Stealing Some Of Microsoft’s 76% Ad Tech Market Share

downloadWhen you think of advertising technology in the display space, the first names you’re likely to think of are Google, PubMatic, Adobe, and AppNexus. But Microsoft? Not really top of mind, unless you are thinking of its disastrous aQuantive acquisition in 2007. Sure, every now and then MSFT will pick up the odd Rapt or Yammer, but is it really having a huge impact in the ad tech space? Even if you’re a regular AdExchanger reader, you’d be justified in thinking it’s not.

But you’d be 100% wrong.

Microsoft has been quietly running the inner ad-technology workings of digital display since the first banner ad was purchased in 1995. According to some recent research, the company’s ad-planning software boasts an amazing 76% market share among agency media planners. MediaVisor ranks a distant second with a measly 9.7 Almost nine in 10 planners who use Excel spend more than an hour a day using its software, while almost 35% use it for more than four hours per day[CO1] . [l2]

That software is called Microsoft Excel.

Released in 1985 (originally for Macintosh), Excel is nearly three decades old and has been powering digital-media planning since its inception. Combined with Outlook, Word, and PowerPoint in the Office suite of products, Microsoft tools have been central to the digital-media planning process for a long time. Planners plan in Excel, publishers pitch in Excel and PowerPoint, contracts are made in Word, and everything is communicated via Outlook. And then there are the billing and reconciliation tasks that occur inside spreadsheets. Nobody ever seems to wonder why more than $6 billion in digital display media transactions (representing nearly 70% of all ads sold) use Microsoft tools and the occasional fax machine.

While innovative companies have challenged the dominance of these systems in the past, early efforts fizzled. The complexities of modern digital-media planning, combined with the reluctance of agency planners to change their behavior, have hindered innovation. Looking at past and current “systems of record” for media buying, it’s no wonder planners are scared of change. If you have ever seen legacy agency operating systems, you wonder if a single dollar was ever spent on user experience or user interface design.

Why Programmatic-Direct Planners Use Excel

As an ad technology “evangelist” of sorts, it is my job to show agencies the future of digital-media planning. This is starting to be called programmatic buying, a term which encompasses both “programmatic direct” buying, which targets the transactional RFP business that accounts for the bulk – 70% – of digital display ads, and “programmatic RTB,” which accounts for the impression-by-impression purchases that represent another $2.4 billion, or 25[CO3] % of the pie.

Companies like MediaMath and AppNexus have made the latter category wildly efficient. Buyers don’t use Excel to create an audience-buying campaign across exchange inventory. Instead, they log into a web-based RTB platform.

For automating guaranteed display buys, though, Excel has become the default for media planners, even though if it doesn’t have the features of many web-based systems available. For example, Excel doesn’t track your changes. When planners change something, multiple files are created, and it’s easy for two people to work on a plan at the same time, duplicating work and botching it up. Excel isn’t Sarbanes-Oxley compliant, either. Agencies end up with thousands of Excel sheets on hard drives and servers, and a complicated file versioning and access system that makes replicating and tracking plans really difficult. Excel doesn’t integrate easily with other systems. At the file level, Excel is great. You can import and export Excel files into almost anything. But Excel can’t send out an RFP, or accept an order. Excel can’t automatically set an ad placement inside an ad server like DFA or MediaMind, or get Comscore updates. Excel is amazingly flexible, but it wasn’t built for media planning.

Today, the average digital-media plan costs nearly $40,000 to produce and takes as many as 42 steps to complete. That’s why, according to a recent Digiday survey, more than two thirds of agency employees will leave their jobs within the next two years. Digital-media planning should be fun and innovative, and young, smart people should want to be spending their time influencing how major brands leverage new technologies and media outlets to sell their products.

