AppNexus CEO Brian O'Kelley.
Spring has brought with it a season of confession in the online ad world: AppNexus CEO Brian O’Kelley recently told a conference that his company does not always reveal the original price of ad media to the clients who pay for it.
The admission comes after GroupM CEO Rob Norman, and his chairman, Irwin Gotlieb, both said something similar at a different conference.
The context to the debate is about real-time buying by demand side platforms (DSPs) — which is jargon that describes how ad buying companies analyze web users' browser histories, and then use that data to target them with ads.
The controversy is over whether advertisers should be told what the original price of the inventory was, and whether it's fair for them to pay a premium price in an auction without knowing the original price, or who the losing bidders were and what prices they bid at. (Or whether they even want to know.)
Some clients, like Kimberly Clarke and Ford, have pulled away from such practices.
Some agencies, like IPG Mediabrands, say they offer clients full transparency.
At the Programmatic I/O conference in San Francisco this month, the price transparency debate was raised by moderator Mark Mahaney, an analyst with RBC Capital Markets.
Here's a section from the transcript. The controversial bit is near the end, where O'Kelley is asked on the subject of price transparency, "Do you expose the price of each individual publisher?" He replies, "No."*
O'Kelley tells Business Insider the transcript is wrong and that he's misquoted. The term "publisher" should not be in the transcript, he says, because the question referred to buyers, not publishers. In fact, he says, the question as recorded in the transcript doesn't make any sense unless it refers to buyers rather than publishers.
O'Kelley's response, he says, refers to whether buyers are allowed to know the prices offered by other buyers who failed to win the bidding for a given piece of inventory.
He also pointed that AppNexus doesn't do arbitrage because its services as offered at a fixed cut of the sale price, which buyers can check. The cut doesn't change from deal to deal, he says.
O'Kelley did, however, tell us that buyers often don't know the original floor or reserve price that inventory was offered at. Given that they can only win the inventory in an auction, that price is relatively meaningless anyway.
He was debating the point with Andrew Casale, VP of strategy for Casale Media. Casale tells us that his original point stands: That buyers should know what the losing bids were and who bid them. Not knowing that info leaves the market opaque and prices distorted — Ford would adjust its buying strategy if it knew it was continually losing bids to Chrysler. Right now, neither company knows who they are bidding against.
The other people on the panel were Victor Milligan, chief marketing officer for mobile ad exchange Nexage; and Rajeev Goel, CEO of Pubmatic, which offers publisher ad exchanges.
Q: What will be the next tipping points that will be proof points to force more dollars to programmatic?
O’Kelley: It’s very tough to sell media by hand. Salespeople are a pain in the ass. We’re getting lots of questions about what’s the ROI of replacing salespeople with real-time bidding. There are still a lot of questions, like what does “quality” or premium inventory mean? As we hone in on what that means, it’s easier for a marketer to make sure their ads only appear near quality content. We need to find ways to determine what the online equivalent of good TV shows are.
Casale: The exchange market needs to be more transparent. It breaks one fundamental tenet of a market, which is price discovery. They’re completely opaque.
Q: In what market does that really happen?
Casale: Nasdaq. You can purchase that knowledge. No one in our business is transparent.
O’Kelley: I call bullshit.
Casale: Do buyers on your exchange know where the price comes from?
O’Kelley: We publish a full price history, though we won’t reveal a publisher’s price unless they want to.
Casale: I’m talking about the buyer, not the publisher. Do you expose the price of each individual publisher?
*Correction: This story was changed to include O'Kelley's statement that he believes the transcript is wrong.
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