Michael Walrath is the former CEO of Yahoo!’s Right Media.
As eBay became pervasive, a slew of companies appeared with the sole purpose of helping people buy and sell goods on the giant auction site more effectively. These service businesses earned a slice of the transaction value for their efforts. Others took a different approach. Consignment shops and antiques dealers would buy goods on eBay and resell them at a markup in their stores, effectively arbitraging information (many sellers don’t know the value of their goods) and expertise (goods can be perceived as more valuable when purchased from a specialist).
Years ago at Right Media, we used to talk about the need for liquid marketplaces for digital advertising. Soon, a common theme emerged: “You’ll know we’ve been successful creating liquidity when the service layer materializes.” What we meant by this was simple. When businesses develop with the primary purpose of helping buyers and sellers of advertising make the most of marketplace opportunities, then we can begin to talk about successfully building a truly liquid marketplace and unlocking the efficiencies it offers.
Much as 2003 – 2007 saw the rise of the ad network, 2007 – 2010 has been characterized by the rise of the demand service layer. With exchanges and networks, we achieved a critical mass of inventory available in a competitive marketplace. In turn, we saw a dramatic increase in the *complexity* of that marketplace. It is ultimately this complexity (the number of buyers and sellers and differing methodologies for valuing ad space) that creates opportunity for service businesses geared toward reducing that complexity, and unlocking new value in the marketplace.
