Should publishers run their own digital exchanges?

Ad exchanges generate revenue, but publishers are now wondering if they can do a better job, Alasdair Reid writes.

When the digital revolution turned ugly, thanks to the worst recession in living memory, many publishers responded by "outsourcing".

Journalists were sacked and a large chunk of primary content creation was farmed out to PR or news agencies. There was a similar cull in commercial departments and, increasingly, the responsibility for selling digital inventory was handed over to third-party advertising exchanges.

It was a strategy that arguably made sense when the industry was searching for more online ad revenues. The exchanges promised an automated process and a larger pool of advertisers, and often involved ad space that publishers were unable to sell, at no additional cost or risk to them. Or so the theory goes.

However, one consequence has been the devaluing of online inventory. Some publishers are now starting to reconsider the Faustian pact they have got themselves into.

A couple of weeks ago, News UK announced that it was terminating its third-party contracts and was setting up its own global ad exchange to handle digital advertising – both online and mobile – across its global news brands.

The company will retain its existing ad sales teams and the new platform will operate as an additional trading tier for a portfolio including wsj.com, thetimes.co.uk, nypost.com, theaustralian.com.au and news.com.au.

Robert Thomson, News Corp’s chief executive, said: "Content aggregators would like to commodify our content, while data scrapers would like to aggregate our audience. The only way to reach the world’s greatest content and most lucrative audiences is directly through our digital properties."

Some greeted the move warmly. Those who worry about the future of the sector maintain that the market is almost entirely driven by price these days – and no-one’s talking about context or the extent to which great content can add to advertiser value.

However, others are reluctant to let go of the exchanges that do generate revenues in a competitive marketplace. It minimises risk, cost, stress, management time and effort.

So should publishers bypass third parties to create their own ad exchanges?

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