NEW YORK (AdAge.com) -- For years, online advertisers have used online ad exchanges to buy display advertising. But now exchanges are also coming to the more complex and fractured world of online video.
Adap.tv, a 3-year-old Silicon Valley video ad-serving company, has opened the doors on the first online video ad exchange, and is expected to announce as much Tuesday; Gannet, Demand Media and dozens of local TV stations are trying it out, as well as Publicis Groupe's Vivaki and Omnicom Group's OMG Digital.
But Adap.tv won't be alone: As more sites outsource their video ad serving and adopt standards from the Online Advertising Bureau, online video ad exchanges promise to become more commonplace. The need they fill is to service the vast low end of the market where news, semi-professional and amateur video has been difficult for publishers to monetize.
More video exchanges coming
Several video ad networks are said to be developing their own exchange-like capabilities, and there is little stopping the big display ad exchanges from developing the capacity to trade video inventory as well. Adap.tv CEO Amir Ashkenazi said several large video ad networks were already buying in the exchange, but declined to name them.
The online video market is starkly divided with a high end consisting of premium content such as TV, music videos and other professionally produced entertainment, which is highly in demand by brand advertisers, and a long tail of low-end semi-pro and user-generated clips, which also may be valuable to some advertisers.
There is plenty of inventory on the low end but very little premium inventory. Brand advertisers may want to construct custom programs around scarce and expensive premium video; they may also want to buy as many targeted impressions as possible, such as Reckitt Benckiser did last year with cost-per-thousand-viewer ad rates as low as $1.
Adap.tv's exchange offers publishers an additional sales channel for video that they might not be able to otherwise sell. It also gives agencies the opportunity to buy video audiences in near real-time without dealing with multiple publishers or ad networks.
"It is the same thing we're doing with audience on-demand in display," said Sean Kegelman, senior-VP at Publicis unit Vivaki Ventures. "It's the idea of addressable audiences for display and now for video and, ultimately, for TV."
Lower ad rates?
Display ad exchanges, and ad networks before them, are also blamed for separating ads from their context and driving down ad rates across the web, which is great for agencies and marketers but not so great for publishers.
Mr. Ashkenazi said the company has built in protections that make their system less real-time than a display ad exchange, but give publishers more control over what campaigns they accept and which they don't, even allowing publishers to manually approve each bid, if they chose.
But the notion of near real-time video ad buying is a major break from the past and stands in stark contrast to TV, where inventory is generally bought well ahead of time. Similarly, online video advertisers face difficulty finding enough inventory for mass campaigns. Reckitt Benckiser's biggest challenge in placing its $20 million campaign was finding enough inventory at the low price they were willing to pay.
Will video ad exchanges take the same toll on video ads? Not necessarily, Mr. Kegelman said: "We will pay more if the performance is there."
On February 28, Axel Springer, Business Insider's parent company, joined 31 other media groups and filed a $2.3 billion suit against Google in Dutch court, alleging losses suffered due to the company's advertising practices.
