A new "AD Exchange"

The next big Internet race might turn the buying and selling of advertising space on Web sites into the online equivalent of the pork-bellies pit.

Over the past few years, a host of small companies has started electronic exchanges where advertisers and Web sites can buy and sell online advertising space. The companies, with names like Right Media Inc., AdECN Inc., Turn Inc. and ContextWeb Inc., have been an obscure sideshow to a broader battle over Internet advertising.

That's changing quickly. The biggest Internet companies, including Microsoft Corp., Google Inc. and Yahoo Inc., are focusing attention and money on the emerging business, hoping to be first with the kind of large-scale, dynamic market for the ad industry that the Nasdaq market brought to stocks.


Over time there will be "a handful of winners that build very high-tech marketplaces," predicts Jim Barnett, chief executive of San Mateo, Calif.-based Turn. "That's what we're trying to do; that's what Google is trying to do."
Exchanges usually collect payments for ads and pass them along to the sites, taking a commission. Ads are generally priced per thousand times they're viewed by consumers, a unit known in the industry as CPM.
"Theoretically, with an exchange, one technology platform can cover an enormous swath of the Internet."

Or so the big players hope.

Indeed, if the dream is to have the same kind of impact on advertising that spot markets had on commodities and stock markets on equities, one or more exchanges will need a critical mass of buyers and sellers. As with stock markets, "liquidity" is key for the ad exchanges: the more participants, the greater the chance of finding buyers and sellers.
With exchanges, "the underlying assumption to that is you're buying a commoditized product that anyone can sell you," says Steven Kaufman.

WSJ