All digital publishers have unsold ads. All advertisers are looking for cheaper positions. Enter programmatic buying to bring the two together. David Reed looks at how automation is transforming digital media buying and the data used to make decisions.
Imagine you work as a digital media buyer for a FMCG product. You need to place the latest campaign against your target audience of men aged 18 to 27, rotating creative and getting the best possible price for each impression. For each possible ad position there is a profile supplied by the publisher, a price and a host of third party data which you could take into consideration. Now multiply that by the 1.3 billion available options.
It is that scale of the media buying task online which has led to the introduction of programmatic buying. “To get the scale of TV advertising, a video ad buyer would have to run hundreds of ads compared to tens they would need on TV. Programmatic buying steps into that space,” says David Burch, communications director, Tube Mogul.
Publishers have implemented real-time bidding (RTB) platforms that manage their entire inventory so that media buyers’ own RTB solutions can plug in and find the media mix required. As a result, both sides are able to achieve greater efficiency, but they are also having to change their business processes.
“Digital advertising to date has relied on pretty analogue methods to deal with advertisers - phone calls, requests for proposals, etc. Marketers are used to buying TV with some verified numbers on the audience they are reaching. That was an easier world. Reaching an audience online has not been easy,” he says.
The pace at which online inventory is created and sold does not suit that more leisurely approach. Advertisers want to run more dynamic campaigns which can be frequently tweaked and targeted. Equally, publishers have tended to have a long tail of unsold positions across their media estate from which they have achieved little yield.
“What publishers are grappling with is the increasing volume of orders,” says Rob Jonas, managing director, EMEA, PubMatic. “Historically, digital advertising was a relatively simple marketplace with simple pricing. In the last three to five years we have seen an explosion of pricing mechanisms, advertising models and richer formats, as well as new consumption platforms like mobile and tablet.”
“The fundamentals haven’t changed - publishers need to develop an audience which advertisers want to reach. It is the route to market that has changed. Ten years ago, publishers knew their buyers. Now the number of buyers is too great,” he says.
Programmatic buying is actually just the current stage in an evolution of digital media technology. With the arrival of Web 2.0, publishers needed to support dynamic content which created a demand for content management systems. This opened up new opportunities to offer advertisers, but also revealed which positions were the most or least favoured.
Jonas says this is where RTB and automated ad buys are making an impact. “One thing changes - if you have an impression below the fold in a backwater, if the right person is looking at that ad at the right time, that potentially increases the value of your inventory if you can identify them. It increases the value of this inventory which was seen as an unsaleable remnant,” he says.
Leveraging this long tail has undoubtedly supported the investment which publishers have been making into programmatic buying solutions. Being able to sell unfavoured positions by overlaying additional data which reveals their true value is a major bonus. On the other side, advertisers are able to uncover targets at better prices than if they only look at premium positions.
While this may look like a technology-led revolution, that is not necessarily the case. Wolf Allisat, chief revenue officer at TagMan, says: “What we are seeing in the online world is really direct marketing repeating itself with different technology. This is not a free lunch - programmatic buying is just a way of buying faster.”
His company’s solution manages the entire raft of tags which a publisher or advertiser might be making use of. These can run into the hundreds once every display, search, affiliate or retargeting network is taken into account. Each of those will be using data from its own specific tag to claim revenue for the traffic it has generated. By having a total overview, clients can start to get a much clearer picture of what is really working for them.
“Affiliates will not be able to just claim revenue from advertisers on our platform because if their tag is not served, it doesn’t get paid for. One large UK retailer told its affiliates it didn’t want to pay for traffic from existing customers because they already get a newsletter. It saved up to 40 per cent on its affiliate spending just from that,” he notes.
Just as programmatic buying is changing the way advertisers buy from publishers, so tag management is shifting the centre of gravity in digital marketing. “You don’t get fired for putting all of your digital marketing into Google. It is getting 80 per cent of budget because of last click attribution models. All of sudden, when we look at all the data, we are finding advertisers shifting budget into display because it can be shown to be effective,” says Allisat.
That is good news for publishers and another data source which they can use in order to justify higher prices for their ad positions. A noteworthy aspect of RTB is the way media sales has become far more data-rich than it used to be.
As Jonas says: “The volume of third-party data that can be layered in to a publisher’s ad inventory is increasing because it allows them to increase the value of those ads. Companies like us have solved that from a software perspective. We allow publishers to manage their first-party data through our platform and layer in third-party data for them.”
At the same time, this is starting to expose flaws in some of those third-party data sets. “There is a lot of bullshit data. It is like the old days of TV advertising. You can find 30,000 audience segments from one provider, but how do you know whether some of them are wrong?” wonders Burch.
Dominic Trigg, managing director, Rocket Fuel argues that his company’s platform avoids this issue. “One solution relies on a single source of proprietary data. We have the polar opposite - our view is to use multiple sources and make sure data is reliable. We have the capacity of 500,000 media buyers analysing that data,” he says.
A crucial aspect of programmatic buying which he highlights is the machine learning which can be brought to bear. Intelligent algorithms examine those data streams and generate reports that allow the advertiser to make better-informed strategic decisions.
“What seems important at the start may not be by the end of a campaign. For example, we were handling a campaign for an FMCG brand - the data said it should target men aged 18 to 27. But when the client evaluated the results, it turned out to be a female audience who were buying,” recalls Trigg.
In an old-school media buy, the advertiser would have been locked into a particular profile and set of impacts. Discovering where sales really came from and then changing the media mix would happen several months down the line. Now it can happen in a matter of hours - more data means better decisions.
Trigg points out that what emerges is often a much clearer understanding of both the appropriate ad opportunities and also the brand’s positioning. Surprisingly, even with the pace of programmatic buying, rival advertisers do not end up fighting for the same space.
“Even if you had two similar brands using our platform, the chances of them buying the same ad is minute. They would almost never buy the same position at the same time. Brands have differences and there is a vast inventory of ads - this allows them to make the most effective buys for their needs,” he says.
Programmatic buying is also helping to revalidate the core skills of media buyers and agencies - producing good creative and developing marketing plans. It is also helping publishers to improve the quality of their content and the nature of the inventory they have to offer.
Tom Barnett, managing director, Switch Concepts says: “I don’t think this will ever take human decision making out of the process. Where we have found great success is with publishers’ sales forces - if they work with the system, it improves their knowledge and helps them get to new customers or find opportunities to sell premium ads. It can enhance an existing sales team which has been finding it difficult.”
That may require them to adopt a much faster process. “Online advertising is really being run on a 30 to 90-day cycle. The buyer places an order, gets a deal for one month, collates reports and then reviews,” says Barnett. For early adopters on both sides of the fence, there will be competitive advantage and significant gains to be realised.
Some issues still remain to be resolved. Most of the programmatic buying and tag management platforms are services which are sold in to either the sales side (publishers) or the demand side (advertisers) and sit as a connection to their management systems. They take a commission on every trade, which means that every one pound of advertising budget has been reduced by the time it reaches the media owner.
For now, that is a small price to pay for the significant improvements which can be achieved by both parties. Programmatic buying has arrived and is helping publishers to improve revenues from their long tail of inventory. Whether that tail ends up wagging the dog won’t be clear for another few years.