Why Does Google Want AdMeld So Badly? High Frequency Trading for Online Ads

carrier hotel Why Does Google Want AdMeld So Badly? High Frequency Trading for Online Ads

The luxurious accommodations at Google's Carrier Hotel

When Google plunked down a $400 million offer for New York’s AdMeld, a lot of local venture folks were surprised at the price.

“They’ve got some good growth, but nothing that would justify this kind of premium,” was how an ad-tech investor put it Betabeat. To date AdMeld had raised just $30 million.

But a chat yesterday shed some light on the situation. “We are getting a ton of pitches from former Wall Street quants looking to start companies that apply the principles of high frequency trading to the emerging market for real-time bidding across online ads,” said Bryan Birsic, a senior associate at Village Ventures. 

Birsic says that while a few companies have claimed to have real time bidding, AdMeld, Rubicon and a few others are actually just beginning to create a efficient, liquid market for this publishers online advertising inventory. “Folks who have reached their limit on Wall Street, or who are looking to make the jump to tech, see a big opportunity here for high level algorithmic arbitrage.”

Google is the perfect company to jump into that market. They are an engineering heavy culture with a ton of resources to throw behind what boils down to a computational arms race. The $2 billion they plunked down for New York’s premier Carrier Hotel at 111 Eighth Avenue means that Google is sitting on some of the fastest fiber in the media capital of the world.

The challenge for Google right now is to convince the anti-trust folks down in D.C. that the acquisition of AdMeld doesn’t give them to much power in the online advertising market. It’s unlikely that the Feds have even thought about the implications of the high frequency trading model making its way into the ad market. But if the deal is approved, look for Google to bring serious firepower to this fast developing business.

According to Forrester Research, the real-time bidding market will hit over $820 million this year, up from over $350 million in 2010 and more or less non-existent in 2009. And while that report was actually commissioned by AdMeld, its clear a lot of firms are looking to bring the lessons of high frequency trading to bear on the booming RBT market.

As Jay Sears, General Manager of the CONTEXTWEB Ad Exchange, put it on his blog, “Pundits will say Google bought publisher relationships and Admeld’s yield optimization service for large publishers. Now Michael and Ben and their team at Admeld have done an excellent job of pulling in top, large publishers such as CBS, IDG Tech Network, NBC, Quadrant One and, but this misses the point entirely. Google bought QPS volume, period. [QPS is queries per second, a measure of liquidity or volume of display ads being offered via real time bidding.]”

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  1. Nobody says:

    “Jump in” to the “RBT market”???  Do some fact checking… google is already a dominant player in this market and has a full product stack.  They’re buying premium publisher relationships.

    1. Industry Vet says:

      They are a player in sell side RTB not buy side RTB,

      1. Vet says:

        Correction – That should be reversed, they are a player in buy side RTB, not sell side RTB.

  2. Mike says:

    Nicely written, but this article is completely inaccurate.  Google will throw away Admeld’s technology and use their own RTB stack which is more mature and running at significantly higher volumes already. They’re acquiring customers and a know-how on how to do less intelligent network optimization to fully service publishers.

    1. Mike says:

      Just to follow-up on my own comment.  Those “quants” looking to make the jump should think twice.  RTB is *very* different from high frequency trading and the lessons learned from finance will not apply nearly as nicely  to online advertising as they think.

  3. pokoleo says:

    It should be “too much”, not “to much”

  4. Duh says:

    Are you guys really not seeing this clearly?  Google acquires companies to slow the market down, so that they can maintain control over market progression.  They are a large organization that takes a lot longer to bring to market products/services than more nimble startups.  By acquiring the leader (or near the top) of a specific market, they slow everyone in that market down, so that they can continue to maintain control over specific areas of online marketing.

    The publisher contracts, advertisers, and (maybe) the technology is just the icing on the cake.

  5. Agreed with “Nobody”, Google is just way bigger than Admeld in RTB
    And by the way, most of HF trading is about buying and selling later something that has a listed price that varies with time. There is no “later” for an ad placement and it does not have a liquid price. Good luck applying HF strategies to it. But it can still use some quants though.

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