I’ve been thinking that the ad exchange / stock exchange analogy, while convenient for explaining what you do to your mom, is getting kind of tired. It lends itself to misunderstandings and overgeneralizations – in the words of incoming IAB chair Wenda Harris Millard, it’s as if we trade ads ‘like pork bellies.’ I wish we could trade ad inventory like pork bellies – then we might actually be able to create some interesting derivatives off them, starting with options contracts. The kind of thing I spent a lot more time thinking about a couple years ago, back when I was at Root Markets and we were raising money from the Chicago Board of Trade. But realistically, ad inventory just isn’t that fungible – many different factors vary an impression’s value, and advertisers target to and bid differentially on more and more of them. Believe me, we’d take ad space and turn it into a commodity if we could, but the same thing would happen when other products of differing value are mistakenly bundled together – someone smart would buy the bundles, take the best of the lot and sell it separately, and then rebundle the rest, lowered in quality, for resale.
I was therefore delighted to find a new analogy at the tail of one of Saul Hansell’s must-read posts on Bits, coming from Michael Rubenstein at DoubleClick: online ad space is traded like gemstones.
Gems, he pointed out, are traded in financial markets, yet each one has distinctive characteristics and thus a particular value. “We like to think of our publisher impressions as diamonds,” he said, “not pork bellies.”
It’s not a bad comparison at all, when you think about it. Here’s a bit on De Beers’ Diamond Trading Company from Wikipedia:
DTC receives uncut diamonds from all of De Beers’ mines around southern Africa, as well as some production from Alrosa in Russia. The diamonds are then sorted into over 16,000 categories, according to size, color, clarity, carat and quality (amount of inclusions).
Multiple dimensions affect the pricing of these diamonds, which are then sorted into lots and sold in a competitive marketplace. That’s pretty much what any ad exchange does with impressions, taking into account geography, demographics, past behavior, and a ton of other variables to slice the inventory into teeny tiny chunks. That’s hardly a commodity.
