Orange-France Telecom Group and OpenX announced a partnership today to launch the Orange Ad Market. Both parties believe it will “lead evolution of online advertising exchanges in Europe”. Tim Cadogan, OpenX CEO, took time to speak to ExchangeWire this week to explain the new venture in more detail, the significance of the offering to European ad traders, and how publishers will benefit from the increased liquidity and efficiency of the new Orange Ad Market.

How will the new partnership work between Orange and OpenX?

TC: In a nutshell, Orange will operate Orange Ad Market by leveraging its extensive local market footprint, bringing the supply and demand in the countries covered under this agreement. OpenX will power the underlying global market that all supply and demand flow into and will provide Orange with the regional-specific tools required for success in the local markets. Part of powering the market will include running the auctions in which advertisers bid on publishers’ inventory.

How significant is this Orange and OpenX deal for the exchange eco-system in Europe?

TC: The ad exchange market in Europe today holds incredible promise but is still very nascent. It needs to be nurtured and grown with a truly focused approach. And we think this partnership represents a significant step in the evolution of the European exchange eco-system.

Orange Ad Market is the first approach to the market that brings together best of breed supply and demand relationships and deep local knowledge (Orange) coupled with a global market and technology providers (OpenX). It differs sharply from other exchanges that have a one size fits all approach to the market. By not using the knowledge, experience and relationships a local partner can provide, they don't do a great job today of providing local support and customisation. As a result they often don't get access to the best local content and inventory.

Orange brings in-market knowledge and experience to the Orange Ad Market, underpinned by OpenX's world class platform and global exchange. We believe this will quickly encourage the participation of many more local and regional buyers and publishers.

Orange Ad Market will give Europeans access to a global marketplace that will create value and efficiencies for the whole ecosystem.

Is Orange’s move towards automated ad trading a signal of maturity for the exchange space?

TC: We strongly believe this is a big step in solving a major problem within the online ad market.
The world of online display advertising has grown rapidly and as a result the marketplace has become complex and inefficient. This becomes apparent when you look at the numbers:
In 2009 the online ad market was valued at $55 billion (J.P. Morgan). This figure includes both search advertising and non-search (display advertising). There is a major disparity in the value of these components versus the activities of typical web users.

- Search: 5% of people’s online time / two thirds of online ad spend
- Non search (all our other online activities): 95% of people’s online time / one third of online ad spend

What this complexity and inefficiency means is that on the demand side, the explosion of ad inventory supply has made the planning and buying process costly and time consuming. On the supply side, fragmentation in the media buying space has made it almost impossible to optimize inventory yield.

The market needs a structured solution that is open, simple to use and transparent to all parties. The ad exchange is a powerful solution as it is an automated online market place where buyers (advertisers) and sellers (publishers) participate in auctions for ad space.

The opportunity for the market could be huge - some analysts predict display could be a $10 billion business. Today it’s a nascent market but we believe it’s the next big growth area.

How will OpenX help Orange trade its inventory through the new marketplace?

TC: OpenX is providing the platform and technology underpinning the Orange Ad Market. This is a separate business that sits alongside the Orange Ad Network (using the Unanimis brand in the UK). Unanimis will work with the Orange Ad Market to monetise inventory and improve site yields but this will not replace existing business, but enhance and extend current trading by introducing new buyers (and therefore increased competition) for saleable inventory.

Will publishers have control over pricing? Can they set minimums on inventory? Will they have control over who buys their inventory?

TC: Yes, yes and yes. We operate a unique "price protection" design. Sellers submit the minimum price they are willing to sell inventory for. Only ads that exceed this price compete for this inventory. By participating, sellers by default will only receive ads from Orange Ad Market if their floor is beaten and therefore increasing yields.

Will it be just non-premium available on the platform?

TC: No. The inventory available on Orange Ad Market will represent a broad spectrum and will include both premium and non-premium. And it’s important to remember that Orange will be taking a leadership role by placing its own inventory into Orange Ad Market.

How will you manage this process?

TC: The success of Orange Ad Market is linked to our capacity to bring niche content and audience to the advertisers. The long tail is key for us, providing that we guarantee quality inventory to advertisers. In addition, participation of the top 100 publishers in the market will bring scale and quality inventory. We are confident that we will add value to the publishers because we understand their challenges and we do know they are continuously looking for additional revenues, beyond their primarily sales. Our experience as a publisher and operating a publisher network for the past 10 years will help create value.

We expect the Orange Ad Market will introduce a whole new set of buyers for publisher inventory, due to the ease of market access, which will provide uplift to overall yields. Importantly, this activity won't replace existing sales channels but introduce another, increasing demand and ensuring the best price is paid for inventory.

Will OpenX look to establish similar partnerships with other large European publishers and ad networks?

TC: This is a multi-year partnership that is exclusive in the countries where we’ll launch for the duration of the contract. This reflects our commitment to each other as partners in Europe. OpenX considers Orange as the first major partner in a global inter-connected alliance of regional partners driving participation in the global OpenX Market and driving value for each other. We are in a range of conversations with potential partners in other regions of the world.

There’s always been a serious dearth of quality inventory available through exchange platforms. Do you think that a lack of quality has hindered the adoption of exchanges in Europe and elsewhere?

TC: We think it’s less about the quality of content and more about the disparity that currently exists in the online advertising market. What’s needed is an easy to use, simple system that allows publishers and advertisers to quickly and easily purchase and provision inventory. While lack of quality has undoubtedly been an issue, the main reason we believe for the relative slow rate of adoption of exchanges has been simply the lack of vision from companies operating in this space. This partnership we believe will fundamentally change that.

On the quality issue, however, Orange will bring its own premium inventory to the market and will build strong agency relationships to secure that of other publishers.

Will all ad inventory be available to buy through RTB when the Orange Ad Market launches in Q2?

TC: Yes. Orange Ad Market will include comprehensive Real Time Bidding functionality.

Will European traders be able to bid on ad impressions in real-time?

TC: Yes. Demand partners from all over the world will be able to bid on inventory in the Orange Ad Market. This applies to RTB demand partners as well, once their buy-side tools are integrated.

Can any buyer purchase Orange Ad Market inventory through the OpenX exchange?

TC: Yes, absolutely. The Orange Ad Market is part of the global OpenX Market. Any buyers can buy inventory on any seller worldwide. Having the benefits of a fully global market coupled with the multi-local in-market relationships and expertise of Orange is a key to the unique and advantaged nature of this partnership.

How will you ensure brand safety across the Orange Ad Market?

TC: Brand safety is a key concern for many advertisers and one we have identified as a limiter to early adoption. To overcome this we have introduced into Orange Ad Market a brand safety feature which ensures for an advertiser their ads will only appear on safe sites. This will closely follow the thinking behind IASH and we are in discussions with key demand partners about the form this will take for launch.

What would you say to some publishers who are worried that automated ad trading is commoditising their premium inventory?

TC: The publisher is in control of what inventory is made available to the market. The opportunity for publishers is to generate fair value for the inventory that is made available to the market as competition is introduced.