Facebook‘s open RTB platform LiveRail has joined a growing number of exchanges that have banned ad networks from purchasing and reselling impressions on its exchange.
The trend is part of ongoing efforts by the exchanges to clean up their inventory and make it safer for big-spending brand advertisers as they migrate to programmatic.
The news was made public last week when several ad networks received letters from LiveRail, stating its plans to terminate its relationship with them by the end of November. In a copy of the letter obtained by AdExchanger, Facebook explained its goal was to close the distance between advertisers and publishers by cutting out middlemen, and shifting towards more “quality, direct-publisher relationships.”
Ad networks have long been criticized for practicing so-called arbitrage on exchanges (i.e. bidding on and winning impressions only to immediately put them up for auction again or resell them directly to an advertiser at a higher CPM). While many ad networks claim they are helping advertisers find valuable remnant impressions, media buyers feel the practice adds to their costs without adding to the value of the inventory they’re acquiring.
As Facebook’s publisher-side programmatic technology offering, LiveRail is an influential global player in programmatic. It auctions inventory on behalf of publisher clients such as Major League Baseball, Hulu and A&E Networks, and is integrated with most well-known buying platforms. (A representative of Facebook declined to comment for this story.)
LiveRail’s decision followed on the heels of a similar decision by AppNexus, a large independent exchange that has long struggled with a reputation of being the Wild West of programmatic buying. AppNexus drew attention two weeks ago when CEO Brian O’Kelley told AdExchanger it had banned arbitrage and booted several networks engaged in the practice as part of an effort to clean up its exchange.
With two major exchanges having made the move to ban arbitrage, others could soon follow.
Andrew Casale, CEO of Index Exchange and a strong voice for more transparency in the programmatic supply system in Canada, applauded the move by LiveRail (a competitor to Index). He said that the more exchanges disallow high-frequency reselling, the more it will improve overall quality in the programmatic space, to the benefit of all legitimate parties.
“A lot of the entities that use that particular feature – or loophole – are not creating value, and I think clamping it down will ensure those that remain will be engaged in value creation, which is good for everyone in the ecosystem,” he said.
He said that while it has been clear for some time that arbitrage networks don’t add value for the advertiser, and it is fairly easy to detect networks engaged in arbitrage, some suppliers have been willing to overlook the practice because each transaction adds to their revenue.
Index also does not allow networks to resell impressions on its exchange, or resell impressions bought on other exchanges, he said.
Banning arbitrage may also help to eliminate certain kinds of ad fraud that continue to run rampant on open exchanges. Arbitrage networks are often linked to fraud, since they can serve to launder fake impressions by reselling them under spoofed domains, rather than the sites where they are actually hosted. For example, a network may sell impressions that appear to come from YouTube, but are actually running on a bot site that no human has visited.
Arbitrage has been a major problem for Canadian publishers. Properties owned by major publishers such as Bell and Rogers are often spoofed by fraudsters even though those properties don’t sell their remnant impressions on the open exchanges. Unauthorized arbitrage and spoofing were one of the primary reasons behind CPAX’s transition to an invite-only exchange last year.
In recent months, a variant phenomenon called “arbitrash” has become prevalent in programmatic video. With arbitrash, a network buys a banner impression and resells it as a preroll video ad for double or triple the original price. Instead of the ad running in a standard video player, as the buyer intended, it’s stuffed into a banner.
LiveRail (which prior to its acquisition by Facebook was a dedicated video exchange) still hosts a large supply of video impressions. Although there’s no indication arbitrash was a problem for LiveRail in particular, banning arbitrage entirely will certainly help keep arbitrash off its platform.