The reality is that young media planners are finding their days are filled with reconciling monthly invoices and ad delivery numbers. Have you noticed media planners’ eyes glazing over during your latest “lunch and learn?” That’s today’s young agency employees’ way of calling bullshit on ad tech. Our technology has been making their lives harder and their hours longer, rather than ushering in a new era of efficiency and performance.

How We Can Finally Beat Excel

I believe that dynamic is rapidly changing now. Buy-side technologies from innovative software companies, combined with offerings from sell-side players that are plugging into publisher ad servers are creating a programmatic future by building web-based, easy to use, and extensible platforms.Here are a few reasons these types of systems will start to get adoption:

  • Pushback on agency pricing models: Big agencies have been getting paid by the hour for years, but their clients are starting to push back on cost-plus pricing schemes. After exposure to self-service platforms and programmatic buying, they are getting used to seeing a larger percentage of their money applied to the media, and that trend is only likely to continue. Brand advertisers are demanding more efficiency in direct-to-publisher buys, and that means agencies must start to embrace programmatic direct technologies.
  • User interfaces and user experiences are improving: Young people plan media. They are used to really cool web-based technologies, such as Snapchat and Twitter. Today’s platforms not only centralize workflow and data, but increasingly come with something even more critical to gaining user adoption: a nice interface. When we start building tools that people want to use and a user experience that maps to the tasks being performed online, adoption will quickly increase.
  • Prevalence of APIs: Today’s platforms are being built in an open, extensible way that enables linkage with other systems. Since there are so many phases in modern digital media planning (research, planning, buying, ad serving, reporting, billing) it makes sense for platforms to be able to talk to one another. While some legacy APIs are not the best, they are getting better. Servers-to-server integrations make a lot more sense than 23-year-old planners updating spreadsheets. As David Kenny, CEO of The Weather Company, once remarked, “If you are using people to do the work of machines, you are already irrelevant .”

Because of these factors, I expect 2013 will be the year that programmatic direct buying changes from a fun concept for a planners’ “lunch and learn” to a reality. It’s time for us to finally get cracking on stealing some of Microsoft’s ad technology market share.

[This post was originally pushed in AdExchanger on 4-23-13]

If it’s Not Programmatic Premium, Then what is it?

CountryAndWesternI recently returned from an exciting IAB Annual Leadership Meeting in Phoenix, where a packed Arizona Biltmore resort was host to over 800 digital media luminaries. On the tip of many tongues over a two day session was “programmatic premium,” the term our industry is using to describe the buying of digital media in a more automated way.

One particular “Town Hall” type meeting was particularly spirited, as leaders sparred over what “programmatic” meant, whether or not publishers should be using it, and how agencies were leveraging it. Here is what I heard:

We are calling it the wrong thing. Like it or not, the term “programmatic” is tied to the concept of real time bidding. This is natural, given the fact that the last 5 years in ad tech have largely revolved around DSPs, SSPs, and cookie-level data. This creates a problem because, when you add the word “premium” into the mix, you have a really big disconnect. Most folks don’t really consider the large majority of exchange inventory “premium.” Doug Weaver said we should just call it “process reform,” since we are really talking about removing the friction from an old school sales process that still involves the fax machine. Maybe the term should be “systematic reserved” for deals that happen when guaranteed buying platforms (like NextMark, Centro, and MediaOcean) plug into sell-side systems (like iSocket, AdSlot, and ShinyAds) to enable a frictionless, tagless, IO-less buy. It is early days, but I suspect this may be what people are talking about when they utter the term “programmatic premium.”

Private Exchanges Seem like a Fad. For programmatic premium to take off inside of RTB systems, something like having “Deal ID” and “private exchanges” need to be implemented at scale. Yet, for all of the conversation around programmatic premium, I heard very little about private exchanges, Deal ID, and the like. I really think this is because of publishers enjoy having RTB as a channel for selling lower classes of inventory. They are getting better average CPMs from SSPs than they were getting in the network era, and they can experiment with who gets to look at their various inventory and play with floor pricing—a much higher level of power and control then they recently enjoyed. But do they want to sell the good stuff like this? The answer is no. They do, however, want to find ways to get out of the RFP mill that makes the transactional RFP business they manage so cumbersome and people-heavy. Again, that seems to be in the domain of workflow management tools, rather than existing supply-side platforms. If any of the many publishers at the conference were leveraging private exchanges to sell double-digit CPM inventory to a select group of customers via RTB, we didn’t hear a lot about it.

