Yahoo Flexes Its Media Muscle

Anyone seeking proof of Yahoo’s clout need only observe the distressed responses from demand side platforms and website retargeting firms to news that it has disqualified them from bidding on its remnant inventory. Or the satisfaction with which agency trading desks greet this same information.

Beginning January 11, 2012, advertisers working with DSPs to buy Yahoo’s unsold – or “class two” – display ad space on Right Media Exchange will be required to obtain their own direct accounts with the company. No longer can a marketer rely on its DSP’s single seat on the exchange to buy Yahoo Network Plus inventory – a situation observers say has created secondary auctions and new forms of arbitrage.

“We’re looking to get as much transparency as we can,” says Seth Dallaire, Yahoo VP sales and the guy in charge of the Yahoo Network Plus, which manages all inventory not sold directly in premium deals. “There is not full transparency. There may be different actions happening within the technology that are not entirely clear.”

The move affects DSP companies like Invite Media (owned by Google), DataXu, XA.net, and Triggit, which were notified of the policy change just before Thanksgiving and initially given just six days to prepare. (Today Yahoo extended that deadline to January 11, motivated by concerns about inventory availability during the all-important holiday season and the number of new seats being added, according to Dallaire.)

The one-seat-per-advertiser rule also applies to retargeting companies, eliminating firms like Criteo (also an ad network), TellApart, and Dotomi from bidding for multiple clients.

Some DSPs have reacted with alarm to Yahoo’s plans. Their objections range from the lead-time (addressed by Yahoo today) to unnecessary new friction in the marketplace. In an AdExchanger article aggregating their reactions, Triggit CEO Zach Coelius stated, “With this new rule Yahoo has chosen to do that only thing they can to attempt to maintain account control for the short term. Their hope is that by requiring advertisers to have accounts that they will be able to staunch the bleeding and keep their direct customer relationships.”

Meanwhile agency trading desk executives are pleased. Yahoo, eager to preserve its agency relationships, will emphatically not cut off their right to aggregate media buys on behalf of multiple clients.

As Dallaire told ClickZ, “Agencies and the holding companies are critically important customers for us. Staying close to their desire and the objectives they have for their clients, including how they meet them through programmatic buying, is very important to Yahoo.”

While no surprise, this pledge is obviously good news for the likes of Publicis’s Vivaki, WPP’s Media Innovation Group, and Omnicom’s Accuen. The removal of ad tech middlemen from the bidding process gives these trading desks more access to inventory that Yahoo hopes will increasingly be seen as the most premium media space available for purchase on a programmatic basis. If Yahoo goes on to disallow traditional third party ad networks from buying its inventory, as many believe it will, the result will be an even greater consolidation of their group buying power.

“We’re supportive of the decision,” said Nick Beil, president of Vivaki Nerve Center. Beil sees the move as an extension of Yahoo’s decision last year to cut the number of ad network buyers on Right Media from hundreds down to about 10. That move intended to reduce daisy-chaining of ad impressions, which were often resold multiple times with a negative impact on ad quality.

Not that the trading desks wish ill on demand side platforms. Most of them license DSP technology and will continue to do so. But they have increasingly found themselves in competition with some DSPs that buy up Right Media inventory on behalf of multiple advertisers.

The policy change takes place against the backdrop of Yahoo’s key real-time bidding partnership with Microsoft and AOL, under which the three companies will be able to resell each other’s remnant ads in a marketplace that dwarves the size of any existing ad network.

Ad Networks – Next in Line?

Yahoo has declined to comment on whether it will stop traditional ad networks from bidding on its unsold ad space through Right Media. According to Dallaire, the company remains in discussions with partners such as AOL’s Advertising.com. However, one source familiar with Yahoo’s plans says it will block most traditional ad networks from bidding on Network Plus inventory in the first quarter of 2012.