The history of TripleLift is one of increasing liquidity. For us to get to the next level of our business, liquidity is essential. But what exactly is liquidity and why is it so important for our business?

In the financial sense, liquidity is the ability for an asset to be bought or sold without changing the price of the asset. So you could think of a stock like Ford. If you own 100 shares of stock and you decide to sell them, the market will buy them immediately and it won't really change the market price of Ford at all. If you tried to sell 10 billion shares of Ford stock, however, there's only so much latent demand for Ford stock, so the glut of supply (you selling your stock) would drive the price of Ford stock down - at least temporarily. The same concept applies to the other side of the equation - if you tried to buy 10 billion shares of Ford stock, the price would go up. Ford is a pretty liquid stock in reality. But if you think about the market for zebras - there aren't that many buyers or sellers of zebras. So if you sold 100 zebras all it once, many of the buyers would have their zebra needs taken care of, so the next zebra on the market would have to lower their price significantly to be able to sell their zebra. Zebras are, I would assume, an asset with very little liquidity.



If you think about TripleLift, we have a relatively unique form of media. We have supply - publisher inventory, and we have demand - advertisers that will buy media. The demand comes from both the managed / IO business and from the programmatic business. If we doubled our supply overnight, we only have so much demand. Some of it is elastic - retargeting and pure cpc/cpa performance demand would scale relative to inventory, and some is inelastic - our managed demand generally has absolutely fixed budgets. So some impressions would see fewer bids, some would see none at all - because budgets etc would run out. So the clearing prices would drop across the exchange. Similarly, if demand doubled, the clearing prices would increase significantly.

While it's not necessarily a bad thing for us to have a market that's sensitive to supply / demand shifts, the it means that we still have a long way to go. If we bring in 5 very big, important publishers - it can impact the exchange dynamics. The less sensitive our exchange is, the better off we are. That's both because of the result itself, and what that result requires.

Ultimately what enables liquidity, and what we're really after, is a depth of both supply and demand. From the stock market analogy, this means that if you sell 100 Ford shares to someone, there's another person there that wants the next 100, and then the next 100, and so forth. So there's a depth of demand for your supply of Ford stock. From the native advertising perspective, when any given impression goes to auction in our exchange, we want a number of buyers to want it. Only one person will win it - but the 2nd, 3rd and 4th place buyers will want the next impressions. So additional impressions could come onto the exchange for this buyers. This means that the 2nd price will be higher than it would be with less liquidity, in general, and the pricing will be more stable over time.

There's no particular point where we've reached "sufficient" liquidity - the more we bring on supply and demand together, and the more our fill rate grows, the higher liquidity inherently becomes. That said, it's fundamental that the more liquidity in our ecosystem, the healthier the relationship is between supply and demand, the more demand and supply we have - and the more money we're all making.

Note: what exactly do I mean by "elasticity" - basically the question of how much "latent" demand do we have on our platform. My meaning is a bit of a divergence from the pure economics version of "elasticity of demand."

In economics, elasticity of demand means how much demand would change relative to a change in price. In other words, if price increased by 1%, how many people that originally wanted that item would stop wanting that item.

In TripleLift terms, elasticity is generally with reference to the nature by which demand scales proportionately to supply. Retargeters have a very high elasticity, meaning they largely have unlimited budgets. Anywhere that they see their users, they will buy impressions for those users if the inventory performs. So if we double inventory overnight, and the inventory maintains the same characteristics - if retargeters were buying 10% of the inventory before, they will probably be buying 10% of the inventory after. Performance buyers are similar - they look for inventory where they can achieve a certain CPA. So they'll buy - often with limitless budgets - anywhere that they can run and hit their targets. Our managed campaigns have the lowest elasticity, because as long as we could have fulfilled the campaign before the inventory changed, there is no change in how much demand we get as a result of the increased inventory.