But to Bill Lederer's mind, the job was never finished. Lederer, former CEO of early e-commerce company Art.com and executive at the
In an exclusive interview on the new company, founded with former Wall Street technologist and entrepreneur and MediaCrossing Chief Technology Officer Ted Yang, Lederer says the Stamford, Conn.-based company is the first true digital media trading company. "We take the best of Wall Street and the best of Madison Avenue and put it together in a trading business," says Lederer. "We haven't seen that yet."
Lederer claims to have created a new category of ad tech company, variously describing MediaCrossing's system as something advertisers, ad agencies, and publishers would use instead of an ad exchange, or a so-called demand-side platform (DSP) that buys on exchanges, or an ad network. Like those companies, it deals in display, video, mobile, and social ad inventory for now, but plans to expand to other media.
But mostly Lederer compares the company to market makers in the finance world that connect stock buyers and sellers directly rather than through a network of brokers. Like those market makers, and unlike today's ad exchanges, Lederer says, MediaCrossing may actually buy ad inventory on behalf of publishers and advertisers, thus assuming the risk that the value of that inventory could change significantly.
MediaCrossing, he says, connects publishers and advertisers much more directly than today's ad exchanges like Google's DoubleClick Exchange. In those exchanges, he notes, there are a whole bunch of middlemen--ad networks, DSPs, ad selling firms called supply-side platforms (SSPs), and others.
All of those add a lot of cost. For each dollar of ad impressions sold, he says, the exchanges take about 15 cents, DSPs take 15 to 25 cents, SSPs take 20 cents, and after ad agencies take their cut, publishers get only 25 cents. By cutting out middlemen, he says, MediaCrossing will be able to take only a few pennies on the dollar yet still build a business from being efficient and trading in high volumes.
Jerry Putnam, one of the individual investors, says he views MediaCrossing as fulfilling a similar role in advertising that Archipelago, an electronic trading exchange he founded and eventually sold to the NYSE, did in financial and commodity markets. "Eventually the buyers and sellers are going to find each other nearly directly," he says. "The type of technology being deployed is nearly the same as what we used in our industry." Instead of the multiple steps through multiple middlemen that it takes for Toyota, say, to place an ad in the Weather Channel site, he says, "the only intermediary will be a Cisco switch and a Dell computer."
MediaCrossing's competitive advantages include expertise at pricing systems, including sophisticated pricing algorithms that can make trades very quickly. The company uses mathematical models that can quickly determine what a particular audience segment is worth to a particular advertiser or group of advertisers.
The net result should be that online advertising should become more efficient. Of course, that could mean ad prices fall by a lot in some cases, which won't sound great to publishers already reeling from low display-ad prices that keep dropping lower. But Lederer claims publishers eventually should be able to make more money even with lower ad prices because today, half their inventory never gets sold--some 8 trillion impressions a year. MediaCrossing can quickly find buyers for that inventory, he says. "We should be able to improve your overall monetization as we grow to become a continuous source of bidding on your available inventory," the company says on its website.
It all sounds a little too good to be true, except of course for all those middlemen. Since Lederer isn't opening up the inside workings of the technology (though you can get a little more detail here), and few outsiders have delved into it to offer an independent assessment, it's difficult to assess his claim to have created something entirely new that will shake up the online ad industry. Jeff Zabin, founder and research director for information technology research firm Gleanster, who was briefed on the company's plans, says MediaCrossing is "fundamentally changing the game for digital media buying."
Lederer says he has 20 clients using the system so far, about one-third each publishers, advertisers, and agencies. The advertisers include a consumer packaged goods company, a large event company, and a travel firm, with 20 other potential clients expected to join soon. The company says initially it has more than 200 of the top publishers.
A raft of trends make it possible for a firm like MediaCrossing to work, Lederer says: the exploding volume of programmatic ad trading, more standardized processes and protocols in ad operations, higher-speed trading thanks to cloud computing, and a wealth of third-party data.
Backers for the company, which has 16 employees, include Connecticut Innovations, Rialto Bridge Partners, and longtime financial services figures Jerry Putnam, Minder Cheng, Daniel Tierney, and Steve Schuler.
