The more time I spend in the online media industry (and at Right Media), the more I see parallels between an online network and a financial market. The chasm between an efficient market such as NASDAQ and the online media network space is equally apparent.

So, what parallels can be drawn between a financial market like the NASDAQ and an online media network, or even the aggregation of all the media networks? 

In the coming weeks/months, I’m going to dig into this more. I’ll look at the impact on buyers and sellers from a macro and micro perspective. Feel free to email me if you read this and find it interesting or worth discussing/arguing. My email is my first name, then @rightmedia.com.

Chapter 1 - Networks as Market Makers

Before coming to online media, I worked for Citigroup in the Debt Derivatives group in New York. Derivatives are financial instruments that increase or decrease risk based on the buyers/sellers view of a market. Each party in the transaction is attempting to minimize risk while maximizing return on investment (ROI). For example, if I own millions of dollars in GM bonds, and I believe that GM defaulting on their bonds will cause me to lose money, I can buy a derivative, or ‘protection,’ from a seller to cover a portion or all of the loss in the event of default. This protection comes at a price which is negotiated between buyers and sellers, either through a trading platform or through a customized financial agreement. The seller earns money by offering the protection and assuming the risk, and the buyer minimizes risk (loss of value) by ‘passing’ it to another party. Financial markets such as the NASDAQ, Instinet or even creditex.com thrive by serving both parties fairly based on their needs and outlook.

Much like a NASDAQ, an online media network facilitates transactions of somewhat standardized products between buyers and sellers. The network operates like a broker/dealer, such as Smith Barney, by aggregating supply and servicing the buyer directly or through their intermediary (an agency). Advertisers buy media to maximize ROI (through users’ actions or brand positioning), and attempt to minimize risk through targeting buys (content or behavioral), centralized ad serving, standardization of contracts and ‘optimization’ (which I’ll be writing about more later).

This entry was posted on Thursday, December 29th, 2005 at 12:00 am and is filed under Network Media Exchange. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.