Agencies Love Programmatic. We heard programmatic perspectives from many major agencies throughout the conference, mostly in bite-sized chunks in networking sessions. When asked whether large agencies had less of an incentive to create efficiency in media planning and buying (since they get paid on a cost-plus basis), some agency practitioners admitted this was true but offered that “times were changing quickly.” Clients, having access to many highly efficient self-service buying platforms for search and display (and some, like Kellogg Company, having their own trading desks) there is a lot less tolerance for large billable hours related to media planning. It makes sense; the easier it is to plan a campaign, the cheaper it should be. Marketers would like a bigger chunk of their money going to the media itself. That said, we also heard that agencies are being pushed hard on meeting KPIs—and that even goes for brand marketers. Meeting those KPIs is easier to manage in a programmatic world, and that means pressure to buy through DSPs, rather than emphasizing guaranteed buys. That means lower prices for publishers, and probably necessitates plugging higher and higher tiers of inventory into RTB systems.

We Got Both Kinds

Like the honkytonk saloon in the Blues Brothers that offers “both kinds of music—country and western,” we have to accept two types of “programmatic premium” right now. The first is the notion of buying real premium inventory inside of today’s RTB systems through private exchanges. The second is the notion of buying reserved inventory in a more systematic way. Both approaches are valid ways in which to create more efficiency, transparency, and pricing control in a market that needs it. We just have to figure out what it’s eventually going to be called.

[This article originally appeared in ClickZ on 3/6/2013]

How you Pay your Agency Matters

Paintbrush digging up a one hundred dollar billI have been working for a company that makes software solutions for buying digital media, and I have worked for a number of ad technology companies in the past. In a world where digital banner ads are still purchased through e-mail and fax, and media plans are mostly created using Microsoft Excel—technology dating from 1985—the ad technology industry sees an opportunity to create efficiencies in the way media is bought and sold. As an industry, one of the odd dynamics we have encountered in bringing our product to market is how independent agencies are more apt to embrace new efficiencies than the “big four” owned agencies who lead the space in terms of media spend.

Logically, you would think that gigantic media agencies, managing hundreds of media planners and buying on thousands on digital media channels, would grasp at the chance to do more planning with fewer personnel, migrating towards web-based tools that offer efficiency and centralization. The evidence has shown otherwise. On the surface, it may seem as though the biggest difference between independent agencies and the majors is size. The majors have Ford, and the independents have the Ford dealers. They both work very hard to identify digital audiences, perform against marketers’ aggressive KPI goals, while trying to understand how they got there through detailed analytics. At the core, the difference between what media teams within holding company shops and a smaller agency does is minimal. So what accounts for the reluctance of bigger shops to innovate with technology tools?

One reason may be the way they get paid.

The biggest shops consistently rely upon cost-plus pricing, which pays them based on hours worked, plus an additional, negotiated margin. The typical $500,000 digital media plan takes an alarming 42 steps and nearly 500 man hours to complete, which can cost up to $50,000—and that doesn’t even include developing the creative. If you are paying your agency on a cost-plus basis, your agency doesn’t have a lot of incentive to create your plan faster, or with less labor. In fact, this type of pricing scheme creates an incentive for inefficiency, or what economists call a “perverse incentive.” Unfortunately, every cent you pay towards the labor of creating a media plan subtracts from the amount that can be dedicated to the media itself.

