Sales-sourcing: A Tale of Two
Not having studied finance nor growing up with aspirations of working on Wall Street, and despite a significant number of years in the online space, not to mention more than one article on the topic, but the online ad exchange model, even excluding discussions about transitory liquidity, isn’t the most intuitive to grasp. For me, a part of this confusion stems from a history of working on very closed systems, where every piece of the puzzle became, if not proprietary, at least worth guarding.
In the typical closed system, there is no such thing as unwanted inventory, only inventory that doesn’t perform as well as others. They didn’t build their systems, and given the complexity of them, they can’t easily just decide to make certain impressions that meet (or don’t meet) specific criteria available to those outside the system. Said a different way, when a closed system receives an impression call, it chooses between ads in its system, and each ad either has a fixed revenue return or an expected one used to slot it in, e.g. a CPA ad. Each ad has a creative associated with it, and the whole thing runs smoothly in its self contained universe. Working with an ad exchange, though, you can’t set in advance a creative or a price, so a closed system has no real way of calculating the revenue or knowing where to slot the ad from the ad exchange. From the exchange perspective, they get rotated into the closed system as a normal ad, blind of helpful information for them to know what ad deserves (or using auction terminology has won) the impression. And, as a result, both systems run sub-optimally.
The ad exchanges do not require every impression. In the case of Right Media, upon launching their exchange, in order to build up volume, they happily accepted publishers and other networks’ left-overs. By focusing on one of spots that is the most difficult to monetize, they knew it would both give them time to perfect their system, and if they could succeed, it would give them a big hook for being able to capture more of their inventory. Publishers who wanted to work with them could set a minimum price per impression and ping the exchange to see if they had an ad that met it. For publishers not running a closed system, the systems they use integrate well with the exchanges, which makes sense as the exchanges most likely had them in mind as opposed to being the remnant players of the remnant networks. Most publishers run ad serving software as opposed to ad networks, especially the closed ones, that have sophisticated ad optimization layers built on top. Much like rules based search engine management optimization, the vast majority of ad serving software focuses on helping those with inventory manage their ad impressions based on straightforward metrics like price, as opposed to say effective yield. Like saying, show this ad between these hours, the rules based approach allows for a publisher to say, if no ad exists at this rate, look here. That’s when the exchange will have a chance to fill the impression if it can meet the criteria set by the publisher (generally price related).
In the performance marketing space, we have equivalent exchanges, but they have yet to hit the critical mass that a Right Media has. Leadpoint ranks as perhaps the most established. Like the online display exchanges, they began as a way for those with leads to more effectively sell them, or borrowing from the financial world, get liquidity for their leads. If LeadPoint is the Right Media of the lead world, then the Advertising.com of the space is LowerMyBills, a closed system where buyers of leads have limited transparency, and one where LowerMyBills would look only to its sales force with their established relationship and not to an outside entity for liquidity. In the display world, an Advertising.com could work with a Right Media although they might not, just as LowerMyBills chooses not to work with an exchange even if it could help them, and in the beginning, the same worked for LeadPoint. They didn’t want the exchange to be a backfill option. In mortgage, where selling a lead multiple times is acceptable, they didn’t want to be the place you went to only for your unsold leads. Those leads perhaps being the ones that were sold a handful of times or contained less desirable user data, i.e. data that didn’t translate into a large conversion for the end buyer – think of the difference between selling a Yugo or a Mercedes. From this perspective they didn’t act like a true exchange but an outsourced sales platform with greater transparency (as a seller of leads you knew who got your leads and what you made per lead). Only now, has the platform evolved where it can act more like a true exchange, although it requires using their platform to manage all your relationships.
Thinking about the exchanges not so much as true exchanges but companies that have taken what once was a competitive advantage and turned it into a utility, you could call companies like LeadPoint the new form of affiliate marketing. Like any ASP, they help you manage a key piece of your business without having to build it internally. With LeadPoint, that can be using their buyers and marketplace to using their system for managing your buyer relationships and using theirs to fill in as well as they using yours. And, it wasn’t until thinking about them in the solutions provider sense, the standardizing what once was a competitive advantage – sales and lead management – that I realized that another company offered a very similar value proposition. They, though, operate in a completely different landscape and pitch themselves differently. Go to their website – MobileMessenger.com – and you won’t really get a feel for what they do so much as the space they operate in and the types of audiences their products serve. That didn’t stop one of the top names in the investment community, Silver Lake Sumeru, from taking an interest in them, and I think I now know why. They really operate the underpinnings of a mobile exchange. Granted it took me a while to understand what they did when I first met them. If your traffic leverages mobile subscription plans for revenue, you will have had a hard time not knowing about them, or at least not seeing their ads.
Yet, it wasn’t always this way for Mobile Messenger, who expanded to the US less than a 18 months ago, but has operated for more than eight years. Those in the direct response space, especially those who do run or have run mobile subscription products, had a set way of doing business, and it always involved CPA. Whether they built their own landing page or used one provided from a network, they expected to make money – the same amount – for every user. Enter Mobile Messenger, who offered them a chance to potentially make more, but the person running the traffic wouldn’t see this value up front; they received it as part of the lifetime value, an operating method typically reserved for those with the content and carrier relationship (Dada Mobile for instance). Complicate that still with the fact that Mobile Messenger didn’t have any ready made landing pages, banners, or affiliate login, and you can see why what they did or why to work with them over an affiliate network didn’t always click with people.
Finally, I understood it, as they offer savvy marketers a way to make money off their traffic by having greater access to the monetization process for mobile subscription services. Now, I understand it one step better. If you can generate traffic interested in mobile subscription services, they offer a marketplace for clearing the leads where you make the real value of the lead (lifetime value) without owning the sales relationship and customer service.
Differing from LeadPoint, part of their success too came from taking a more active role in helping affiliates and entrepreneurial networks make money off their service by getting into design and creation of offers, yet remaining the behind the scenes people. This is something LeadPoint might consider as it helped Mobile Messenger go from sizable to unavoidable.
In the end, though, what we have are two very different companies that have made great businesses by not so much being an exchange as showing that you can remove, what at one time seemed necessary, components to success. This isn’t to say that if I built a company I would feel comfortable not having my own sales force; then again, hearing about some of the largest partners of each it might warrant a real look.
