Monthly Archives: April 2014

Apr 12 2014
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Ad Ecosystem, Ad Technology, Marketers, Media Agencies

The buyer’s role in shaping programmatic’s future

By Eric Picard (Originally Published on iMedia – April 12, 2014)

Media buying has been moving to more and more automated mechanisms over the last few years. When I talk to buyers about why this is the trend, they nearly always say something like, “Publishers package inventory that they want to sell, but I want control. I want access to inventory I want to buy.”

In 2006, I wrote an article called “Content Distribution: The Final Media Revolution.” The point I was making is one that would be hard for people in 2014 to ignore — that consumers are in control of their media consumption habits and that media companies should embrace this rather than battle it. Heck, back in 2003 I wrote another article on the same exact topic called “Control, the Killer App,” which was more focused on advertising conceptual design.

Now let’s talk about the concept of control from the perspective of the buyer. Today the vast majority of media dollars are spent on direct buys where the buyer has sent the seller an RFP and a media plan and asked the seller to put together a proposal. This process has developed over the years in digital as a way for buyers to push the grunt work (and frankly, sometimes the creative work) of media planning and buying off to the seller.

This evolved because, in digital media, the buyer has no idea what’s available to buy. In television, the buyers know in advance what shows are on television and how many ad slots are available in which pods. When they execute a buy, they’re just seeing if the slots they want have been sold yet. Magazines are a bit more complex, but buyers still have an immense amount of knowledge about what’s available. In digital media, the world is very opaque. Buyers don’t know what the seller has to offer, let alone what’s “left” to purchase. This has put publishers in a position to craft packages of inventory that they push to the buyer.

Some media directors see it as their jobs to take the packages offered by publishers and break them up. The problem is that buyers tell the publisher what they want, and publishers bundle together the desirable inventory with undesirable inventory that they force upon the buyer. This effectively would be like going to the grocery store for bananas and being told that in order to buy bananas, you also had to take some plantains and avocados. You can imagine that as the buyer you would tell the seller to jump in a lake — at which point the seller would say, “Well, maybe I can throw the avocados and plantains in for cheap.” After negotiating for a few minutes, the seller effectively lowers the price on the junk you don’t want to the point that it’s almost free — so you simply take it. This is how the sellers move the inventory they can’t sell; they bundle it together and effectively lower the price of all the inventory in the bundle until the buyer is willing to accept it.

This has “worked’ for the last 15 to 20 years mostly because buyers didn’t have much choice in the matter. There was too much work on the buying side to bother trying to wrest control back from the seller. And sellers were happy to pick up the slack; it gave them great opportunities to package inventory and increase sell-through.

But things have changed, and all media buying is heading down the path toward programmatic mechanisms. Today programmatic comes effectively in two flavors: RTB and direct. They’re supported by two separate software stacks and reflect the two different ways to buy media:

RTB: RTB is buyer-centric and enables buyers to take full control over what they’re getting. The buyers define the inventory they want to buy, and then the tools procure that inventory over the advertising exchanges. Companies playing in this space include AppNexus, MediaMath, Turn, DataXu, [x+1], Rubicon, PubMatic, and many others.

Direct: Direct is seller-centric and enables publishers to package inventory and expose it to buyers in programmatic means — but keep the publishers in control of defining the inventory and bundling it in ways that meet their sell-through goals. Companies playing in this space include Yieldex, iSocket, Bionic Ads, Adslot, Shiny Ads, and many others.

The problem with the programmatic direct stack and methodologies is that buyers want to be in control. The rapid (and massive) growth of the RTB stack has been driven as much by the control that buyers have gotten over their media buying as anything else. Buyers want to be in control.

Of course, publishers want to be in control too — which is why they’re adopting the programmatic direct technologies at a rapid pace. And the RTB buying tools vendors are lining up to plug into the APIs provided by the direct vendors.

At the end of the day, programmatic media buying and selling is the future. But I’m convinced that ultimately the buyer will demand control. And publishers simply don’t have the means to refuse this demand. We’ll see lots of mechanisms designed to plug the buyers into the sellers’ systems over the next few years, with significant effort placed on giving the buyer more insight and control over what they’re buying.

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Apr 01 2014
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Ad Ecosystem, Ad Technology, Economics, Predictions

Programmatic: A Rising Tide

By Eric Picard (Originally published in AdExchanger October 1, 2014)

While we’ve been sitting in the progressively warmer water of the “programmatic kettle” without noticing the heat, the world has changed. The incremental changes have been small, but they have been happening constantly and quickly. Taken together, these changes are significant.

