Programmatic Direct is in the Top of the Second Inning

ScoreboardLately, I have been working on a whitepaper about the “programmatic direct” phenomenon. Part of the research involved surveying a bunch of influential people in the space, and asking them where they thought this new buying methodology was in terms of adoption. Their answers kind of surprised me.

If “programmatic direct” was a baseball game, we are in the top of the second inning.

The game has basically just started, and a few balls have been put into play, but the action is just getting started—and the big sluggers have yet to step up to the plate. If you are a regular AdExchanger reader, you would be justified in thinking that programmatic direct was quickly gaining steam by progressive agencies and publishers. After all, there has been a good deal of hype surrounding the idea of enabling programmatic access to higher classes of inventory, and it seems like almost every ad technology player in the display space is getting into the game.

Sure, some real innovations are happening in programmatic RTB that are enabling private marketplace transactions. Initiation-only auctions and fixed rate deals inside of exchanges are only the tip of the iceberg, though. New web-based technology and advanced ad server APIs are starting to provide real process automation—the tools that will make it easier to buy and sell the 70% of inventory currently procured through the “transactional RFP” process.

However, there are a few major things that need to happen before “programmatic direct” can really take hold:

A Directory: It may sound strange, but one of the biggest failings of digital media has been the lack of a directory for buyers. In direct mail, you can look up how many people get the L.L. Bean mailing list, add all kinds of criteria (males of a certain age that have purchased with a credit card in the past three months), find out exactly what it costs, and who to buy it from. No such thing exists in digital media. Hence, the RFP process, where buyers have to go through hoops just to get a sense of pricing and availability. This simple act of discovery adds time and complexity to every transaction. Today’s programmatic direct systems are being built from the ground up—starting with good information, and also with dynamic pricing and availability information thanks to API connections to DFP and other publisher ad servers.

Standards for Electronic Ordering: Another obvious thing that needs to happen before real process automation can happen in digital is that a set of standards have to be agreed upon. The IAB has known this since 2008, but five years later the “eBusiness Task Force” (now called the “Digital Automation Task Force”) seems no closer to its original mandate. Its stated mission: Updating the XML schema and implementation testing for the electronic delivery of digital advertising business document.” Those documents include Requests for Proposals (RFPs), insertion orders (IOs), and invoices—documents that must be standardized in order for adoption of programmatic direct buying to occur at scale. However, there is urgency like never before to get such standards implemented, and a source close to the action says that “we will see more movement in the next nine months in standards and protocols than has happened in ten years.” Let’s hope so. The wide adoption of a common set of standards and protocols opens up the door to the electronic IO—the key to achieving scale in programmatic direct.

Culture Change: While a directory can be created and standards adopted with lots of hard work, those things are actually easier than the real key to programmatic direct adoption: culture change among agencies and publishers.  Agencies must leverage technology to empower the “23 year old media planner” and give them a reason beyond sneaker parties to go to work. Technology will unleash their creativity and get them focused on solving real problems for clients. Likewise, publishers need to escape the “$200,000 a year salesman,” with his accompanying high T&E and schmoozy selling style. Publishers need data-driven sellers that understand how to drive programmatic adoption, and can sell based on the new “media investment” paradigm happening at agencies—understanding tactically how to spread digital dollars across a broad portfolio of channels. Agencies now they cannot remain stuck with the current cheap labor model. Publishers understand that they cannot keep their higher classes of inventory outside of programmatic channels. Change is hard, but it’s already here.

About a year ago, I said that 2013 would be the year of programmatic direct. It turns out that 2013 has been the year of programmatic direct hype, and a ton of valuable behind-the-scenes work on the technologies that will drive it in the future. But unlike the perennial “year of mobile” programmatic direct will become a reality quickly if some of the above building blocks come together.

[This post originally appeared in AdExchanger].

