On the Programmatic Road to the New Premium, Part 1: The Efficiency Imperative

Driving Programmatic Efficiencies Into Guaranteed Territory

“The truth is, digital media is overpriced.”

I believe I flinched a bit as the agency executive made that blunt statement. We were chatting in the wake of a heated conference session about viewability, where the chief concern among the publisher quotient had been are agencies really going to pay more for viewable impressions? Supply side representatives seemed unanimous in their disbelief. 

Even as publishers struggle to bring in meager CPMs by tacking on audience segmentation, offering audience extension programs and now adding viewability metrics, digital media is still considered too expensive by the buy side. Is there no pleasing them?

Of course, it was more surprising to see how many publisher revenue strategists agreed that, yeah, digital media is overpriced – not all, but a healthy number candidly shrugged and nodded their heads when queried. An aggravating amount of manual processes go into producing generally mediocre-performing campaigns.

Wasn’t audience targeting going to be the industry’s savior? While advertisers are increasingly demanding data-driven ad products from their publisher partners, audience has been commoditized – every site may have a distinct audience, but they can be reached through a variety of channels. It is no longer a differentiator for publishers – it’s simply the new normal, another line item expected by advertisers. 

So if both sides understand – and dislike – these mundane steps, why do we keep up this same dance?

Well, many publishers are changing the music. It made sense that as soon as audience was commoditized, the focus would turn back to content and context. Publishers like BuzzFeed and Gawker are boasting tremendous results through their native advertising programs – custom, integrated solutions that place advertising directly in the content stream rather than juxtaposed. This streamlined method seems better suited to digital rather than the box approach hastily transferred from print or the interruptive style that has brought in bank on TV.

Basically, native is a substitute term for premium, and the concept is equally as vague. During the recent Native Advertising Summit, a great deal of talk was dedicated to trying to define native and figuring out if it’s scalable. But when premium is in the eye of the beholder, how can you slap a simple definition on it? Should native be a one-size-fits-all solution? Should premium be scalable, or [gasp] a commodity?

Rather than figure out what it is, it’s easier to say what native is not: standard IAB units, the majority of which we will be handled on a programmatic basis in the near future.

Which returns us to question we attacked in the last round of articles on this subject: Is programmatic premium an oxymoron? Like everything else in this industry, the answer is complicated.

Widespread adoption of channels such as programmatic guaranteed and private marketplaces will push programmatic into the realm of what is now considered premium inventory. However, that’s the catch: this widespread adoption – alongside the rise of native advertising and viewability – will destroy that outdated concept of premium, the one where anything that’s sold directly is, and what’s indirectly sold ain’t.

We are in the midst of a major shift in how digital advertising is bought, sold and served. Viewability, native advertising and programmatic proliferation are all coming to a head to seriously shake up the industry and introduce a new, more effective form of premium digital advertising – one that will prove far more beneficial to both the demand and supply sides.

While this may seem like quite a grand end goal, we have to understand where we are regarding this transition – the promised land is still a ways away. However, the road ahead is getting clearer and clearer, especially if you comprehend the machinations underlying the shift. 

Streamlined Media Planning 

The solution is not a pricing algorithm that is tuned to make decisions in less than 30 milliseconds. The problem is streamlining workflow for humans – site discovery, RFPs, document management, negotiations, plans, presentations, approvals, implementation, optimization, reporting, billing, collections, and all that messy stuff that happens in the back room. Joe Pych, Founder and President, NextMark

A few months ago I found myself in the middle of a tense phone call. A certain state of which I had been a resident many years ago claimed I owed them back taxes and demanded I fax them my tax returns immediately.

“Fax?” I asked, trying to recall the last time I used such an archaic device. Did our office even have one? “Why can’t I email them to you?” 

“I’m afraid we can’t allow that, sir,” the tax department said. She’d been testy since the beginning of our conversation, but now seemed to have passed into the realm of pure annoyance.

“But the returns – they’re PDFs. They’re electronic documents.”

“It doesn’t matter.”

“I didn’t even need to print them to file them – I used e-filing.”