The term programmatic has gone mainstream in the last year – at least in the ad industry. Chances are, if you mention to anyone in our space that you work in programmatic, you won’t have to explain what that means anymore. This is true even if you’re talking to a typically “out of touch” executive, because every major company in our space is not only engaging in programmatic, it’s a significant portion of their spending or revenue. They’re likely either hiring or have just hired an executive to manage it, and may have already had turnover in their executive roles in programmatic.

Publishers are finally facing the reality that this isn’t a fad and they’re not treating it like a bad thing anymore. They’re not only selling “just some” of their inventory on programmatic and they don’t just see it as a source of revenue from remnant inventory.

Most major publishers have moved toward selling premium inventory over a programmatic channel. They’ve either sold inventory over a private exchange, adopted a programmatic direct vendor to offer premium inventory over an API, adopted a vendor to help with yield that incorporates programmatic (like Maxifier or YieldEx) or they’ve just rolled the dice and allowed Google’s Dynamic Allocation algorithms to let the exchange compete with sales on premium inventory – and from what I’m hearing, they probably had great success with it.

I’m hearing people talk about programmatic in ways that are very mature. There’s discussion of programmatic channels instead of channel, and there’s discussion of programmatic outside of the context of the concept of “channel.” There’s an understanding blooming among both buyers and sellers that taking a view of their media processes through a programmatic lens opens up bold new opportunities.

Publishers are investing in programmatic heavily – and it is getting deeply ingrained in their business processes. Previously publishers thought of their inventory in a pretty simple way: sponsorships, tonnage and remnant. Today they think about inventory and channel relationships very differently:

  • Direct relationship: old-fashioned sales
  • Programmatic direct: publisher-packaged inventory offered over API or through a self-service tool
  • Private exchange: DSP buyers can buy inventory with a “first look” ahead of it getting passed to the open exchange – and possibly ahead of other partner relationships
  • Vertical network: direct relationship with a vertical network that either buys direct or through a private exchange
  • SSP: Some publishers have a partnership with an SSP that divvies up inventory between ad networks and various ad exchanges
  • Open exchange: Some publishers skip the SSP and remnant wholesale deals to old-school ad networks, and drop it directly into the exchange

Agencies are moving programmatic into the mainstream. The trading desks started out as small dedicated businesses, and are either growing radically and becoming more than just centers of excellence, or they’re being primed for integration across the whole agency model. Expect to see very significant changes in every major media agency over the next few years – this is coming, and fast. Expect the changes to be about efficiency and driven as much by their client’s requests as finally accepting that the trading desk model, where the agency arbitrages their own clients, is nearing the end of its life span.

Agencies are investing in technology, not just to “bid on the exchanges” but to (finally) automate media buying. And the programmatic umbrella is being used as a catch-all for these conversations – whether it means investing in buying infrastructure that automates the RFP process or automates bidding. And the vendors servicing agencies are bridging from the guaranteed space into the programmatic space, and the programmatic vendors are bridging into the guaranteed space. This might be the most fun I’ve had in a decade when it comes to ad tech.

Marketers are eyeing the programmatic world as they put digital marketing through the same process we saw every other major business initiative go through: the “IT-ification” of marketing. CTOs and CMOs are actually deeply collaborating. They sense an opportunity to get investment in marketing infrastructure and bring their first-party data to bear on the marketing business at large.

Ad tech vendors clearly sense this opportunity. Every vendor I’ve talked with in the last six months is gearing up for a major initiative focused on the marketer directly. Not that they are trying to bypass the agency just to “go around them” – which was the old-school unhealthy dynamic many ad tech vendors have attempted since digital marketing started. Rather, they are hearing from the marketers directly – and often are being brought into the conversation by the media agencies, which are acting as agents of the marketer at their client’s request.

This trend deserves another paragraph. Marketers are looking to integrate ad technology into their enterprise IT technologies. They want to unlock the power of their first-party data, but can’t let it outside the firewall (more metaphorically than in reality). They won’t allow the raw data to sit in the hands of their agency partners, but this isn’t about “marketers taking digital marketing in-house.” They aren’t disintermediating the media agencies – they’re just pulling the technology relationships in-house and then providing their media agencies with access to the integrated tools from outside.

