Programmatic trends in 2015

2015-trends-blogBoy oh boy, 2015 was a big year for advertising debate.

To try and bring some closure to a year of fervid discussion on the Econsultancy blog, we asked two experts on performance marketing to give us their view on programmatic in 2015.

And if you want to learn more on this topic, book yourself a place at our Programmatic Training Course.

Is there a creativity vacuum?

David Carr, Strategy Director at DigitasLBi 

As we all raced to keep up with the exponential increases in options and terminology, maybe new realism began to creep in.

Had media left creative behind? Was programmatic only about cheaper buys and cheaper dynamic creative optimization with production efficiencies, real-time price updates and maybe a “personalized” colour-way and call to action based on someone’s browsing history?

When you asked around the industry for great creative examples the same ones would come back: Axe Brasil’s Romeo Reboot with its 100,000 dynamic videos, Diesel Decoded’s 400 bespoke copylines and the Amanda Foundation’s digital “Pawprint” work.

Yet programmatic is not just about direct response and CPAs. Programmatic is people. Programmatic allows creative to build a tailored story arch for the individual.

This makes brand ideas and human truths more important than ever to stimulate and organize the work making it consistent, relevant and distinct.

It means rethinking storytelling through a lens of data and technology to give personalization at scale and enable a brand relationship that learns – not just buying on a DSP.

Axe Brasil’s Romeo Reboot was an example of dynamic video.

romeo reboot

Brands seek transparency and control

David Carr, Strategy Director at DigitasLBi 

It is this technology lens that means new ways of organizing an agency are needed along with new client-agency relationships.

Creative, media and technology need to be re-integrating or at least work far more closely together. This way savings from spend can be used to create more effective work and technology can give greater transparency.

When at most 45 cents in the dollar reaches publishers and even an in-house or managed service on a shared platform leads to unknown ad-tech, DSP sell-side, reseller SSP and primary SSP fees plus data leakage to competitor algorithms, transparency is vital.

Taking a brand-first approach where clients control the bidding strategy AND the tech roadmap while not being lumbered with platform development and management might be a solution here?

Chris O’Hara, VP Strategic Accounts at Krux Digital (author of Econsultancy’s Programmatic Branding report)

More and more, we are seeing big marketers decide to “take programmatic in house.”

That means hiring former agency and vendor traders, licensing their own technologies, and (most importantly) owning their own data.

This trend isn’t as explosive as one might think, based on the industry trades – but it is real and happening steadily.

What brought along this shift in sentiment? Certainly concerns about transparency; there is still a great deal of inventory arbitrage going on with popular trading desks.

Also, the notion of control. Marketers want and deserve more of a direct connection to one of their biggest marketing costs, and now the technology is readily available.

Even old school marketers can license their way into a technology stack any agency would be proud of.

The only thing really holding back this trend is the difficulty in staffing such an effort. Programmatic experts are expensive, and that’s just the traders!

When the inevitable call for data-science driven analytics comes in, things can really start to get pricey! But, this trend continues for the next several years nonetheless.

Only app development is outsourced more than display advertising (source:Organisational Structures and Resourcing Best Practice Guide)

outsourced disciplines

Users suffer (especially on mobile) without union of creative, data and tech

David Carr, Strategy Director at DigitasLBi 

As all media continued to go mobile in 2015 the underbelly of programmatic was exposed. Hundreds of competing cookies on a page with javascript that bloated page weights above 1mb – if they even allowed the page to render at all – became a too common occurrence.

In this context programmatic became not just the future of ad buying but perhaps the best advert for Adblockers you could have.

Creative, data and technology consolidation for a mobile world is one potential solution but ultimately the only way that programmatic can live up to its promise is for all three to work together.

That way we can get back to people. Where do they go, what are they interested in, how do they respond to content and messages and how do we offer them something useful, usable and delightful?

Targeting with purchase data improves segmentation

Chris O’Hara, VP Strategic Accounts at Krux Digital

Remember when finding the “household CEO” was as easy as picking a demographic target?

Marketers are still using demographic targeting (Woman, aged 25-44) to some extent, but we have seen them shift rapidly to behavioral and contextually based segments (“Active Moms”), and now to Purchase-Based Targeting (PBT).

This trend has existed in categories like automotive and travel, but is now being seen in consumer packaged goods.

