When the New York Interactive Advertising Exchange (NYIAX) was unveiled to the world earlier this year, it made some bold claims about the impact it would have on the advertising industry. CEO Lou Severine promised that NYIAX, which uses Nasdaq tech to bring Wall Street’s automated trading capabilities to the buying and selling of advertising, would “change everything”, and that “advertising as we knew it for the past twenty years will be ancient history.” Investors are buying into the vision too, as NYIAX announced the successful completion of a $5.6 million funding round a few weeks ago. VAN spoke to NYIAX’s chief product and technology officer Richard Bush about what this new trading platform offers, and how it’s progressing on it’s mission to “change everything.”
The ad industry is of course no stranger to automation, with programmatic buying now an everyday practice in digital advertising, but bulk forward sales still involve a lot of human input, with companies establishing relationships and setting up deals via insertion orders (IO) over the phone. This continues to create a lot of inefficiency said Bush, both through the inherent time inefficiency of human-to-human interaction compared to automation, but also due through efficiency that comes from human error. “One of the things we found, certainly in our early holding company conversations, was that the upfront deals are done but they’re not necessarily financially tracked” he said, which can create problems down the line.
With transactions automated and recorded to a ledger, both the buy-side and the sell-side can track the progress of payments, and also track delivery with third party verification services that NYIAX works with. These guaranteed contracts can also help advertisers/agencies and publishers forecast their spending more accurately, allowing them to plan their other spending more easily. “Publishers are interested in understanding what kinds of investments they can make in the creation of content and just in general, so the more they sell in advance, the more they can prepare” said Bush.
The Future of Futures
NYIAX’s system will also enable futures trading, differentiated from forward trading by the fact that payment is made in at the point of trade, rather than the point of delivery. Publishers may in certain cases want to offer heavily discounted prices to advertisers if they’re willing to pay in advance, a practice which is currently very rare in the industry. Bush says NYIAX’s guaranteed contract tech will allow these deals to happen much more commonly, and while the futures market has not really been his company’s focus, he does expect the market to grow as industry players adopt this new type of deal.
To enable this new way of trading, NYIAX is using a customised Nasdaq financial framework which it has built to be compatible with ad trading, and has opted to use Nasdaq’s blockchain-based transactional engine. The use of blockchain is in large part an effort to future-proof NYIAX said Bush, as he believes that blockchain storage will be the standard for transactional records in the future. But blockchain does have other advantages for its use in ad sales too. “Essentially what it means is that all the transactional records we keep of activity on the exchange are stored in blockchain. Once a trade has been made, the details of that trade and the subsequent tracking and reconciliation of the activities like payments and flows are all recorded in the ledger. This provides a level of transparency and trust which the industry is craving,” said Bush.
This system takes a little getting used to, and NYIAX provides training for companies working with it, though Bush says those involved in beta-testing have adapted to it well and feedback has been positive. “Because we’re partnering with the current delivery ecosystem, there some familiarity with parts of what we’re doing, and that’s been going well. Based on the early interactions we’ve had, people have told us they see the need for automation across the board, not just RTB style automation,” he explained. NYIAX is using that early feedback to work on ensuring that it’s partnering with the right companies for delivery, and ironing out some confusion around the terminology. For example, some of the phrases commonly used in the finance industry have required some clarification for those working in advertising.
There are still other misconceptions which NYIAX has to overcome. The blockchain component can be a source of confusion due to the fact that may still associatie blockchain heavily with Bitcoin, and assume that NYIAX must trade in Bitcoin, which isn’t true. Some too are under the impression that NYIAX will lack the kind of audience data found in RTB trading. Whilst Bush conceded that there is some data which only RTB trading can use, he argued that most of the data that RTB is commonly traded on is widely available over primary delivery systems, and stressed that while NYIAX does not offer impression-level buying, it does allow for a healthy degree of audience targeting.
If NYIAX can overcome these misconceptions and establish itself in the digital market, the company will be seeking to expand into other media. Bush expects it won’t be too difficult to translate the current model for use in other markets. “We chose the most complex market [digital advertising] to start with,” he explained, “so most of the work about simplifying existing processes, although that still requires quite a bit of effort. But we don’t have to re-architect the whole setup from scratch up either.”
Bush and his team have already started identifying partners within other sections of media and familiarising themselves with the different types of inventory used. Work on these other media is expected to begin in earnest in Q1 of next year.