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.

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