Publishers are still wary of the ad exchange model. The idea of selling their inventory at rock bottom CPM prices is keeping them away from the trading platforms. I’ve recently had some conversations with some senior publisher execs, and their attitude to the ad exchange remains sceptical at best.

It’s still very early days for exchanges in Europe though. But the European market remains ridiculously fragmented, and a homogenised open exchange model will not fit the continent's disparate market in the short term.

It is no surprise then to see different channels emerging as a means to sell non-premium inventory. One of the more interesting developments has been the rise in the popularity of “dark pool” trading.

A “dark pool” is effectively a private exchange run by a publisher or group of publishers that allows the trading of ad inventory outside of open ad exchanges without prices being disclosed to the market.

These “dark pools” are allowing buy-side traders to buy inventory at a guaranteed price. And some are even allowing pass backs if buyers don’t like the cookies they’re seeing.

Having worked in a B2B publishing background, I wonder if this would be a perfect non-premium strategy for some trade press publishers: guaranteed CPM pricing for access to highly-targeted audiences.

The best example of this in the European market is the Premium Alliance, a private exchange with optimisation capabilities being developed by Germany's top publishers to sell non-guaranteed inventory. It could actually be Europe’s biggest “dark pool” of ad inventory.

So, who is involved in helping publishers establish these off-exchange inventory pools? The Right Media exchange has been assisting European publishers for some time to set up private (invite-only) exchanges. Others involved include the Swedish company, Admeta. Its exchange technology is facilitating the private sale of non-guaranteed inventory for a number of large premium European publishers.

Johan Klaesson, President and CEO at Admeta, spoke to FarneyMedia recently about the growing trend of “dark pool” trading:

Have you seen a lot of large European publishers adopt an off-exchange strategy?

First of all, there is a significant difference in how different geographical markets react to this type of set up. Publishers in the UK and the northern parts of Europe are more inclined to adopt these business models than publishers in southern Europe. There are basically two types of customers that approach us about a solution for an off exchange strategy.

- Publishers that previously have been working with any of the dominating exchanges or yield optimizers with unsatisfactory results and are therefore looking for alternative solutions

- Publishers that would like to protect their brand and premium sales therefore need full control of what advertisers and creative’s may appear on their site. But most important avoid cannibalisation on their premium business.

The first category might be interested in a solution whereby direct advertisers and ad networks bid head-to-head. The second category might only allow direct advertisers and agencies in to be totally confident of what appears on their site.

What advantages do you see in this type of ad trading for the publisher?

The benefits depend on the publisher’s commercial strategy and organizational set up. Some publishers may realise substantial organizational synergies because premium sales and non premium sales get tightly connected.

However, the most important benefit in trading ads this way is of course the increased control. This appeals to publishers with strong brands but it also has a strong impact on sales as any potential channel conflict is eliminated, allowing eCPM levels of all ad inventory to appreciate.

The publisher also gets a stronger customer relationship and more business development opportunities - and is able to sell a greater proportion of the inventory to direct advertiser, cutting out the middle man and consequently generating higher yields.

How does your technology help large publishers develop their own “dark pool” of ad inventory?

Ever since we entered the online marketing game in 2002 we have been sceptical of the “one solution fits all” approach promoted by many technology suppliers in this industry. The European market is extremely fragmented which has forced us to develop a flexible platform that allows publishers to adjust technology to fit their business, not the other way around.

How the publisher handles the client relationships is entirely up to the individual publisher. Either the publisher lets their client fully into the system so that they can place their bids directly or they deal with the sales process in a similar way they handle their premium client relationships.

This way the hierarchy between direct advertisers and ad networks is managed in the simplest way possible. The one that pays more for the actual ad impression gets prioritised.

Do you see this trend developing as more publishers look to shift premium inventory through the 2nd channel?

We have seen a lot premium inventory shifting over to secondary channels in markets that have seen big drops in premium prices. Publishers in weaker advertising markets tend to be doing this more - and that’s hardly surprising.

As the price gap declines though, the efficiency gains of trading inventory through secondary sales channels makes it a more attractive strategy.

We see overall inventory increasing faster than the demand for premium ads. This increases the size of non-premium inventory and thereby its importance. This opportunity has a great potential to increase overall revenue: that’s why we’ll see more and more publishers having a stronger focus on remnant inventory.