Thought Leadership
SpotX on the Rise of the Curated Marketplace for Online Video

kevin-schaum-spotx

Kevin Schaum
Director of Mobile Operations
SpotX

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For those of us that aren’t familiar with SpotX, please tell us a little more about your company and core offering.

SpotX is a video supply side platform. We enable publishers and broadcasters to programmatically monetize their content with video advertising and to optimize their yield across all demand sources. In 2014, Europe’s largest entertainment network, RTL Group, made a majority stake investment in SpotX. We have offices in Denver, New York, San Francisco, London, Belfast, Amsterdam, Hamburg, Singapore and Sydney.

  

SpotX was formed in 2007, and was one of the earliest pioneers in the online video advertising market. How did the online video advertising marketplace look then, and how has it evolved to where it stands today?

This press release from 2006 has been passed around a few times internally in recent years. It paints a pretty good picture of the vision that SpotX’s founders had for an “auction based video ad serving platform” before SpotX was even launched. SpotX was truly one of the pioneers of the video advertising market.

Keep in mind that when SpotX (then called SpotXchange) was founded in 2007 much of what the industry now uses in our day-to-day operations wasn’t in place. There wasn’t a standardized framework for serving video ads, let alone transacting media programmatically — VAST, VPAID and OpenRTB standards didn’t exist. Publishers and advertisers transacted media through insertion orders and ad ops teams manually trafficked creative in a complex, time-consuming process. The first generation of demand-side platforms, which are key to today’s marketplace, were being founded around the same time as SpotX. The idea of programmatically serving video ads to mobile phones in real time was a long, long way off.

At the time that SpotX was founded, it was envisioned as a self-service video exchange where advertisers and publishers would transact media. As the industry progressed, demand side platforms grew and started accessing SpotX’s supply via the VAST protocol, which was introduced in 2008. The VPAID rich media video standard was introduced in 2009 and OpenRTB was launched the following year in 2010.

Over the years, SpotX expanded its offering to publishers by building tools to enable publishers to holistically manage their inventory across screens. We evolved from a video exchange into a video supply-side platform.

The online video advertising marketplace continues to progress today. OpenRTB has enabled a uniform ecosystem for transacting media and we now have more than 50 DSPs transacting buys within our public and private marketplaces every day. 

2015 was a year of massive growth in both mobile spend and private marketplaces for us. We’re also seeing data being leveraged in ways that were inconceivable just a few years ago. Buyers are committing device agnostic budgets based more on individual user profiles derived from device IDs and cross device data and less on the demographic makeup of a given site or app.

Finally, it’s important to mention the changes to the internet itself in the past nine years. In 2007, there were 1.3 billion internet users worldwide. In 2015, there were 3.2 billion internet users worldwide. Users increasingly access content via smartphones, tablets and connected televisions. In emerging markets, many people are accessing the internet for the first time on mobile devices. Throughout the world, video buyers are committing budgets to reach consumers programmatically, wherever they may be. Our goal is to offer the best tools in the industry to enable publishers to access these budgets and optimize their yield.

 

Who are some 3rd party companies you work with and in what capacity? (data providers, viewability partners, ad verification partners, etc) 

We work with many data partners, including DoubleVerify for ad verification and fraud detection, ComScore for ad validation, Lotame for audience targeting, zvelo for content categorization and audience targeting, and Moat for viewability measurement.

In addition to the partners we’re already working with, we’re in the process of a major transition of moving our publishers from VAST (only MP4 creative) mobile inventory to VPAID 2.0 (VPAID JS rich media creative) mobile inventory here at SpotX, which opens a big door for advertisers looking to use their own 3rd party data verification and measurement tools. These tools have been enabled on desktop for years because of the flash based VPAID 1.0 standard. We see it as a natural progression to bring them to our mobile marketplace

 

To the extent that you can reveal, why do you think RTL Group acquired a majority stake in both SpotX and StyleHaul (and invested in Clypd)? Is the ultimate goal true cross-platform digital video content distribution and monetization?