A loud, exasperated exhalation on the other end. “Sir, I need you to fax them. That is final.” 

Rather than further incur the (misguided) wrath of the state government, I dropped the argument. While I was relieved that an e-fax service saved me from uselessly printing and scanning a bunch of sheets, I was annoyed by having to pay for this seemingly unnecessary service. A petty inconvenience to be sure, but still a useless extra step employing outdated technology.

No matter how much we brag about super-efficient real-time bidding growing at a 98% rate year over year, somewhere around 80% of digital media is acquired through guaranteed insertion orders. And this process involves fax machines, spreadsheets and other vintage tech that should embarrass an industry supposedly on the cutting edge of digital.

The lack of efficiency and manual busywork in the direct sales process has long been a perennial sour subject at AdMonsters Publisher Forums. But inefficiency in guaranteed digital media has also plagued the buy side. According to NextMark’s hand-dandy digital media planning workflow calculator, creation and execution costs account for around 8% of a campaign budget, a number the company believes is low – apparently 10%-12% is a more typical gauge for agencies. 

So in a $500,000 campaign, $40,000 is associated with creation and execution of the media plan – NextMark has a headache-inducing diagram of this 42-step process as well. About $19,000, or 47.5%, of the cost alone is associated with implementation, execution and reporting. A great deal of this is mindless processes that can ­– and should be – automated.

As agencies are increasingly squeezed in demonstrating their value – especially with brands digging their toes in programmatic waters and working directly with publishers on native advertising efforts – the imperative to cut costs and build efficiencies is higher than ever.

Companies such as Mediaocean, NextMark and Centro are answering calls to ameliorate the planning and buying process. For example, Centro was kind enough to give me a demonstration of its recently introduced digital media planner. This cloud-based negotiation platform offers a straightforward, step-by-step process for building digital media RFPs. When completed, RFPs can be sent to 13,000 media contacts – the sell-side representatives follow a URL back to the platform and reply to the offer. The complete negotiation is saved within the platform; notifications appear when RFPs are answered.

Currently, Centro’s Media Planner is hooked into DFA’s ad server (additional ad server integrations are forthcoming) allowing for an IO at the click of a button. Planned enhancements in the coming year include trafficking and optimization controls as well as a financial application.

Toss out the fax machines, lose the spreadsheets – this is the future of media planning and it’s streamlined. As even trading desks are experimenting with guaranteed buys, the need to be executed at  – and the sell side needs to answer in kind.

Supply-Side Enablers

Essentially what’s happening is that the order-taking process, the RFP, and the inventory avail “look up” that have been intensely manual for the past 20 years are being automated. And APIs between systems have opened up that allow all these various tools to communicate directly and to drive through the existing roadblocks. Eric Picard, CEO, Rare Crowds

If the digital mediascape is a laboratory, indirect sold inventory has been the consummate lab rat. Publishers initially just plugged these spots with house ads before experimenting with their monetization through ad networks. A quintillion belly fat ads later and this “tier 2” inventory was walking the exchange maze, jacked up on special formula RTB.

And what an experiment that was: take the lowest of the low, the unwanted masses, the unsellable inventory, the vast remnant, and make it attractive to buyers. The RTB test aimed to find a way to make the unsellable palatable – through machine-based trading and audience targeting. Say what you will about RTB, but the experiment has been a success. The underlying technology works like a charm.

As Foundry Group Managing Director Seth Levine commented in “Paths to Programmatic Premium,” “Economics drove remnant adoption [of programmatic trading] first – because the risk of getting it wrong was lower on marginal CPMs.” As programmatically traded non-guaranteed inventory has only raised CPMs incrementally, the time has come to push into guaranteed territory – to bring automation and workflow management to direct-sold inventory. 

Third-party programmatic guaranteed providers have done just that. “Bill-to-fill” solutions from the likes of isocket, Shiny Ads and AdSlot offer publishers guaranteed buys without any of the challenges around implementation. Endless RFP negotiations banished, click to approve the creative QA and the provider even takes care of the financial transaction.

