I was reading Zach Coelius’s article defining DSPs the other day and it made me wonder, why does it seem like new companies, generally, are winning the DSP wars? For that matter, how did no one jump into the space now dominated by Pubmatic, Rubicon, and AdMeld?
- Zach says that DSPs should have access to billions of impressions per day. Ad.com had that years ago. Valueclick was big. Right Media, theoretically, could have tried to spin around and be a DSP. One wonders how they let so many new companies enter this gap.
- Zach emphasizes reporting, impression attribution and other features as key aspects of a DSP. Traditional third-party ad servers are all perceived as excelling in this area.
Certainly, there are features that they did not have, but it seems like extending the product would be easier than building a new product. I can point to several things that probably made transitioning to this new exchange/DSP world difficult:
- The quarter-to-quarter pressure of publicly traded companies. The ability to invest to meet new market technologies is frequently limited for large companies. If you look at exchanges, Right Media was a well-funded private company. DoubleClick was going nowhere until it went private. Then it was able to escape some of the quarter to quarter pressure and before you know it, they used Project Wolf to sell themselves at a huge mark-up to Google.
- Legacy architecture. Sometimes it is simply easier to build from scratch than to build with a legacy code base. Particularly with the growth of new abstractions for rapidly developing technology such as Ruby on Rails.
- Margin and other business structure limitations. This is the real killer. There was a certain expectation for how the relationship worked and breaking new ground was hard. When people have revenue and profits, sacrificing those if you want to change the structure of the industry is hard. This is classic Innovator’s Dilemma kind of stuff. Making an advertiser or publisher think of you differently if they are already a substantial source of revenue is a big risk.
How did the big ad companies of the first half of this century sleep on these new opportunities in the market? Give me your thoughts.