RTL Group has heavily invested into online video, as they have redefined their understanding of TV. It isn’t just ‘television’ anymore. It means ‘total video’. This is important as many people still think that TV is just for the living room, which overlooks the multitude of platforms and devices that are available today. RTL Group has made acquisitions in two areas which are bundled in the RTL Digital Hub: MCNs like StyleHaul and BroadbandTV to expand reach among young target groups as well as in advertising technology with SpotX and Clypd. The goal is to have quality content available whenever and wherever the viewers are watching and the ability to monetize that content with the best tools in the industry.

 

It’s been reported multiple times that the adoption of ad blockers by consumers is becoming more widespread, marked most recently by ad blocker Shine signing their first network-level deal with European carrier Three. How do you think the ad blocking issue will play out over the next few years? Will advertisers and publishers find a way to mitigate this existential crisis they face? 

My view is that publishers should ultimately be in control of how they monetize content, but that consumers will vote with where they spend their time ingesting content. Ad budgets tend to follow users.

Creating high quality content is not cheap. A value exchange must exist between the content consumer and the publisher, or quality, professionally developed content will become scarce. From the other side of the table, consumers understandably want control over mobile data usage and seek good user experiences.

I think a balance will be found with publishers utilizing technology to deny access to their content for users who block ads while at the same time exchanging multiple low yield, intrusive ad units on a page for one or two high yield units that more seamlessly integrate with content. In addition, I anticipate we’ll see server side stitching becoming a popular way for guaranteeing ad views in video environments.

Mobile carriers making a play into the ad-tech industry is interesting. At first glance the Shine-Three partnership appears to be about making sure consumers don’t incur data fees from viewing mobile ads. It does make me wonder whether Three will be rolling out their own advertising offerings, as we’ve seen other carriers start to do. The existential crisis between publishers, advertisers and consumers could potentially get much more complicated if mobile carriers start implementing a pay-to-play model for advertisers or publishers. 

 

What are your thoughts on private marketplace deals for digital video? Do you think there ever will be a point where buyers will be able to purchase almost all inventory through RTB or private marketplaces, through a singular, unified standard?

We’re seeing enormous growth in private marketplaces (PMPs). I see PMPs as a logical next step in the programmatic ecosystem. Open marketplaces revolutionized the way media was transacted, but didn’t enable buyers and sellers to set terms with each other in advance. PMPs enable sellers the ability to programmatically sell inventory based on pre-brokered terms to a select group of buyers, often times at fixed rates. This provides better fill to sellers as well and control over who is buying their inventory, and more guaranteed reach to the buy side.

As far as whether almost all transactions will be transacted programmatically at some point in the future, I think we are a ways off. Programmatic video ad spends in the US are expected to grow by 85% this year, following a more than 3x increase last year. Estimates are that as much as 65% of video inventory will be transacted programmatically in 2017. Keep in mind the term programmatic doesn’t necessarily signify a single, unified standard. There are still a lot of legacy APIs being used and a lot of technical hurdles to overcome to get all buyers and sellers to adopt a unified standard.

I think that we are realistically several years off from getting everyone on the buy side moved over to OpenRTB domestically. From an international standpoint, things are often different from one country to another because of compliance with local regulations and/or differences in the way that media was historically transacted.

 

Venture Capital funding looks to be drying up for the adtech sector (and it seems like for most of tech as well), and so companies will have to find a way to be sustainable and not be reliant on cheap money to exponentiate their business. What effect do you think this lack of VC money will have on the adtech sector over the next few years?

The ad tech industry has matured over the past several years. I agree with Jerry Neumann’s quote from the Digiday article. In many ways, the winners have already been decided. The landscape now consists of a few entrenched competitors who are either multibillion dollar companies or who are owned by multibillion dollar companies.

