AppNexus CEO Admits He Sometimes Doesn't Reveal Original Ad Prices To Clients

Spring has brought with it a season of confession in the online ad world: AppNexus CEO Brian O’Kelley recently told a conference that his company does not always reveal the original price of ad media to the clients who pay for it.
The admission comes after GroupM CEO Rob Norman, and his chairman, Irwin Gotlieb, both said something similar at a different conference.
The debate is about real-time buying by demand side platforms (DSPs) — which is jargon that describes how ad buying companies analyze web users’ browser histories, and then use that data to target them with ads. In doing so, DSPs take the original ad inventory offered for sale by publishers, add their own data to it that makes it more valuable because it’s targeted better, and then sell that at a premium to advertisers who want to buy it.
The controversy is over whether advertisers should be told what the original price of the inventory was, and whether it’s fair for them to pay the premium price without knowing the original price. (Or whether they even want to know.)
Some clients, like Kimberly Clarke and Ford, have pulled away from such practices.
Some agencies, like IPG Mediabrands, say they offer clients full transparency.
In their defense, Norman, Gotlieb and others argue that the targeting data they add to the inventory is valuable, and as they created it they should be able to charge what they like for it. Advertisers can go elsewhere if they feel it isn’t worth the money (and many advertisers spread their buys across a bunch of different companies specifically to ensure they can compare performance).
At the Programmatic I/O conference in San Francisco this month, the price transparency debate was raised by moderator Mark Mahaney, an analyst with RBC Capital Markets.
Here’s a section from the transcript. The controversial bit is near the end, where Kelley is asked on the subject of price transparency, “Do you expose the price of each individual publisher?” He replies, “No.”
We emailed AppNexus for comment and we’ll update this when they get back to us.
The other people on the panel were Andrew Casale, VP of strategy for Casale Media, a sell-side company; Victor Milligan, chief marketing officer for mobile ad exchange Nexage; and Rajeev Goel, CEO of Pubmatic, which offers publisher ad exchanges.
Q: What will be the next tipping points that will be proof points to force more dollars to programmatic?
O’Kelley: It’s very tough to sell media by hand. Salespeople are a pain in the ass. We’re getting lots of questions about what’s the ROI of replacing salespeople with real-time bidding. There are still a lot of questions, like what does “quality” or premium inventory mean? As we hone in on what that means, it’s easier for a marketer to make sure their ads only appear near quality content. We need to find ways to determine what the online equivalent of good TV shows are.
Casale: The exchange market needs to be more transparent. It breaks one fundamental tenet of a market, which is price discovery. They’re completely opaque.
Q: In what market does that really happen?
Casale: Nasdaq. You can purchase that knowledge. No one in our business is transparent.
O’Kelley: I call bullshit.
Casale: Do buyers on your exchange know where the price comes from?
O’Kelley: We publish a full price history, though we won’t reveal a publisher’s price unless they want to.
Casale: I’m talking about the buyer, not the publisher. Do you expose the price of each individual publisher?
O’Kelley: No.
• Ford, P&G And Others In Full-Scale Revolt Against Ad Price ‘Arbitrage’
• AppNexus CEO, Who Said Mobile Ads Were ‘Not Significant’ In January, Will Now Go ‘All In’
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