European publishers are nervous. Extremely nervous. They know change is in the air but are not quite sure what to do about it. On the one hand they have a behemoth technology player, who has a massive influence over the means by which they sell their advertising, working hard to act as their tech stack of choice in the automated channel. On the other you have agency trading desk and DSPs sucking budget from the traditional sales channel into the biddable exchange space. Publishers are caught in the middle - still unsure what to do. Should they commit impressions to the automated channel, and risk certain commodisation of top tier inventory in the first instances of trading? Or sit and watch how the space unfolds? It would seem to be the latter option that most European content owners are opting to chose for the time being.

As I said to a number of German publishers at the recent Ad Trading Conference this strategy is suicidal given the way the display space was shifting to automation. I argued that publishers should take the initiative and lock down supply and data before they were forced into a corner on pricing and inventory allocation. If it's biddable media the market wants, give it what it's looking for. Own the stack. Now is the time for a number of large European premium publishers to build a pan-European exchange, offering European ad traders the type of scale they've never had before. Why go for this strategy now? And how difficult would it be to build out? Let's examine some of the issues involved - and how such a move might even future proof publisher revenue.

I'm A Publisher, Not A Technology Company

This has go to be a massive consideration when embarking on a project like the Pan-European Publisher Exchange (PEPE). The resource required to build this type of technology is not at the disposal of most European publishers. Their job is essentially to create content and sell context/audience/data to perspective advertisers. It's not in their DNA to build tech for automated trading. I totally disagree. Here's a top-level approach to building tech that European publisher partners should take. Hire a product manager - preferably someone from DoubleClick - and map out the business requirements. Then go to the development company responsible for the majority of tech and algo-powered platforms in our space to build out the offering. Et voila, an owned and operated publisher exchange. It is fair to say that most participating publishers in the PEPE would baulk at committing 5-10 million euro building out their own solution. So if it can't be proprietery, simply partner with an ad tech vendor to power it. There are a host of vendors in the European market - Rubicon, AppNexus, IPOnWeb, Improve Digital, OpenX, Audience Sceince, Admeta et al - who are well capable of delivering some robust tech for the PEPE project.

This Can't Be Done... Publishers Are Too Competitive

Rumour has it that there was serious discussion twelve months ago among AOP members about building a publisher exchange in the UK. No agreement could be struck among members - as some thought that such a deal would make their offering less competitive. A fair opinion given how small the market is here. But there is precedent for publishers working together in this way. AdAudience, which was launched last year, saw a number of leading German publishers come together to build out their own BT-powered marketplace. While not an exchange in the truest sense it showed how some European publishers can work together in a joint venture. A JV between some of Europe's giant premium pubs - there's about ten I'd put on a shortlist - would be palatable given that they would not hugely competitive in multiple markets and would have enough scale on their own home patch. There's also the potential language gap between the various publishers. Could UK, French, German, Dutch, Italian, and Spanish publishers work a s a cohesive group? Well, its worth a sit down at the upcoming Ad Trading Summit, London on September 20 and see whether it's feasible. I'll even chair the meeting.

If You Want Biddable Media, You Will Buy From The PEPE

The Xaxis announcement last week was a huge development for this space. WPP is the biggest display buyer, owning close to 30% of the entire European market. Some have dismissed the move as an overdue centralising of resource within GroupM. But the reality is that Xaxis is using the considerable market position of its parent group as well as the tech available (mostly 24/7 Media) within GroupM to build out its own premium layer - without depending on Google. It's good for GroupM, as they look to lock down supply and build their own infrastructure. But what about publishers? From what I'm hearing GroupM is aggressively leveraging trading agreements to secure premium supply and data. No premium inventory sourced through RTB then - just a set price for managed supply. As one publisher said to me last week, "when they're that big, you've got to play their game... there's really no choice in the matter". That's true but brand advertisers still need brand-safe context. Long tail GDN publishers on Adx will never satisfy the strict contextual requirements of leading advertisers.

The present inventory sources are tailor-made for DR granted but once brand goes into the automated channel you need to be moving up the inventory food chain. I suspect many publishers are worried that saying no to Xaxis will have a detrimental effect on their bottom line. But is it really in their interests to agree a set price for a bulk buy - when they can auction off their premium to multiple buyers at higher floor prices on their own exchange. This is the power of collective bargaining and the PEPE. Trading agreements be damned. If you want my premium inventory in the automated channel, you need to bid on it like everyone else.

You Can't Work With Conflicted Vendors... There Needs To Be Price Friction On The Buy And Sell Side

Can you really operate a DSP, SSP, Ad Exchange and Ad Network and ensure the publisher is getting the best price for its inventory? The buy-side is always going to be the winner in that scenerio. And should one vendor operate the de facto end-to-end solution (tech and premium inventory) in the European display market? No. I think it could have a destabilising effect on the whole marketplace. An owned and operated exchange will ensure the pricing power, technology, and data/inventory is controlled by the participating publishers.

Without The Publisher There Is No Advertising Industry

This is probably the most plausible of all the reasons for European publishers to build their own exchange. Publishers are having a hard time as they look to move from print to digital. CPM pricing is being slowly eroded. Locking down premium supply and data in a publisher exchange is a good way of setting appropriate floor prices and earning enough revenue to fund their content business. Advertisers and agencies must realise a simple fact: while hammering publishers on pricing in the short term is good for campaign performance, in the long term it is going to kill our industry. Publishers need to own their own part of the automated channel so they can retain control - over pricing, the tech and their data and inventory.

I'm hearing that a French publisher exchange is on the cusp of being launched. And AdAudience is looking to move beyond BT marketplace to offer biddable media to German advertisers. But it's not enough. Big European publishers need to scale to compliment Google and the soon-to-be-launched Microsoft ad exchange offering in Europe. The market needs and wants a PEPE solution.