Today, marketers are using small segments of people who have actually purchased the product they are marketing (“Special K Moms”) and using lookalike modeling to drive scale and find more of them.

These purchase-defined segments are a more precise starting point in digital segmentation – and can be augmented by behavioral and contextual data attributes to achieve scale.

The big winners here are the folks who actually have the in-store purchase information (such as Oracle’s Datalogix, 84.51, Nielsen’s Catalina Solutions, INMAR, and News Corp’s News America Marketing).

archery targets

Programmatic direct as a route through complexity

Chris O’Hara, VP Strategic Accounts at Krux Digital

For years we have been talking about the disintermediation in the space between advertisers and publishers (essentially, the entire Lumascape map of technology vendors), and how we can find scalable, direct, connections between them.

It doesn’t make sense that a marketer has to go through an agency, a trading desk, DSP, an exchange, SSP, and other assorted technologies to get to space on a publisher website.

Marketers have seen $10 CPMs turn into just $2 of working media.

Early efforts with “private marketplaces” inside of exchanges created more automation, but ultimately kept much of the cost structure.

A nascent, but quickly emerging, movement of “automated guaranteed” procurement is finally starting to take hold. Advertisers can create audiences inside their DMP and push them directly to a publisher’s ad server where they have user-matching.

This is especially effective where marketers seek an “always on” insertion order with a favored, premium publisher. This trend will grow in line with marketers’ adoption of people-based data technology.

For more on programmatic in 2015, see other blog posts and research by Chris O’Hara.

Ben Davis

Published 7 December, 2015 by Ben Davis @ Econsultancy

Ben Davis is a senior writer at Econsultancy. He lives in Manchester. You can contact him at ben.davis@econsultancy.com, follow at @herrhuld or connect via LinkedIn.

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The Future of Programmatic is Programmatic Futures

ElroyBack in 2007, a company called TRAFFIQ started one of the first programmatic futures exchanges. The idea was simple: publishers committed blocks of premium inventory into the exchange at a stated price (say, a block of 500,000 homepage rectangle units in November at $8 CPM), and advertisers could construct packages of premium inventory at discounted prices by making future commitments. Basically, a better, faster way to buy digital guaranteed.

The idea never really took off. Publishers didn’t really understand how to value their inventory in the future, real-time enablement was just starting to take off, and advertisers and their agencies were deeply stuck in manual inventory procurement run by spreadsheets and fax machines. (TRAFFIQ went on to build some highly innovative workflow automation software, and is now a successful technology- enabled digital agency).

Almost eight years later, we are living in a fully programmatic world—but many of the benefits of programmatic futures have yet to come true. Today’s “programmatic” is still very focused on RTB, inventory pools are still murky, and technology’s ability to value publisher inventory still has a long way to go.  What’s missing?

The problem with today’s programmatic RTB environment is that the “exchanges” aren’t really true exchanges like we have in the financial markets. Although you can liken online inventory to stocks, the comparison is tough to justify. Lacking agreed measurement, value continues to be in the eye of the beholder. More importantly, the procurement process is still driven more by the buyers than the sellers. Private exchanges are starting to make inroads in terms of creating valid counterparty transactions, but the RTB pipes have not been engineered to handle the key aspects of transactional workflow.

The biggest, fundamental problem with RTB is that it values inventory in a singular way. In the open market, a 30-year old male car intender costs the same whether you find him on Cars.com or Hotmail. Although tweaks in RTB with private transactions can enable premium inventory procurement, it’s not scalable. The right exchange should be able to value audience separately from everything else.

Another issue is the problem of valuing inventory over time. As a publisher with 30 days to go in my quarter, my homepage inventory may be worth $10CPM. But, the day before the quarter closes, that same inventory may be worth only $1CPM if I haven’t sold it yet. Today’s networks and exchanges enable publishers to set a solid floor price, but have trouble managing value dynamically. That’s because future publisher pricing is not being matched with visible demand. Ironically, the real-time nature of today’s exchanges actually limits a publisher’s ability to manage yield, because every impression is always chasing an immediate bid. A real futures exchange would enable a publisher to value inventory dynamically, so it matches the value set not by bids—but by buy orders in the system (real, stated demand for future inventory).