These providers are offering the ability to set it and watch it bring in cash. If something in this offering whiffs of ad networks, there are two big differentiators: complete transparency and the guaranteed label. One publisher representative mentioned that its third-party programmatic guaranteed service actually notifies his team when it sees an opportunity for the direct sales team to approach an advertiser.

Third-party programmatic guaranteed providers have put the heat on supply-side technology like ad servers and SSPs, and they appear to be responding. Already ad servers and SSPs are forging the programmatic premium path by enabling private marketplaces and preferred deals. (Interestingly, audience trading desks like Xaxis are also pushing into this territory by building their own private exchanges with “preferred partners.”) While there are plenty of hiccoughs to overcome on that front – e.g., necessity for a separate IO for every campaign – they realize the next step is bringing a similar level of efficiency to guaranteed sales.

“Pubs should be able to push out info about all classes of inventory into different buying systems – RTB, network, direct sales, etc.,” comments Sam Bell, VP of Business Development for OpenX.  “These various execution models should all be competing – and in order to do that effectively it must be done in the ad server.  This means that the ad server is going to be required to manage those demand channels and also manage the information that flows to each of those buyer systems.”

Ideally, each sell-side technology platform could offer the ability to seamlessly sell and execute direct, programmatic guaranteed and private marketplace deals through a single platform that covers multiple channels – display, mobile, video. Of course, you can also serve display, mobile and video from the same ad server, but many publishers still go with multiple providers. However, just having the ability to offer such capabilities – at scale, no less – speaks volumes about the progress of the digital advertising industry.

Adapt or Die 

But are these shifts toward the fabled programmatic premium? Well, it’s actually what Upstream Group Founder and CEO Doug Weaver calls “automated process reform”: “bringing machine-based precision to the act of trading ads for money.” Leveraging automation to streamline guaranteed sales is an essential step toward a future in which the vast majority of standardized inventory is traded and executed through programmatic channels.

In the same column, Weaver laments the overuse of the “intellectually lazy” term programmatic, but this is standard operating procedure in this industry when we try to comprehend amorphous concepts and shifts in behavior: we invent a neat-o marketing term. (Maybe we picked it up from those PR people we keep in close company.) Unfortunately, that term tends to slide down the slippery slope from cool to confusing to abhorred.

If “banner” ever had any hipster cred, that was well before my time; that catchall phrase for standard IAB display units has been abhorred since this side of forever. “Native” is another one of these terms that seems to have quickly glided into the confusing zone, perhaps teetering on the border of abhorred.

As I mentioned in the beginning, defining native seems to be a Sisyphean task, but at its core is the idea that content and advertising are being thrust into the same stream, which is seemingly the optimal monetization strategy for digital media. This is not to say the banner is in its death throes (though hopefully it will stop making appearances on smartphones) – especially online, interruptive display units are ideal for fulfilling audience targeting and frequency initiatives.

But should the banner still be considered premium? Or sold and executed in that manner? Should direct sales teams be actively selling guaranteed banners, or rather as complements to highly customized, integrated campaigns (cough, native) – similar to how private marketplaces and audience extension deals are arranged?

When I brought up programmatic guaranteed to an industry luminary recently, he commented, “That’s about publishers trying to dwindle down their direct sales teams.” Purveyors of third-party programmatic guaranteed have long highlighted that they are not in business to kill direct sales teams. However, the goal of programmatic guaranteed is indeed (to use another icky industry term) to disrupt them.

Publishers are notoriously slow to adapt new technology – how many are still trusting black-box ad networks with their unsold inventory? – and processes. If the voices at AdMonsters’ Publisher Forums are to be believed, direct sales teams are notorious sticks in the mud when it comes to embracing change. But the development of efficient workflow practices and the programmatic trading evolution are rapidly reaching a tipping point – members of direct sales teams must adapt or face oblivion.

Because efficiency is not the be-all, end-all of successful digital media monetization – it’s merely the next milemarker on the road to the new premium.

In the next installment of this series, we’ll examine where purely programmatic channels currently fit within publisher ad operations and why the programmatic guaranteed and private exchanges may become increasingly competitive. In addition, we’ll peak at viewability’s effect on the shifting landscape and the potential of audience futures.