It turns out that parallel structures have also emerged in the online advertising markets. Platforms increasingly give select buyers and sellers access to private marketplaces (PMPs)—exclusive exchanges for ad inventory. PMPs allow selected advertisers who have negotiated a special deal with a publisher to bid for advertising space, usually of a higher quality and in a less crowded, and therefore less competitive, market. These arrangements are attractive because they offer better transparency to the participants and also allow buyers to keep targeting data and other valuable information away from the public markets.20
PMPs are a growing segment of the transactions taking place in online advertising. In 2018, 45 percent of all the money spent in real-time bidding auctions took place within the confines of a PMP. Of the $19 billion that are projected to enter into the programmatic ad space between 2018 and 2020, the majority will go toward PMPs and other private arrangements.21 By 2021, spending on PMPs is projected to exceed spending in open exchanges by more than $2 billion.22 Ironically, this trend is driven by the opacity of public programmatic marketplaces, where brand safety and an overall lack of transparency make for a more risky advertising environment.
On a systemic level, PMPs introduce a new source of opacity while ameliorating the problem for a select few. If you lack access to a PMP, you cannot see the activity in these premium dark pools of advertising inventory. This introduces many of the same structural issues that accompany the rise of dark pools in the financial markets.
For one, the publicly available price no longer reflects the supply and demand across all the players in the marketplace. That means it is harder to know what the prevailing value of an ad is. Is the price paid to deliver an ad to a given consumer too much or too little relative to the overall market? Is a specific kind of ad receiving more demand over time, or is that demand falling?
Ambiguity about price reintroduces some of the challenges that programmatic advertising was intended to solve. By creating an interconnected set of markets with competitive bidding, programmatic advertising promised to foster price transparency in the marketplace. That is, players in the market would have a good sense of how the rest of the market was sizing up the opportunities to buy and sell attention. The growth of PMPs muddies the waters again.
Programmatic advertising makes it challenging to effectively track whose attention an advertiser is buying. The growing presence of PMPs creates a hazy landscape of pricing and available inventory for the ad buyer. But the opacity problem is not limited to PMPs alone. The highly consolidated nature of the programmatic advertising ecosystem itself contributes significantly to the murkiness of the internet’s attention economy.III. The New Intermediaries
The development of online programmatic advertising is often cast as a story of disintermediation. This is true to some extent. Traditionally, marketing agencies have played a major role in facilitating the interaction between advertisers and publishers. Programmatic advertising has supplanted this middleman role, allowing buyers and sellers of ads to transact directly. As a result, the gatekeeping role of agencies has eroded, and marketing agencies have struggled as “self-serve” programmatic marketplaces have grown.23
That is undoubtedly a positive story in some respects. Advertisers have more direct control over how their messages are distributed to the public and can choose how best to achieve their specific goals. Publishers are no longer beholden to marketing agencies, who long served as gatekeepers to major advertising dollars. In economic terms, disintermediation is a happy ending: costs should be lower overall, and supply should be able to meet the demands for advertising faster and more effectively.
This story overlooks one important point: the companies that brought about disintermediation have themselves become intermediaries in the advertising space. Google, Facebook, and major ad exchanges have huge sway over the rules of buying and selling ads because of their relative size and the high level of consolidation in the marketplace.
That consolidation increases market opacity. The availability of data about the state of the global online advertising marketplace is now dependent on the business decisions of a small number of platforms. The failure to disclose relevant information or the publishing of misleading information can severely distort the advertising markets.
One striking illustration is the subject of an ongoing lawsuit around claims that Facebook made in 2015 promoting the attractiveness of video advertising on its platform.24 At the time, the company was touting online video—and the advertising that could be sold alongside it—as the future of the platform, noting that it was “increasingly seeing a shift towards visual content on Facebook.”25 Mark Zuckerberg argued publicly that “the vast majority of the content that people consume online will be video.”26 Facebook backed this push by tweaking its News Feed algorithm to promote video, directing huge amounts of traffic toward this type of content.27
The company’s “pivot to video” encouraged publishers to invest heavily in the creation of more video content, often at the expense of existing staff. The effort also fed substantial industry hype about the value of video advertising on Facebook.28
But it turned out that Facebook overstated the level of attention being directed to its platform on the order of 60 to 80 percent. By undercounting the viewers of videos on Facebook, the platform overstated the average time users spent watching videos.29 Facebook later admitted that several other key video advertising metrics were overstated.30 Creative accounting has dogged other marketing metrics that Facebook has promoted. One analyst noted that Facebook claimed to be able to reach 25 million more eighteen- to thirty-four-year-olds in the United States than should exist according to the U.S. census.31 Another report cast doubt on Facebook’s claims about the performance
