The way digital advertising is bought and sold has, with the emergence of programmatic and real time bidding, often been compared to stock exchanges and day trading.
There are many similarities. But last week, the New York Interactive Advertising Exchange (Nyiax) was released to a small private pilot audience, before its full release later in the year, stripping programmatic of its “Nasdaq of Advertising” title. Nyiax literally operates on a combination of Nasdaq’s trading architecture and blockchain technology.
City A.M. caught up with Nyiax’s chief product and technology officer, Richard Bush, and Lou Severine, its chief executive, to find out more about how it will work.
Using Nyiax, advertisers and publishers will be able to trade and re-trade future advertising inventory – or “guaranteed advertising contracts”, a concept not dissimilar to the futures market. Bush, a Brit abroad, says a distinction needs to be made however. “First of all we’re focused on ‘forwards’ – we don’t want to confuse people with the word ‘future’. Yes, they are in the future, but they’re not necessarily a futures contract,” he says.
Severine says to think of it like the “upfront” media buying that dominates American television – where a network will showcase the season ahead, and 90 per cent of that inventory will be purchased in blocks, months in advance. “So it’s looking that way but in the online world,” he says. Except, with tradeable contracts on a centralised exchange, once purchased, advertisers will be able to sell, or “re-trade”, them with other buyers.
"A hypothetical contract of 1,000 impressions, for example, of which an advertiser only wants to use 250 impressions, could be re-traded as a 750 impression contract – so long as it prior to the trading lock date of that particular security – meaning far less wastage."
Such as futures are financial contracts obligating the buyer to purchase an asset, or the seller to sell an asset, at a predetermined future date and price, the “forwards” contracts on Nyiax oblige the seller to adhere to a set of predetermined terms – the qualities, attributes and terms, structured in a common taxonomy – at the winning bid price.
The platform, in its embryonic form at least, deals exclusively with “premium inventory”, meaning publishers who want to list inventory need to meet stringent criteria. “What we mean by premium really is just ‘known’ publisher entities who have passed certain rules: do they have a direct sales team? Do they typically command higher CPMs [cost per thousand]? That sort of thing. That list typically comes out looking something like the ComScore top 100,” says Bush.
At present the publisher decides the listing price of the contract, which advertisers can bid on, but with scale, something akin to market makers may enter the field. “In the early stages the publisher can actually list their inventory into different instruments, and it’s their prerogative to set the price,” says Bush. “I think actually as we move outside of our early pilot and launch phases, we’ll be able to help give guidance, because the market will have data, and there’ll be common norms. But ultimately we’re not taking positions in this market, we’re a technology company – it’s not our job to price things. We can help provide tools to do that, but we’re not doing it ourselves.”
Thinking about the future, I ask whether institutional investors will be able to buy large swathes of inventory and hold it – stifling the supply will increase demand, and subsequently, price. “That’s something that in the future we’re looking at,” says Severine. “There’s been a lot of speculation surrounding large hedge funds coming along and buying up the inventory for big events like Black Friday, the Super Bowl, or Cyber Monday, to then add it to a portfolio so they can sell it for a profit. If it works and the demand is there, we’ll open it up. But right now we’re just looking at the digital world and trying to provide a better tool and a better exchange for advertisers and publishers,” he says.
Bush talks me through the process of listing a forward contract on the exchange step by step: “a publisher, which is the original seller, can bring inventory onto the platform, which ultimately will be described in instruments,” says Bush. “They’re basically listing their interest to sell. Then buy orders, sell orders, and standing orders can be created, which is very similar for financial markets. Those are then matched, or sit on the books, and those are all guaranteed upfront terms – they’re defined inside those orders.
“So that’s the first step, where buyer and seller are discovering each other. Then we move into trading; this is where we rely quite heavily on the core technology that we’re leveraging off Nasdaq, and that’s essentially, when the order is matched, two or multiple positions are created, depending on whether there’s a trade or re-trade.”
From there it jumps back into the advertising world. “We’re not building a delivery engine, we want to leverage a lot of the pipes of the existing industry, whether it be ad servers, or supply and demand side platforms, delivering heavily on the relationships that our clients have, and those integrations are a heavily important part of the advertising product that we’re building on top of Nasdaq,” says Bush.
"There’s been a lot of speculation surrounding large hedge funds coming along and buying up the inventory for big events like Black Friday, the Super Bowl, or Cyber Monday, to then add it to a portfolio so they can sell it for a profit.
Programmatic trading has revolutionised the way advertising inventory has been sold in the last seven years or so by allowing decisions to be made in real time by machines. But with every rise is a fall, and the rise of programmatic has affected the quality of display advertising: problems with ad fraud, viewability, and inadvertently funding terror are on the lips of everyone in AdLand.
“What programmatic has done for the advertising world has made the delivery method extremely efficient,” says Bush. “But I think that everyone is realising now that, actually, there’s a whole portion of the industry which hasn’t been made efficient.
“So we feel this is the next phase. Now that delivery infrastructure is in place, it’s very well known, and understood, it’s time to start focusing on making the contracting process more efficient – enabling trading and liquidity in that part of the process. Programmatic is a very good delivery system, but it hasn’t allowed the higher value inventory to come across into an exchange. That’s what we’re focusing on.”
Elliott Haworth is business features writer at City A.M.