Although the demand side has it pretty good right now, a true programmatic futures exchange could be truly game changing. Yes, today’s exchanges are serious arbitrage machines. Because the buyer has access to the entire market, they have more information available to them to manage their investment. The problem is, in programmatic RTB, they are stuck with a two-tiered system: secure “premium” inventory through private exchanges and/or DealID functionality for branding and demand creation, and drive lower-funnel activity through performance-driven bidded buying in the wilds of the exchange. Ask any trading desk manager—it’s still really hard to get exactly what you want without going to guaranteed buys, cross-channel buying still requires multiple systems, and communicating the value of the “media investments” you are making to clients is near impossible, because everything is bought and measured differently. So, going from “media buying” to true “media investment” necessitates a true programmatic future exchange, akin to NASDAQ or the NYSE.

In such an exchange, publishers would be able to value their inventory by utilizing a combination of their existing rate cards and product catalogs (for selling advance contracts), and data from buy orders in the market itself. Just like in the stock market, prices would fluctuate based on the spread between bid and ask pricing—and the contract date. Publishers could therefore execute any type of guaranteed buy in such a system (direct sales) as well as have the exchange handle direct deals (“programmatic direct” and “private market”). This is because such an exchange would manage matchmaking, not the execution piece. This is critical. Today, we are watching systems built from the ground up to deliver ads try and go in reverse to manage the process of buying them. As we have seen, the rise of “automated guaranteed” platforms suggests that RTB is not quite cut out for the job.

Why would the demand side want a true programmatic futures exchange? First of all, a true futures exchange treats media as a true commodity—and makes it tradable. The beauty of a commodities exchange is that, once you own a future contract for pork bellies, you can sell it. In digital media, once you have bought a bunch of 300x250s in Appnexus, you are stuck with them. Arbitrage is not the same as futures trading in a regulated market. A true programmatic futures exchange for media would actually enable well-heeled buyers to leverage their scale to consolidate positions in media, and resell them in bulk (or in chunks). Think about that. Imagine GroupM buying the entire Q4 consumer electronics inventory in February. What would that be worth to another agency representing Sony as the holidays approached?

The bottom line is that, despite the power of RTB pipes, we are a long way away from seeing the platforms where addressable media will be traded in the future. Eight years ago, my bet was on a programmatic futures exchange, and I am still long.

[This post originally appeared on 11/7/2014 in AdExchanger]

Punching the Monkey

BannerAdI recently tried to explain what I do for a living to my 14-year-old son. I found myself telling him about ad tech.

“Basically, we make technology that helps marketers buy different kinds of banner ads,” I told him.

“You mean the kind of annoying pop-up ads that everyone hates?” he asked.

His look of profound disappointment said it all. I explained that the kind of work we do wasn’t just about populating the Internet with the “Lose five pounds with one stupid trick” type of banner. But even though we are getting a lot right, my explanations eventually started sounding pretty weak.

I have been working in this business since 1995. Aside from doing some ad implementation testing, I have probably clicked on about a dozen banner ads in as many years. Today’s robust, real-time ad tech “stack” has been purpose-built to optimize the delivery of the kind of banner ads most people already hate: standardized IAB units, retargeted ads, auto-play video pre-roll units and even the dreaded pop-up and pop-under.

Publishers without robust direct sales options depend on networks and exchanges to monetize the endless streams of traffic they create, and they happily collect their $1.10 eCPM (cost per mille) payments. Advertisers looking for cheap reach and performance plumb the depths of such inventory to find the rare conversion, and hope they are getting what they pay for rather than a shady “last view” attributed banner.

Today, the highest and best use of the standardized banner has enabled marketers to leverage their first-party data to bombard site visitors with retargeted ads – an effective tactic, since they are essentially paying to accelerate a conversion that has a great chance of happening on its own.

As an industry, it seems pretty clear that we will look back on this era in digital ad technology and see how primitive it was. Have we built a trillion-dollar real-time ad serving machine for punch-the-monkey ads, or have we really innovated and created disruption?