The significance of this is lost on many in the market – many analysts think it means bad things for the holding companies – but clearly that isn’t the case. This may be the best news in years for the holding companies. Their clients are making significant and permanent investments in digital marketing. And their need for assistance is going up – not down.

Here’s the biggest insight I’ve had in the last six months: Programmatic media is just as labor-intensive as direct media. The work is different and much more technical (and also more insightful, honestly, as there’s a lot more data generated), but there’s more of it – all the time. And it’s growing. Media agencies aren’t going anywhere; they’re busier than ever. Marketers need the help. Publishers have whole new ways to increase yield and revenue over these channels. And ad tech vendors are consolidating and investing significantly in their technology.

Programmatic is a rising tide lifting all boats in our space.

Apr 01 2014
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Ad Ecosystem, Ad Technology, Online Media

The Difference Between Programmatic RTB And Direct

By Eric Picard (Originally published on AdExchanger April 1, 2014)

I had the great fortune to moderate a panel called “Programmatic Guaranteed” at AdExchanger’s recent Programmatic.io conference in San Francisco. The prep conversations for this panel, the conversation on stage and the conversations with audience members afterward were very compelling.

Clearly the market wants to figure this out, and the promise of programmatic means different things to different people. This is a complex space that needs more information and definition, which we’ll do today.

As an industry we have two primary “stacks” of technology that drive advertising between the buyer, seller and consumer. One is what I’ll call the “direct” stack, and the other is the real-time bidding (RTB) stack.

Direct Advertising Stack

The “direct” software stack in play supports publishers. This is the first-party ad sever, the publisher’s inventory management system. Examples include DoubleClick for Publishers, Open Ad Stream and Freewheel.

This publisher system enables publishers to manage their advertising businesses – in particular, this is designed around the need to put ads on pages, monitor revenue and manage sales. But one of the primary uses of these systems is for publishers to package their inventory. One of the core uses of this entire technology stack is to find inventory that is available for sale, and package it in order to sell it to advertisers.

The direct stack is a set of tools and technologies for packaging inventory for sale to buyers. Packages are assembled either in advance, or in response to a buyer’s request for proposal and media plan.

The Programmatic Direct Stack

Over the last few years, a variety of companies have launched in the programmatic direct space, which aims to connect the publisher’s direct systems to buyers’ systems – either the traditional or the programmatic tools. Examples here include YieldEx, iSocket, Shiny Ads, Bionic Ads and AdSlot.

The problem with this stack, from the buyer’s perspective, is that the programmatic direct world is an extension of the direct platforms. They are designed to package inventory according to the ways in which publishers want to sell inventory. They aren’t designed to allow the buyer to manage against their own goals. The contract terms for inventory are defined by the publisher, and executed according to a publisher-centric view of the world.

The benefit that buyers get from the direct stacks are that the inventory can be reserved — in other words, the publishers and buyers can agree in advance on not only the price of the inventory, but the volume and budget that the buyer is signing up to spend. And the publisher is willing to guarantee the buy, meaning that if they under-deliver, they will give the buyer a “make-good” on the inventory that was not delivered.

Programmatic RTB Advertising Stack

The RTB software stack is focused primarily from the point of view of the buyer. There are supply side platforms (SSPs) like Rubicon and Pubmatic that are publisher facing, but like their demand-side partners (DSPs), their focus is on enabling the buyer to find inventory according to their definitions, rather than packaging inventory up on the publisher side.

The systems in the RTB world are very flexible and don’t require packaging in advance.  The only problem with this is the inability of these systems to easily offer a guarantee on the buy. There are some mechanisms that can be used, such as the Deal ID standard, which allows a buy-side system to be assigned to a specific ID in the sell-side system. But typically these are supported more by the SSP, and not within the direct stack of software.

There is an immense amount of investment in the ability to forecast and ultimately to sign reserved or even guaranteed deals in the programmatic RTB software stack, but we’re still a ways from this. We may find ourselves supported here in the next year or two – but matching these systems together has proven challenging – and recreating the ability to forecast and give make-goods in the RTB stack has been nearly impossible.

The ‘Holy Grail’

There is another path that some technology companies are exploring, which is the ability to push the advertiser’s demand goals directly into the publisher’s direct ad server. In this model, the buy-side system allows the buyer to specify their goals, and then through integration with the publisher’s direct ad server, can create line items matching the advertiser’s goals. But this is a new approach that has not been fully productized yet in the market. It will be interesting to see how this evolves.