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November 28, 2011, Article

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MediaMath CEO Joe Zawadzki in AdExchanger

Industry Reaction: Yahoo! Requiring RMX Seats For DSP Advertisers

By: John Ebbert  Published: November 28, 2011

Link to original article

Last week, several demand-side platform (DSP) companies were informed that their advertiser clients could no longer buy Yahoo! remnant, display ad inventory through their DSP seat on the Right Media Exchange (RMX). Instead, those advertisers will need to get their own seats on RMX if they want to buy Yahoo! remnant display ads. Read more.

AdExchanger.com reached out to a selection of companies in the ad ecosystem which use DSP technology. They were asked the following question:

"What's your reaction to Yahoo! requiring seats for advertisers on Right Media Exchange versus buying through DSPs, ad networks, etc.?"

Joe Zawadzki, CEO, MediaMath

"Well, there’s a lot conflated into that question.

Remember first, Yahoo is making a distinction between DSP-as-technology, which they continue to support, and DSP-as-buyer purchasing Yahoo inventory on their own seat. It's only the latter that's impacted. Stopping DSP-as-technology would be like Google disallowing search bid management tools, or publishers deciding third-party ad serving is no longer allowed. Advertisers and agencies simply need centralized buy-side technology and analytics to succeed going forward.

What Yahoo is doing is requiring seats from advertisers and agencies on Right Media in order to understand who is ultimately buying their inventory, and to be able to influence their spend on Yahoo!. We are very supportive of that (and have quite a few clients doing this already). Yahoo! deserves this, and it should boost both their direct sales and their success through programmatic channels.

My only concern would be the lead-time. Five business days to get a seat established on Right Media is fairly ambitious even for a motivated and well-informed client. Their hope may be that dollars simply migrate to Yahoo! network+ management without impact to performance, but that’s a big risk to ask Fortune 1000 brands to shoulder during a critical time of year. As a Yahoo! shareholder and the DSP who bleeds the most purple, I'd propose a more reasoned timetable during this holiday season on behalf of clients everywhere."

Rob Leathern, CEO, XA.net

"My answer to this is two parts: 1) the handling of it, and 2) the business strategy/larger picture. As to 1) keep in mind that they told us this at 6.30pm EST on the Tuesday before Thanskgiving to be effective as of December 2nd. This doesn't give us a lot of time to make a transition for our clients to their own seats. Regardless of the business reasons for the decision, doing this now, in Q4 before a holiday weekend for firms who have spent millions of dollars on their platform is a big middle finger move by Yahoo.

I personally believe it's a completely wrongheaded approach to partnership, in stark contrast to the relationships we have with companies who have ad platforms like Google, Facebook and LinkedIn and is a sign of a former Internet giant with great assets flailing around for a workable strategy. If they had an easy-to-use self-service model for advertisers to buy from them directly that would be one thing, but they don't – and *in fact* they told us not more than 6 months ago that the Yahoo! sales team valued DSPs and companies like ours who helped them better service both large customers with complex needs AS WELL AS customers who spend less than $25k per IO since in their words at the time 'it costs them $10,000 to create and manage an insertion order [IO] through their internal process'. I can't think that's improved in the last 6 months."

Mike Baker, CEO, DataXu

"First, why is Yahoo making it harder for advertisers to buy its inventory?

Perhaps Yahoo! is trying to create a benefit to preserve and substantiate Class 1 pricing (you can't access its Class 2 inventory unless you sign up for a seat). The cost of buying Yahoo! inventory is likely to go up but the big question looms, will there be a discernible benefit for the buyer? We license our platform – DX3 – to agency trading desks, agencies and advertisers, large and small. Yahoo's decision will impose additional hard and soft costs on each of these segments, fees that we have traditionally absorbed on our clients’ behalf as part of our commitment to making digital marketing easier and more effective. DX3 aggregates over 20 mega-suppliers of inventory, including Yahoo!, and makes intelligent investment decisions across the more than 10 billion impressions we see each day (and that’s not even counting Facebook), to allocate spend to the highest performing segments. It’s incredibly efficient for buyers, and it’s fully transparent because anyone can license and use DX3 directly. Even large advertisers and agencies have shown little interest in signing individual agreements with exchanges because there are real costs (trading fees, reconciliation costs, cash flow, labor in managing multiple relationships) and no real benefits.

Does Yahoo! still matter to advertisers of RTB and audience buying?

Today it’s all about finding the consumer no matter where they go, and Facebook is dominating as of late. Every buying decision now involves price/performance analysis to maximize ROI, and ad inventory has been shown to be highly fungible so no publisher is indispensable on a plan. Google – with its aggressive entry and expansion into the exchange space – seems to have embraced this new reality, and the percentage of spend from our customers has increased with those that provide value and steadily declined with those who don't."

Zach Coelius, CEO, Triggit

"Over the last three years we have seen tremendous innovation in the advertising technology space as Demand Side Platforms (DSPs) have come to provide significant new value to advertisers. The billions of dollars that have shifted to DSPs are a testament to the value advertisers find in the new efficiency, targeting and scale. Throughout this innovation cycle Yahoo has chosen to play defense. They now find themselves in a situation where many of their customers have migrated to DSPs and Yahoo is faced with disintermediation. Without their own DSP to compete directly in this market against Google’s Invite Media and independent players, Yahoo is in a tough position. 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. Unfortunately for Yahoo this defensive move is as unlikely to work as their earlier refusal to adopt RTB until years after the rest of the market. They must innovate, and start playing offense, or they will continue to get left behind by the rest of the market."

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