RTB Is Dead, Long Live RTB

The recent acquisition of [X+1] by Rocket Fuel is a great sign for our industry. It basically validates the idea that, for programmatic RTB to be effective, real data science must inform targeting. [X+1] is one of the best at cross-channel targeting, and they have already started to figure out the cross-channel attribution puzzle. An everlasting always-on stream of RTB banners for branding and retargeting might prove to be a hugely important part of unlocking a broader multi-channel strategy – if the data can dictate it. If data management platform technology can be leveraged to truly optimize addressable marketing, then RTB will survive and thrive. With consumers always on the move, and every form of media starting to be addressable, real-time programmatic will be something marketers have permanently switched on, and we’ll see the true value of the pipes we have created.

Programmatic Direct

How about inventory that is relatively standard, but a bit nicer than that found within the exchange environment? Transacting on this tier of inventory works quite nicely with all kinds of one-to-one connections within RTB, and buyers and sellers are quickly leveraging the pipes to make private marketplace deals.

If I am a quality financial publisher, why wouldn’t I sell within RTB for $8 CPMs, rather than pay a $200,000 salesperson to sell at $12 CPMs? The math just makes sense. Delivering higher tiers of inventory at scale to private buyers is a great use of RTB, but not a panacea for overall inefficiency in media procurement. But, we have seen those RTB pipes service entire new classes of inventory, and start to appeal to brand marketers.

Workflow Automation

The problem with getting really good inventory has always been the difficulty understanding rates and availability. That’s why the RFP exists today, and isn’t going away anytime soon. Publishers will always want full control over the really good stuff. Because they know their inventory better than any algorithm, there will always be a need for human control and creativity. Big, custom sponsorships and custom-curated native executions will only increase over time, as more television and print budgets shift into addressable digital. You just can’t automate those deals. Marketers and agencies will demand programmatic efficiency to compress an expensive, 42-step process for securing guaranteed inventory. This is one area that programmatic RTB has not been built to handle (these deals are neither “real time” nor “bidded”), but we are seeing real innovation from a number of companies trying to bring programmatic efficiency to guaranteed deals.

It’s hard to explain everything that we are getting right to a 14-year-old who spends more time on mobile apps than in an Internet browser. His assessment, in surfing the desktop Internet, is probably right – it looks like a lot of weight loss ads and sneaker retargeting. But, it’s still early days nearly 20 years after the first banner ad was served.

Fraud and the Pivot Towards Programmatic Direct

ImageThere has been a lot of talk about the pervasive amount of click fraud and bot traffic happening in digital. Marketers are reportedly spending anywhere from 30% to 70% of their digital budgets on fake impressions and clicks, and an entire cottage industry is cropping up to help marketers combat fraud and try and protect their digital marketing investments.

Some people claim that price of fraud is already built into the programmatic RTB ecosystem. Marketers are using programmatic RTB for direct marketing, and they are measuring sales using CPA metrics. If they are paying $100 per verified acquisition, should they care whether it takes 10 million or 20 million impressions to produce a conversion? Some say that they don’t, and take the view that they only pay for results, justified by their backend conversion metrics which take media cost into consideration.

I hope this is not the case. Ignoring fraud with these justifications is what ultimately may kill the digital advertising business before we ever get to scale.

Another big problem is faulty, fraud-like attribution. Let’s take the case of the big programmatic marketing platform that has been getting great conversions for their customers. Marketers look at the results of such platforms and think that the technology has managed to effectively separate the wheat from the chaff in popular ad exchanges and find the “sweet spot” of cookie targeting that converts. But, dig a little deeper and you notice that many of the conversions are happening on webmail subdomains (mail.yahoo.com). In other words, the platform is getting last-view attribution from successful e-mail marketing. This is a more subtle case of fraud…but really more of a tax on digital ignorance for marketers. But again, the marketer sees this channel producing results that align with his CPA goals. Did the conversions get attributed correctly? Maybe not, but those questions get overlooked when the blended CPA is on target.

Cookie bombing and other types of fraud are just as likely to limit digital advertising to performance budgets, and keep real growth at bay.

If we are being honest with ourselves, we must admit that there doesn’t seem to be a ton of desire to solve these inherent problems in programmatic RTB. There are too many people making too much money to want to fix it. And it’s going to destroy programmatic RTB as we know it. Who benefits from the current scenario?

