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One of the best sessions at this week’s iab Annual Leadership Meeting, was “The Great Debate” that pitted agency versus publisher on the topic of buying through exchanges.  The subtitle of this session was “Resolved: A Data-Driven Ecosystem Permanently Disadvantages Publishers.”

This was the last session of the conference. Anyone who left early missed out!

Participants in the debate were:

• John Battelle, Founder and Executive Charmain, Federated Media (moderator)
• Michael Barrett, CEO, Admeld
• Quentin George, Chief Digital Officer, Mediabrands
• Michael Zimbalist, Vice President of Research and Development Operations, New York Times
• Ramsey McGrory, Vice President Marketplaces NA, and Head of Right Media Exchange, Yahoo!

The iab posted a six and a half minute excerpt of the 45 minute debate. Here are the highlights:

@0:44 Quentin George describes a Demand Side Platform (DSP):  “For us, DSP fulfills 3 core functions. First, it aggregates and provisions inventory for us across multiple sources and it puts in a dynamic marketplace so we can buy against that. Second, it allows us to ingest multiple sources of data so we can describe attributes that we want to buy against. And then it has some kind of decisioning algorithm that allows us to optimize against a particular outcome.”

@2:08 Quentin George stages the problem: “Our Intent at the highest level is to figure out ways how we can spend more money in digital. It’s of great concern to our clients, our brands. It’s of great concern to our creative partners that are desperately trying to capture and engage consumers.”

@2:30 Quentin George describes the challenges in buying digital media: “It keeps us up at night because we’re ultimately responsible for making the financial investment decisions and it’s just too difficult.  It costs us 2.7 times the labor to spend a dollar in digital than to spend a dollar in television. And, you know, we don’t benefit from that. Agencies don’t get paid for inefficiency. We get paid on results. And so we’re just trying to use data and use technology in a smart way to create a fair marketplace where we can get to fair valuation, whatever that means.  And the challenge for us is we’re in this averaged marketplace where all inventory is averaged. Everything is dollar denominated down to a CPM. In our heart of hearts, on both sides we know it ought not to be so. But the problem is to get to what is valuable, what ought to be premium, and what is not… I don’t think we get there just with people. We need sophisticated technology and data to get there.”

@3:37 Ramsey McGrory describes the shift in power to the demand side: “What’s changed in the last couple of years is the buy side has woken up. They’re using data, technology, people, and process to be smarter. So, what’s changing is the leverage in the conversation. Oftentimes a publisher has fantastic audience. Oftentimes the agency may actually know more based on data they have and based on third party data. But I think the marketplace is changing. And what publishers have to do is get used to that fact and change the way they sell to embrace what’s happening.”

@4:16 Michael Zimbalist expresses publishers’ reluctance to feed the ecosystem: “We can and do bring data that is from our audience. Whether or not it’s explicit data that they’ve shared with us, we want to be careful that that data remains with us. That’s another point of anxiety around this ecosystem. We don’t want to essentially sell the lifetime value of one of our customers for a flight of advertising.”

@5:00 John Battelle raises the economics of selling data: “You load 60 tracking pixels when you go to Wall Street Journal dot com. So if all those are gone, I’m not sure that Rupert is so into investing in wsj.com because he’s making money because those tracking pixels are there.”

@5:17 Michael Zimbalist concludes what happens if the data-driven ecosystem goes away: “We go back to context as proxy for audience.”

@5:57 John Battelle challenges everyone to explain the value of advertising and the unwritten contract with consumers: “We have this massive gulf between what the consumer is getting and what the consumer doesn’t understand what the deal is that they’re getting. I think from a cultural standpoint, it’s all of our jobs to explain the value of why we’re doing this because there’s a lot of fear because fear stems from ignorance. So, we have to address that question because there’s so much good stuff that comes from this. Then it’s up to us not to do evil things with it.”

Unfortunately, some of the best parts were left out of the digested video (the iab must want you to go to the conference ;-).  Here are other highlights from my notes which may be paraphrased:

• John Battelle quotes an anonymous source that would not participate in exchanges: “I will never give them any of my inventory. This is a life and death battle.”
• Michael Zimbalist: “The best possible scenario is we completely control the audience. We want as few people as possible between us and our audience.”
• Quentin George: “Our reliance on third party data is a lot less. We are using more first party data.”
• Quentin George:  “The algorithm is not going to respond favorably to high price floors.”
• Michael Barrett: “The challenge is to turn $1 CPM inventory into $5 CPM inventory without turning $30 CPM inventory into $5 CPM inventory.”
• Michael Barrett: “70% of ad spend is in up front direct sales.”
• John Battelle quotes an anonymous source that had an unfavorable view of exchanges: “They are going to screw everyone. They should be a regulated oligarchy.”
• Upon discussion of the automation that DSPs and exchanges bring, John Battelle asks: “Should a 24-year-old media planner be looking for a new job?”
• John Battelle: “Passion, voice, and point of view is what draws an audience and community.”
• Randall Rothenberg: “This is really a debate between modernism and post-modernism.”
• Ramsey McGrory: “a site may not be the best proxy for an audience.”
• Quentin George cites a growing problem in the ecosystem: “Many agencies arbitrage publishers’ inventory and this is wrong because it creates a conflict with their client.”
• Quentin George: “activity is often a bad proxy for results.”

The session illustrated the growing tension between agencies and publishers.  They are not converging on a solution that both sides can agree on. In fact, it seems they are diverging from an agreeeable solution.  Agencies want to buy using real-time bidding on transparent inventory enhanced with data through exchanges but publishers want to sell inventory directly up-front and guaranteed without a series of intermediaries.

Who will set the market rules?

In conversation afterwards, Tim Suther of Acxiom reminded me, “Remember the Golden Rule: he who has the gold makes the rule.” But who has the gold here?  Is is the agency who represents the money? Or the publisher who represents the desirable audience? 

In my opinion, both sides have the gold. Like any good agreement, we need a solution that has both parties coming away from the transaction feeling like they got a good deal.