Ad exchanges are just one more innovation agencies and publishers need to adjust to.
When advertisers buy display space through ad exchanges, they're directly buying the eyes of their target consumers - not a page in a magazine, not a 30-second window in a TV show, not a square on a Web page. Instead, they're buying the actual audience - the targeted ad, purchased by a real-time bid based on the specific viewer of the Web page, loads seamlessly onto the page just as the consumer reaches it.
The benefits to this kind of approach are clear: no impressions are wasted on the wrong people or a weak media plan. You're reaching exactly the audience you want, and that's it. No time and money is wasted on painstaking negotiations between media buyer and seller; the process is fast, cut-and-dried, and even able to be performed by software. New technology that can dynamically serve creative solutions based on an individual consumer's demographics makes exchanges even more compelling. In this environment, the advertiser only buys the people they want, and then the exact message is tailored to that person. It's true mass advertising customized to one. With these benefits, it's no wonder ad exchanges promise to play a big part in the future of advertising.
But ad exchanges aren't the be-all, end-all for advertisers - neither are they the nemesis of premium media publishers for reasons described in my other column. Ad exchanges are just one more innovation agencies and publishers need to adjust to. Likewise, exchanges are one of many - but not the only - tool that should be used to reach audiences.
Above all, advertisers should be using ad exchanges for reach and targeting. It promises to be the most efficient way to reach any demographic. But for the advertiser-ad exchange relationship to work, advertisers cannot fear traveling to the outskirts of the long tail. With ad exchanges, it's the target consumer, not the quality of the website on which the ad is being served that's the priority. And that's OK. There's value in showing up exactly where the target demographic is. It ensures the ad has relevance to the user, and this promises increased efficacy in branding and conversion.
Beyond relying on the willingness of an advertiser to advertise on less than premium properties, exchanges have other weaknesses. Ad exchanges don't provide the benefits marketers get from being associated with a high-quality media brand - a necessity in some cases for effective brand recognition. And second, exchanges only place ads in standard banner sizes. This makes them vulnerable to ad blockers, as well as savvy consumers who ignore standard advertising units in a phenomenon known as banner blindness. In addition, they don't make possible the kind of custom sponsorships and integrations that can really drive engagement. As a result, an ad exchange buy should be coupled with a handful of integrated sponsorships on relevant websites to combine reach with engagement.
Beyond custom sponsorships, the full digital media mix should include search and social. Search efficacy is amplified with display advertising and is essential for driving traffic. And, a social media program must be implemented so that the brand engages with consumers on a personal level. In combination, ad exchanges become the final piece of the pie.
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Aaron Shapiro is partner at HUGE, the full-service digital agency within Interpublic Group. HUGE, named one of 10 agencies to watch in 2010 by Advertising Age, focuses on helping companies build digitally-driven businesses. At HUGE, he drives digital strategy for some of the firm's largest clients, including JetBlue, NBC Universal, Pepsi, Target, and TimeWarner. Prior to HUGE, Shapiro was founding CEO of Silverpop Systems, the e-mail marketing service provider, a management consultant at Booz Allen & Hamilton, and the founder of a national magazine distributed by Time Warner. Shapiro regularly contributes to industry events and publications and is often quoted in media outlets as a digital strategy thought leader. Follow him on Twitter at @amshap.
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