  • Publishers: Most publishers benefit greatly from the programmatic RTB revenue stream.  Big publishers “fill” their long tail inventory with ads. Mid-sized publishers without large direct sales teams depend greatly on network and programmatic fill for their revenue. Long tail pubs are fully committed to their AdSense checks for survival. A lot of publishers’ Comscore numbers are a lot bigger than they should be, thanks to cheap inventory of unknown provenance.
  • AdTech: Every vendor in programmatic RTB benefits from inventory flowing through their pipes. Most charge on a percentage-of-spend, which means they might sacrifice 50% of their revenue if they had to stop charging for fraudulent impressions. New fraud detection and measurement firms are also profiting (albeit in a virtuous way).
  • Agencies: What would today’s big agencies do without the ability to leverage programmatic RTB to arbitrage inventory, or charge a premium for “unpacking the ad tech space” for their clients? The new programmatic landscape has been a boon to smart, nimble agencies that have built, bought, or leveraged ad technology to pivot their dying media businesses. How eager are agencies to expose the fundamental flaws within the programmatic RTB ecosystem?

The biggest loser in the entire room is the poor marketer, who ultimately pays the bills. But it’s easy to turn a blind eye, because the numbers look good. But how long will big marketers confuse true marketing success with today’s flawed digital attribution metrics? Marketers are starting to think about real measurement frameworks (net new customers), rather than CPA metrics. They are also keenly interested using brand messages to interact with their customers across screens. And they won’t be using CPA to measure brand growth.

So why do marketers continue to leverage programmatic RTB despite the inherent risk of fraud and current limitations for brand advertising? To paraphrase Clear Channel’s Bob Pittman at the recent IAB annual meeting, “Given a choice between quality and convenience, convenience always wins.”

The biggest question lately is whether or not we can make it as convenient (and cheap) to buy guaranteed media at scale. Seeing this opportunity, a lot of players in programmatic RTB are looking hard at the money being spent on guaranteed media (the “transactional RFP” channel), and trying to add new “programmatic direct” tools to their arsenals.  RTB players know that brands are still uncomfortable executing brand campaigns in the wilds of the open exchange, and they know truly premium inventory won’t be available unless publishers have more granular control over pricing, availability, and partner selection. Put more simply, the lion’s share of digital money still gets transacted manually, with paper insertion orders, and successful automation means a big piece of the action.

Providing a layer of automation for direct deals helps with fraud (guaranteed deals, by their nature, offer inventory transparency), and adds the ability to scale within higher classes of inventory.

Marketers are actually looking forward to having their agencies leverage new technology to secure quality digital placements. Whether these innovations come from tweaking existing programmatic RTB technology (private exchanges) or from new, API-driven “programmatic direct” providers doesn’t matter to them. They need to execute cross-channel digital campaigns at scale, and those campaigns (if they are for brand purposes) cannot contain fraud.

Does this spell the end of programmatic RTB? Nope. I think there will always be exchanges and technologies that let direct marketers plumb the depths of the Web to drive online sales. Ten years ago, folks were writing about the death of shady affiliate, click, and CPA networks—but they are still around. But, will today’s programmatic RTB business have to fundamental transform to win brand dollars? Yes, and the path to success is what we have been calling programmatic direct. It will be interesting to see the various technology executions of programmatic direct, as they form the gateway for branding to flourish online.

The Battle for Workflow Automation: What’s Next for “Programmatic Direct”

ImageEven though programmatic RTB has seen the lion’s share of venture capital funding and an enormous amount of innovation, RTB buying only accounts for 20%-30% of all digital media dollars. The real money still flows through the direct buying process, with agencies spending up to 400 hours and $50,000 to create the typical campaign, and publishers burning through 1,600 hours a month and 18% of their revenue responding to RFPs. What a mess….and an opportunity.

Everybody’s battling for a slice of that direct sales pie, and the game is all about helping buyers and sellers automate the manual processes that drive almost 80% of transactional value.

The Holy Grail for both sides is a web based, connected platform that will enable planners and sellers to thrust aside Excel, and start to transact business in the cloud. Although a number of companies have tried and failed to deliver on the promise of workflow automation, the time seems ripe for true adoption, as agencies are being challenged by their clients to create the same programmatic efficiencies across all media channels that they have embraced with RTB. As we speak, winners and losers are being selected, so let’s look at the landscape.

