Fintech and regtech are firmly entrenched in the financial industry’s lexicon — if a new exchange has its way, “adtech” will be the next addition. The New York Interactive Advertising Exchange (NYIAX) plans to offer a guaranteed contract for digital advertising space on Nasdaq’s latest blockchain-enabled technology platform in Q4.
“The advertising world is … becoming more sophisticated with how it buys and sells inventory and there are a lot of challenges around trust and transparency — knowing the counterparties,” NYIAX co-founder Graham Mosley said. “There are a bunch of issues in the advertising world that [NYIAX] could potentially solve.”
Historically on Madison Avenue, bilateral agreements were the standard. A media outlet had available inventory. A buyer came in, they negotiated and signed a contract. It was a manpower intensive process. While the industry was slow to modernize, those deals have become increasingly automated. That move to technologically initiated contracts is key for NYIAX, which aims to bring buyers and sellers of advertising inventory together with guaranteed contracts to lock in future spend.
Mosley pegged U.S. digital advertising as a $72 billion market, “one of the largest markets in the world without a secondary market.” Of course, that number only gets bigger when broadcast and print are included (not to mention international advertising). While NYIAX is firmly focused on digital, those other mediums are the next logical step to expand.
The idea for the exchange floated around for a while before NYIAX founders Mosley, Carolina Abenante and Mark Grinbaum found their technological partner in Nasdaq. It was a good fit because Nasdaq rolled out its Financial Framework, a streamlined tech stack for trading operations, about a year ago. NYIAX will use the Financial Framework architecture to become the first exchange to both run on blockchain technology and be deployed in the cloud.
“With most startups, you come together, you have a product on the business side and you build something from scratch,” Mosley said. “Instead we’re able to build on top of what Nasdaq already has. It’s not their first time — they’ve done this before. So we start with a very strong partnership.”
Previous ad exchange endeavors did not have a technology offering like Nasdaq’s when the marketplace idea began to manifest in the mid-2000’s. It came to a head in 2007 when Google bought DoubleClick, an online advertising company whose crown jewel was an exchange system for buying and selling ad space. The price tag was $3.1 billion, almost double what Google paid for YouTube. DoubleClick’s Ad Exchange, which still exists under the Google umbrella, was the start of a brief flurry of activity.
Shortly after Yahoo paid $680 million for Right Media, which operated the Right Media Exchange (RMX). That acquisition slowly foundered and Yahoo folded what remained of RMX into its Yahoo Ad Exchange in 2015. Yahoo hoped to draw in more premium inventory since RMX catered to the inexpensive end of the spectrum. A few months after the Yahoo and Google acquisitions in 2007, Microsoft joined the fray by purchasing AdECN which offered a neutral advertising exchange platform. That purchase price was not disclosed but was estimated to be in the $50- to $75 million range.
But none of these solutions addressed the uncertainties of the future — there was not a secondary market in place for all of this advertising inventory or an ability to hedge. Using blockchain technology, the exchange offers a matching engine with guaranteed contracts which makes buying and reselling much easier.
Plus, as was the case with RMX, much of the electronic developments in ad sales were not geared to the whole marketplace.
“While they’ve been making investments in what they call adtech or advertising tech, they’ve been doing that to serve primarily the lower end of the market – that is, unsold or low value inventory. It’s not the premium buyers and sellers that really deal with guaranteed contracts,” Mosley said. “[NYIAX] is introducing the world’s first market for guaranteed contracts, kind of bringing Wall Street to Madison Avenue and bringing adtech and fintech together.”
To date, NYIAX’s funding rounds have been well subscribed and advertising conglomerates are banging on the door. Plus, the Interactive Advertising Bureau along with other trade/industry councils had advertising contract frameworks in place. That, when paired with Nasdaq’s exchange member contract, made it easier to develop a standardized guaranteed contract offering. In short, the NYIAX crew believes this is the right time for the exchange.
“The timing has been serendipitous,” Mosley said.