Yahoo's APT (Part 1): A media-friendly future for digital ad trading?

Jerry Yang, the co-founder of Yahoo, calls APT the “next generation of advertising”. Slightly awkwardly, he adds on his blog that APT would be to 2009 “what radio was to 1924, TV to 1947, color TV to 1965, and the Internet to 1993″.

You get the idea.

Actually, APT is intended as a market, an exchange — in the same way that you could describe the London Stock Exchange as a market for share trading. As Yang puts it:

The advertising strategy at Yahoo is about building platforms for publishers and advertisers and our second strategy is about opening things up for multiple sales forces and multiple pieces of inventory.

In other words: APT is what happens when a pure-play giant like Yahoo opens up its highly advanced infrastructure as a trading platform for rival publishers. Yahoo now wants to become a supplier to Big Media, the industry it once threatened to destroy.

Business Week offers a flavour of what’s involved:

The core of the system is an open online marketplace where publishers–Yahoo and its network of partners, including 784 newspapers–use a simple dashboard to post ad slots available on their Web pages.

Advertisers, using anonymous data on visitors to the pages, can target ads to the most likely prospective buyers in particular geographic areas–say, ads for minivans to married women aged 31 to 40 in the Chicago metro area. In one transaction, they can reach potential buyers on Yahoo and on partner sites.

So what’s in it for media owners? At APT’s launch, Yahoo wheeled out Dean Singleton, chief executive of MediaNews Group, which publishes the San Jose Mercury News.

Singleton — whose company has collaborated with Yahoo on the development of APT — believes that the system will dramatically improve newspapers’ ability to generate digital ad revenues.

Singleton believes that media owners will benefit from Yahoo’s behavioural targeting prowess. APT’s ability to combine the offerings of different publishers into a streamlined buying process should also help.

“As part of APT, we can bundle our inventory nationally and in a more targeted way. Today, newspapers are focused on selling sites and sections generally. . .

“We can charge higher rates if we can target better. If we could charge normal rates for our advertising, you wouldn’t be hearing about the woes of the newspaper industry. The reason that online newspaper revenues don’t make up the losses on the print side is because we’re selling cheaper remnant ad space.”

In an interview with the FT, Singleton went even further, suggesting that if APT had been launched earlier, “you wouldn’t be hearing people talk about the woes of the newspaper industry”.

Although he didn’t say it, Singleton probably also hopes that platforms like APT will reduce the role of ad networks, or even disintermediate them entirely. Media owners won’t shed too many tears on this score. Ad networks have always been an imperfect solution to the challenge of selling low-value inventory.

APT should also allow publishers to cut the cost of selling digital ads, perhaps radically. This seems likely because Yahoo’s platform promises to address the supreme paradox of digital advertising — namely: organisational processes that are “crummy” at best. (On Thursday, this adjective was used by Yahoo’s Susan Decker, who knows what she is talking about.)

From Yahoo’s point of view, the ambition is similarly heady. And here’s a significant bit of parsing from Reuters’ Paul Thomasch:

What Yahoo wants is a system as efficient for online display advertising as the one run by Google in search advertising.

Well, yes and no. Yahoo, it seems, envisages APT becoming a unified trading system for all kinds of digital advertising including (yes) online display, but also mobile and search. Video advertising sits on Yahoo’s list of ambitions, too.

So why hasn’t anyone else thought of this before?

As it happens, they have. But in recent years, progress toward automated trading of digital display has been frustratingly slow.

Arguably, the faster-growing market for paid search has been occupying all of the best talent at places like Google, Yahoo and Microsoft. Meanwhile, EBay’s efforts to set up a trading exhange for the US TV industry appear to have foundered in the face of opposition from media owners.

Now, however, Google, Microsoft and AOL are all working on platforms to rival APT.

Of this trio, AOL seems to be closest to realizing something concrete. This week, the Time Warner subsidiary claimed that it will launch an ad exchange called Bid Place in early 2009.

This burst of development couldn’t have come at a better time. In an online display market that shows signs of tanking alongside everything else, it’s precisely what’s required.

By the time we haul ourselves out of recession, digital advertising — and therefore digital media — could look very different indeed.

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