When you look at all of the companies providing a slice of the end-to-end workflow just in digital media execution, it’s hard to imagine that there can be “one system to rule them all” or a true “OS” for digital media. Yet, the dream is just that: An end-to-end comprehensive “stack” that handles media from research through to billing, and eliminates the many manual tasks and man hours involved in connecting the dots. But what are the realities? Let’s saddle up this unicorn and take a ride:

The End of the End-to-End Stack?

The notion of a single end-to-end “stack” for the digital marketer is a tough vision to execute upon. Build a system that has every little feature that a huge agency needs and you have effectively built something no one else can use. The flip side is building something so standardized that individual organizations find little value in it. The “operating systems” of the future that will win should enable agencies and marketers to leverage a standard operating system, but customize it with their own pricing, performance, and vendor data. This enables the efficiency of standardization while enabling data to provide the “secret sauce” that media shops need to justify their fees.  More importantly, the modern operating system for media must be extensible, to allow for a wide variety of point solutions to integrate seamlessly. The right system will certainly eliminate a few logins, but must not limit the numbers of tools that can be accessed through it. That concept necessitates a highly modern, scalable, API-driven, web-based platform. It will be interesting to see how today’s legacy systems (which are exactly the opposite of what I have described) adapt.

Hegemon Your Bets

Several years ago, I wrote that the merger between Mediabank and Donovan may actually be a good thing—provided it offered more choice, flexibility, and open standards. Looking some three years later, I am not sure agencies have any more of that today. Like any other near monopoly, Mediaocean has a disincentive to open up its ecosystem because it invites competition. So time will tell whether their nascent “Connect” effort will become a way for agencies to quickly consolidate their “stack” around a flexible operating system—or if it’s just an integration tax for vendors (a revenue strategy quickly becoming known as the “Lumascrape”). After an IPO, the company will face enormous quarterly pressure for growth. It will be hard to raise prices on already stretched agencies, so publishers will be in the crosshairs. I smell “marketplace” and some monetization strategies around “programmatic direct” enablement for guaranteed media. And what about open standards? Despite years of work by the IAB, the standards and protocols for creating electronic ordering and invoicing are still very much in flux.

Connecting the Dots

More than anything else, the most exciting thing happening in digital media is seeing real programmatic connections between buyers and sellers for guaranteed media. After so much innovation in programmatic RTB (hundreds of vendors, billions in venture capital), we now have some amazing pipes that impressions can flow through. Unfortunately, this has largely been limited to lower classes of inventory and focused almost exclusively on the DR space. Creating the same programmatic efficiencies for “premium” brand-safe inventory is now starting to happen. Whether it comes from new “programmatic direct” pure play technologies, or happens through the RTB pipes, it will not happen successfully without transparency. That means giving publishers control over their inventory, pricing, and what demand partners can access their marketplaces. Will these connections thrive? Not if vendors charge network-like fees, arbitrage media, or don’t provide transparency. Will the endemic fraud in programmatic RTB push more transactions outside the RTB pipes? I think so, and a lot of publishers (see Yahoo/AOL/Microsoft deal) are betting that there are better ways for buyers to access their inventory.

Time for Real Time

Look at all the RTB players who want a piece of the guaranteed action. Three of them (Rubicon, Appnexus, and Pubmatic) will IPO soon, and be under tremendous pressure to increase revenue, margins, and continue to innovate and find new markets. When international expansion stops providing double-digit growth increases, then it’s time to look toward new streams of demand generation—namely, the 80% of deals not currently flowing through their pipes. Those pipes have been engineered for real-time bidding, but guaranteed deals are neither real-time nor bidded. Can they innovate fast enough to provide real value between buyers and sellers? Can they apply years of innovation in DSP and SSP tech to the more prosaic problem of workflow automation? Probably, but there are still business model issues to work out. Most of these companies have put a stake in the ground for either publishers or marketers, and a transactional platform must be agnostic to sit in the middle. It will be interesting to see how new offerings are received in the marketplace.

As the Chinese curse says, “may you live in interesting times.” Indeed, the past several years of ad tech has been nothing but interesting, but the real action is just starting—and it’s taking place in what was the most uninteresting field of workflow automation.

[This post originally appeared in AdExchanger on 3.12.14]

The Four Keys to Programmatic Direct Success

SuccessI was recently talking to the Chief Digital Officer of a large agency that does a lot of digital media buying. He has been working closely with a number of software providers to standardize his operations on a media management system. Getting all his vendor information, order management, and billing information has been a huge undertaking. Apparently, half the battle at an agency is getting paid (getting paid in less than 120 days is the other half)!