There’s No App for That

Building the Technology Stack for Next Generation Digital Media Buying and Selling

Last week’s IAB Network and Exchanges conference was full of the usual self-congratulatory “use cases” of byzantine, data-based strategies for squeezing conversions from web-based display banners for direct response campaigns—or, alternatively, helping to drive “branded performance,” based on the listener’s preference. I was sitting next to an attorney from a large media company, tasked with making sense of the ad technology business. “I have to be honest,” she said, “I have been looking at this business for 18 months, and I still don’t understand what you people are talking about half the time…and I’m a smart person.”*

Unfortunately, that is the exact sentiment of many media planners, account managers, and marketing managers confronting the vast array of choices in display advertising. Once they figure out the alphabet soup of DSPs, RTB, and (now) DMPs, they start to wonder if they actually want—or need—the technology in question. Agencies are trying to figure out how to be the gatekeepers, and advise their clients on the best technologies and practices to drive branding and performance, but the work required to string together all of the various options makes earning money difficult. Digital media margins are in the toilet right now, and will remain there until agencies can manage all of these disparate systems with efficiency.

In the ad technology business, there’s an “app” for almost any way one wants to find and buy an audience—and many more applications for getting and understanding performance. Unfortunately, there is no operating system that can host all of these and make them work together seamlessly. The ideal scenario would be a world in which marketers could bring the different media applications they want to use into a single, unified system. Call it a “media dashboard” that would enable an agency to create a campaign, plug in their 3rd party research data, ad server of record, segmentation data licenses, audience measurement/verification providers, and billing system and enjoy access and control from a single interface. Down the road, as more mature APIs become available, the OS would enable marketers to “plug in” their mobile ad providers, video DSPs, and bid management tools for search marketing.

Almost everyone agrees that this is the future of the business. A famous media investment banker recently remarked that “there are some very smart companies out there

Are you developing your ad technology for the wrong system?

building a technology stack” to address these very issues, but wondered whether SAP or Oracle will be first to the party. My opinion is that the IBMs and SAPs of the world will let a smaller company fight through the growing pains, and let the preferred standardization technology come to light, before swooping in. The big boys can afford to be patient—and nobody wants to be the guy who backed Betamax. The question now isn’t Betamax or VHS—or even PC vs. Mac. The question is, what will be the operating system of next generation digital media, who will support it, and can an active “ecosystem” be maintained that enables technology companies to develop smart applications for it?

I think the answer is yes—and that the next 12 months will be critical in determining what companies will fit into the increasingly complex landscape and those that fail to meet the task. Not long ago, it was extremely difficult to buy from a variety of networks and exchanges efficiently. In comes AppNexus, and suddenly every Tom, Dick, and Harry has access to over 800 inventory sources, and a great bid management tools to boot. Their OS for real time bidding creates real efficiency for marketers—especially when they go through the pain of integration on your behalf. I know quite a few AppNexus users—but very few who will work with data segments that are not natively available in the platform.  The next great media technologies are going to be built for integration into specific systems, offer APIs that enable “easy” data export and ingestion, and flexible so that others can customize them for specific needs.

Evolution is natural to the technology business. Networks become “platforms”…data providers become “DMPs.” Technology companies will forever try and stick their hand in the middle of the transaction between the demand and the supply side, and shave off a sliver of the pie. But, eventually, evolution becomes “revolution” and the game changes for everyone. We are about to find out who has the capital, talent, and vision to devise the next generation operating system for digital media. That system is going to be the one that every company has to develop an “app” for and support, and that system is going to shape the way digital media is bought and sold for a very long time.

As an ad technology company, it’s time to start figuring out how your technology will fit into the larger puzzle if such an OS becomes standard. Is your technology built for an open system, or does your technology (and, more importantly, business model) only thrive in a closed environment? There are a lot of “platforms” out there, but eventually there will only be one operating system. I think there are a lot of really awesome “apps” out there waiting to be plugged into this new operating system, which would benefit from standardization and an installed base of users.

There’s definitely an “app for that.” We are just waiting for the OS.

*That sentiment was also expressed wonderfully in Doug Weaver’s amazing keynote presentation which he was kind enough to make available this morning on iMedia.

[This post appearred on 5/23/11 in Business Insider]