Media agencies have taken a fair old pummelling recently – although currently they’re on the front foot hammering Google/YouTube and Facebook – but a new threat is emerging from a NASDAQ offshoot, the New York Interactive Ad Exchange (NYIAX). In essence this buys and sells ad space through a combination of NASDAQ trading architecture and blockchain technology. Blockchains store vast amounts of data in a supposedly secure ledger and can then be programmed to make automatic transactions.
As such it’s an inevitable extension of programmatic trading but what it also allows is third parties to buy and sell ad space, hitherto the preserve of media agencies (using, mostly, client money).
The new model has already attracted the attention of hedge funds and the like who’ve seen the option of buying up some of the hundreds of billions of dollars of digital ad space swishing around the globe. In theory there’s no reason why they couldn’t buy and trade conventional ad space too. The US TV upfront market, 90 per cent of which is sold long in advance of the programmes being transmitted, could be traded in this way, as could spots on ITV which is sold in a similar way. When you buy a campaign on ITV you’re essentially entering a futures contract – if it delivers fewer ratings than you paid for you get money back, more and you pay more.
The difference with NYIAX (and there’ll certainly be others) is that you don’t need to be an agency representing an advertiser to buy it. Hedge funds have been known to gamble heavily on commodities such as oil in the hope/expectation that the price will therefore rise. They could do with same with ad space if it were sold via an open automated exchange. And the big boys have far more investor money at their disposal than even the biggest holding company media agencies do. The media agencies have to persuade their clients – who are mostly trying to reduce budgets – to put the money up in the first place A hedgie can just buy the space and sell it on to whomever: a client/agency combo or another financial firm prepared to take a punt.
This is probably not what the big media agencies expected to happen when they launched programatic trading. The stakes in the new media marketplace look like being higher than ever.