Recently on ReadWriteTalk, we interviewed Scott Switzer, the CTO and Founder of OpenX. Until recently they were known as OpenAds, but they’ve since rebranded as OpenX. Shortly after the interview was recorded, Google announced a competitive product called AdManager. Scott responded on the OpenX blog by saying that “Googles announcement of a free ad server, Ad Manager, validates our marketplace”. But he also cautioned: “as a publisher, I would find this a dangerous cocktail and I would worry that it may marginalize my revenue.”
I agree that publishers who let Google serve all of their advertisements via AdManager, even the non-Google AdSense ads, are taking a big risk. This was already a risk with
Google’s Acquisition of Double Click,
even before Google’s announcement of Ad Manager. See our post last year,
Google’s Potential Vulnerability: An Open Ad Network
, for more on this topic.
If you agree that a viable alternative is important to the marketplace, an interesting question is: what will OpenX’s business model ultimately be? We’ll focus on this question for the rest of this post.
OpenX Business Model
In our ReadWriteTalk interview, Scott mentioned two high-level revenue streams they think about regularly at OpenX:
- Providing Paid Customer Support
- Helping Publisher’s Maximize their Ad Revenue
While it seems that customer support is a pretty obvious revenue stream for most open source projects, the ‘maximising revenue’ idea gives some interesting indications of the future business model for OpenX. Specifically, Scott highlighted three methods:
“I think that the next thing that we think about in terms of the business model is finding the best way for publishers to monetize their site … we can help them by trying to build efficiency inside the advertising marketplace, which isnt very efficient today. And that manifests itself in a couple of different ways.
One by getting our publishers better rates for ad networks than they could by themselves.
Another could be for our publishers to be able to take direct ads and build a workflow, so that advertising can be purchased directly from them without having to go through multiple emails and a IO process and payment process and that type of thing.
And another could be for ad networks to be able to take particular parts of inventory packaged up by publishers in a way thats attractive for advertisers, ad networks. Those are three very specific things that were looking at.”
Conclusion: Ultimately an Ad Exchange
This line of questioning started with me asking Scott if OpenX ultimately will become an ad exchange. While he wouldn’t confirm this, when OpenX talks about “build[ing] efficiency inside the advertising marketplace” it leads me to believe that they will ultimately become an ad network. Scott did point out that they are also trying to be open and integrate with a lot of the traditional networks, such as Right Media – which is certainly a point of differentiation.
While I understand that perspective, according to Scott OpenX is “serv[ing] in the hundreds of billions of ads per month.” This is in the same neighborhood as Double Click. And with the recent announcement that OpenX is launching a hosted solution (ultimately giving them even more visibility and becoming closer to publishers) an ad exchange seems inevitable at some point. In the meantime, we’ll be testing the hosted ad server on ReadWriteTalk and may eventually use it on ReadWriteWeb as well.
What do you think OpenX will ultimately become? An ad exchange, or do you see another obvious business model? Also, what are your thoughts on Google launching AdManager – is it a threat to publishers?