Certain segments of the industry are probably too highly competitive for new startups to compete – the industry doesn’t necessarily need more video SSPs or mobile ad servers. There will, however, always be new opportunities for both new and established ad tech companies to innovate as the ways people access content and the data available to advertisers continue to evolve.

 

Companies such as Teads.tv, and now most recently AppNexus, now offer Outstream video advertising through their respective exchanges. Does SpotX offer this particular ad unit, and what is your opinion of it?

SpotX launched our own outstream in-content video ad units on desktop and mobile last fall and we now have dozens of premium publishers onboard. We’ve seen a huge amount of advertiser interest in these units, particularly because our units support VPAID Javascript rich media experiences and enhanced viewability reporting on both mobile and desktop. These units do a great job of striking a balance between a positive user experience, publisher monetization and advertiser insights into viewability. 

While other outstream ad units often make multiple ad calls to demand sources, our units are unique in that they make a single ad call into SpotX and all subsequent connections to demand sources and ad decisioning is handled server side. Publishers are able to optimize yield between direct sold campaigns, private marketplaces and the SpotX open marketplace within our UI with a very high level of transparency. This model, which gives all the control to the publisher, is different to competitors in the space that only offer up-front deals at fixed rates. 

Higher CPMs from these units have enabled publishers to displace multiple low performing display units on page. It’s a win for publishers, advertisers and end users.

 

What are some innovations happening in both online and mobile video that excite you the most?

We’ve recently launched a new type of marketplace that we are calling Curated Marketplaces. The SpotX open marketplace has billions of ad opportunities per day. With such huge scale it can be hard for buyers to hone in on the inventory or audience that they are looking for. If you think of the SpotX open marketplace as a massive superstore, Curated Marketplaces are specialty stores that focus on a specific type of inventory (device type, viewability rate, etc) or audience and provide buyers with a one-stop shopping experience for the inventory they are looking for. From a tech standpoint, Curated Marketplaces are transacted via group deal IDs and show up as sub exchanges within a DSP’s UI.

In addition, I’m excited about the transition to VPAID JS, or VPAID 2.0 on mobile that I mentioned earlier. Mobile video has lagged behind desktop in the availability of on-page metrics that VPAID has historically provided on desktop. Last year we updated our ad units to be compatible with the VPAID Javascript standard and we’ve been transitioning publishers over from VAST MP4 integrations to VPAID JS integrations throughout the year. As of now, about half of our mobile inventory is VPAID JS enabled. As we continue to strive to be the most transparent marketplace for both publishers and buyers, this transition enables us to provide better viewability metrics, ad verification and fraud detection.

  

Lastly, what do you see as the future of the way digital and mobile video is bought and sold?

We’ll continue to see buyers getting smarter about leveraging 1st and 3rd party data to conduct programmatic cross-device buys and we’ll see publishers utilizing SSPs that give them control to optimize their yield across all devices in open marketplace, private marketplace, Curated Marketplace and programmatic direct transactions.

 


 

SpotX is a video inventory management platform for premium publishers and broadcasters, helping them manage all of their demand sources from one place, and monetize content across all screens. The SpotX platform offers publishers unprecedented transparency and insight, creating a safe, controlled environment that allows them to connect with advertisers, and achieve the highest revenue possible.

Premium publishers and mobile app developers trust SpotX as the independent solution that helps them better understand the buying behavior of today’s leading brands and maximize inventory yield across private marketplace, programmatic direct and open marketplace deals. SpotX’s ad serving, leading programmatic technology, and open and extensible architecture help simplify the complex digital video ecosystem for global publishers.

Headquartered in Denver, Colorado, SpotX also has offices in New York, San Francisco, London, Sydney, Amsterdam, Hamburg, Belfast and Singapore. In July 2014, leading European entertainment network RTL Group acquired a 65% stake in SpotX, which was founded by CEO Mike Shehan and CFO and COO, Steven Swoboda, in 2007. For updates, please follow SpotX @SpotXchange or visit www.spotxchange.com.

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