We were talking about some of the upfront processes behind putting together a media plan, which were mostly manual: putting the actual plan together in Excel, trading e-mails back and forth with vendors in the RFP process, trafficking ad tags, collecting screenshots, etc. Wouldn’t it be valuable if computers could streamline much of that work, and connect buyers and sellers together more seamlessly?

He agreed that it would truly transform his business, but accepted much of that manual work as part of the cost of doing business (paid for, incidentally, by his clients). The real way to transform his business, he said, was to answer the following questions. If “programmatic direct” technologies simply nailed down these four things, the payoff would be enormous. I paraphrase his answers below:

How much should I buy?  “I basically know that I am going to have AOL, Yahoo, Facebook, and GDN on almost every plan. For my more vertical clients, in auto for example, I also know 95% of the sites and networks I am going to be on. Sure, I use research tools to validate those recommendations to my clients, but media discovery is not a huge pain point. Where we struggle is answering the question of media investment allocation. Should I spend 30% of my budget with Facebook? 40%? I really don’t know, and often don’t have the right mix until the campaign is nearly over. It would be great to have some business intelligence built into a system that recommended my guaranteed media mix programmatically.”

What should I pay? “I also have a pretty good idea what things cost, thanks to the RFP process. When you RFP 40 publishers in a vertical, you find out pretty quickly what your best pricing for guaranteed media is, and you can leverage that information to insure you are giving your clients competitive rates. Unfortunately, it feels like we go through this exercise every time on every RFP. We have the historical pricing data, but it’s all over the place in spreadsheets—and often in the planner’s heads. It would be great if this information was in the same place, and if a system could make pricing recommendations up front in the process, which would also shorten the negotiation process with publishers.

Why am I recommending this?  “The biggest thing we struggle with is justifying our media choices to our clients. When we present a recommendation, often we are asking our client to invest hundreds of thousands or even millions in an individual vendor. My deck has to have more in it than basic audience information. I have to talk about the media’s ability to perform and hit certain KPIs for the price. It would be really useful to have recommendations come with some metrics on how such placements performed historically, or even some data on how other, similar, investments moved the needle in the past. Right now, getting to that data is nearly impossible, and usual resides with your senior planner in the account. The other obvious problem with that is employee turnover. My best planners, along with everything they’ve learned over two or three years walk out the door along with my data and relationships. The right system should store all of that institutional knowledge.”

You need that when? “The other thing a system can help with is speed to market. Publishers hate it when we ask them for huge, innovative proposals—in 24 hours. The reason we do that is because our clients ask us for amazing and innovative media recommendations in 48 hours. The pressure to deliver plans is huge, and you can easily lose large chunks of business by reacting to such requests too slowly. What programmatic direct technology may be able to help with is giving planners access to tools that compress the pre-planning process down, and enable agencies to deliver thoughtful, data-backed recommendations out fast—and at scale.”

Especially for larger agencies, programmatic direct technology has to be more than just workflow efficiency tools and automating the insertion order. (Although that has to come first). The next generation of programmatic efficiency or guaranteed media has to include serious business intelligence tools that can solve the “how” while simultaneously answering “why.”

[This post orginally appeared in AdExchanger on 2.11.14]

Know these Five AdTech Memes for 2014

UnicornMeatWell, at least it’s not the “year of mobile” again. Or, maybe it is. After several days of media investment banking conferences (Gridley and JEGI), I can reliably report that 2014 will be “the year” of many uber-trends ,some of which will enrich the M&A bankers who have a focus on the increasingly frothy ad technology and marketing space. Here are five memes to consider:

“Mobile First”

If you were to believe every ad tech panelist, you might be inclined to throw your laptop in the East River. Apparently—despite desktop only slightly starting to lose overall time-spent share to mobile on a year-over-year basis—nobody is developing ad tech solutions for the desktop anymore. Everyone is “mobile first,” meaning that they are writing code for tablet and mobile phone browsers and apps before developing solutions for the poor laptop or desktop computer. Of course, mobile devices are showing explosive growth, and clearly where the majority of consumers’ time will be found (as evidenced by the 8 of 10 people at my conference table multitasking during the eMarketer presentation which laid out the mobile data). This might be only a slight exaggeration when it comes to mobile eCommerce, which is trending to dominate the vast majority of online sales transactions in just a short time. Also, in case you missed this, it is now passé to call “mobile” “mobile.” Companies are so hip to the growth in portable digital devices that they just talk about “reach” rather than distinguishing between “tablets” and “smartphones.” You know it’s really the “year of mobile” when it’s too lame to talk about.

