufficient volume. That means that anyone with good volume is better off building their own than paying someone else.
If you extend this economic logic into the future, you arrive at an inevitable conclusion. Someday, someone will garner a huge amount of volume by offering exchange services at the lowest possible price, somewhere just north of marginal cost, probably in the 1% to 5% range of transaction fees. Everyone else will find that it is cheaper to use this single exchange than it is to run one themselves. Non-exchanges will stop reinventing the RTB wheel. And exchanges will be glad they moved into other lines of business.