The Second Round of Auctions
As we are well aware, websites such as Google and Facebook maximize profits when selling their advertising space by creating auctions for their potential buyers. But, as this Businessweek article by Doni Bloomfield reveals to us, these ad spaces are not going directly to people looking to post ads for their businesses. In fact, many of these ad slots are being purchased by other companies to be resold at a profit almost instantly. These arbitragers are turning profits upwards of 60% on ad spaces and even selling the slots back to the companies they bought them from originally.
The deals being made by the arbitragers are happening so fast, the ad holding agencies that have been in the business forever are not able to keep up. By the time these companies are able to decide to purchase the ads, they’ve already been bought and resold for profit by the small 10 man computerized companies. This is drastically changing the ad buying industry. Prices of ads are constantly drove up by the computerized arbitragers since they are able to deal with a large volume of ads very quickly and create an auction after the initial auction. This shows that the sites initially selling their slots could possibly make more money on their advertising if they are in the correct market. There are companies looking to buy ad space with higher true values that are not entering the original sites auction for some reason or another and this is causing them to miss out on potential profit.
http://www.businessweek.com/news/2014-11-07/high-speed-ad-traders-profit-by-arbitraging-your-eyeballs