“No Cookie, No Problem”

Guess what? Nobody is worried that cookies are going away. Again, if you spend all of your time in conference ballrooms listening to panelists, you naturally understand that cookies are a thing of the ancient past, rather than the data currency without which 80% of Lumascape companies could not credibly operate. In fact, if the cookie disappeared tomorrow, ad tech players would simply go with a “statistical ID” or another cool sounding identification technology that is being invented somewhere. I am really glad that no one is particularly worried but—hearing this meme several times over the past week—I would be interested in how many platforms and ad networks have developed and deployed data technologies that enable them to do audience targeting at scale without cookies. What I think the reality of the situation might be is that cookie technology is replaceable, but if legislation changes suddenly or Google Chrome decides to switch things up, there could be huge trouble in Luma land. So much value destruction in so short a period is just something not fun to talk about at M&A conferences.

“Stack”

The idea of the “technology stack” is not new for 2014, but what has changed is that tons of point solutions that were funded in 2008 are still unprofitable, their VCs are at the end of their fund lifespans, and it’s time to find an exit. That means someone unprofitable point solution can either become a part of another’s “stack” or everyone can take their toys and go home. The problem with everyone wanting you to have a “stack” is that they are expensive to build and also expensive to license via SaaS. Small players cannot afford a “stack” and the big players already have them. That dynamic is going to create a ton of M&A activity in 2014, as vulnerable point-solution providers, some with excellent technology, succumb to larger integrators. As repeatedly pointed out, the biggest players in the marketing space (IBM, Adobe, Salesforce, etc.) represent the vast majority of M&A dollar volume, all of which has gone towards augmenting “stacks”—and it doesn’t look like they are going to be done anytime soon. There are a lot of good engineers that aren’t going to exit big at their point solution company, and may be ready for a comparatively cushy work life in the bosom of corporate behemoths that offer unlimited Mountain Dew and Skittles in the company snack room. Look for lots more M&A, and much of it “aquihire” focused.

The Funnel is Dead…It’s Now the “Customer Journey”

Everyone now has to have an “omnichannel-capable programmatic offering.” That’s the one parked right next to my Unicorn. Not that the instinct is incorrect—the proliferation of screens means that marketers have to reach people along their “consumer journey.” It’s no longer a trip down the sales funnel, but a twisting landscape where the consumer pushes you information through various social interactions. The smart marketer has to be ready at the drop of a hat to deliver perfect, personalized messages into the consumer’s smartphone at the “moment of truth” before a purchase—and, at the very least, be prepared for various “Oreo” social media moments that can create “earned” media at scale. Sounds like marketers may actually start to miss the old “AIDA” funnel!

“Sutton Pivot”

One of 2013’s memes was the notion the “Sutton Pivot,” or running where the display money is—namely, the 70% of digital dollars that get transacted through the RFP channel. That’s where we get to complain endlessly about funding the “23 year old media planner” with “sneaker parties.” David Moore remarked at the recent JEGI conference that “50% of the cost of a campaign” went into the complexity of planning and delivering it. That sounds like a lot, but might be only a slight exaggeration. Everyone wants everything more programmatically, but the problem is that publishers haven’t quite given up yet. They are still keeping the premium inventory to themselves and out of the exchanges. “Programmatic everywhere” may become a reality…in five or six years. But old habits (and buying methodologies) die hard. In the meantime, everyone with a “platform” is going to try and figure out how to automate the inefficient buying process and try and get some of that 70% flowing through a system that creates a nice “percentage of spend” platform fee. 2014 will see this trend accelerate.

Happy New Year!

Every one of these memes will produce a ton of innovation, lots of M&A, a good deal of mid- to senior- level hiring, and plenty of bankers fees, so don’t worry! 2014 looks like a great year for ad technology!

[Originally published in AdExchanger on 1.23.2014]