So, what to do? The most obvious choice for those working with a large agency under such a scheme is to try and change the payment terms. Pay-for-performance is optimal, but a careful analysis may show that paying on a percentage-of-spend model yields more reach, when you are not paying for the labor of building a media plan. Some marketers are choosing instead to build small, efficient in-house teams to leverage the demand side technologies that their agency won’t to discover and buy digital media. Other marketers choose to work with multiple smaller, independent agencies that have specific expertise in different digital verticals. Those shops usually offer flexible fee structures, and you are far more likely to work with the team that pitched you after you hire them.

As they say in finance, “it isn’t what you make, it’s what you keep.” In digital media, moving away from cost-plus pricing relationships and towards new technologies for media buying means keeping more of your money for reach, and spending less on labor that doesn’t help you move the sales needle.

[Thi spost originally on 3/5/12 in The CMO Site, a United Business Media publication]

Is Programmatic Premium?

Will "buy it now" buttons control display media?

Will “buy it now” buttons control display media?

As the bloated Display LUMAscape shifts, more and more companies focused on real time bidding are turning their venture-funded ships in the direction of “programmatic premium” and trying to pivot towards an area where nearly 80% of display media budgets are spent. This has been called the “Sutton Pivot,” referring to the notion of robbing banks, because “that’s where the money is.”

The fact that that 80%—over $6 billion—is largely transacted using e-mail, Microsoft Excel, and fax machines is staggering in a world in which Facebook is becoming passé. The larger question is whether or not publishers are going to enable truly premium inventory to be purchased in a way that lessens their control. At a recent industry conference, publishers including Gannett and Turner completely rejected RTB and “programmatic” notions. In a world of ever growing inventory, the premium stuff is ever shrinking as a percentage—and that means scarcity, which is the publisher’s best friend. Selling less of a higher margin product is business 101.

As I wrote recently, at the same conference, Forbes’ Meredith Levien laid out the three principle chunks of inventory a super-premium publisher controls, and I want to examine the programmatic premium notion against each of these:

  • Super Premium: Big publishers love big “tent pole” branding campaigns, and are busy building mini-agencies within their sales groups, which bring together custom sponsorship packages that go beyond IAB standard banners. A big tent pole effort might involve a homepage takeover, custom rich media units, a dedicated video player, and branded social elements within a site. While some of the display elements within such a campaign can be purchased through a buying platform, this type of complex sale will never scale with technology, and is the very antithesis of “programmatic.” For many publishers, this type of sale may comprise up to 50% of their revenue. Today’s existing buying and selling platforms will be hard pressed to bring “programmatic” efficiencies here.
  • Transactional: Many super-premium (and most premium) publishers spend a lot of their time in the RFP mill, churning out 10 proposals and winning 2   or 3 of them. This “transactional RFP” business is begging for reform, and great companies like AdSlot, iSocket, Operative, and ShinyAds are starting to offer ways to make selling premium inventory such as this as programmatic as possible. Companies such as Centro, Facilitate, MediaOcean, and NextMark (disclosure: my company) are starting to offer ways to make discovering and buying premium inventory such as this as programmatic as possible. Much of the RFP process is driven by advertisers looking for information that doesn’t need to be offered by a human being: How much inventory do you have, when do you have it, and how much does it cost? This information is being increasingly found within platforms—which also enable, via tight pub-side ad server integrations, the ability to “buy it now.” 100% of this business will eventually happen programmatically. Whether or not today’s big RTB players can pivot their demand- and supply-side technologies to handle this distinct type of transaction (not very “real time” and not very “bidded”) remains to be seen.
  • Programmatic: There will always be a place for programmatic buying in display—and there has to be, with the sheer amount of inventory available. Let’s face it: the reason the LUMAscape is so crowded is that it takes a LOT of technology to find the “premium” needle in a haystack that consists of over 5 trillion impressions per month. If the super-premium inventory publishers have to sell is spoken for, and the “transactional” premium inventory publishers sell is increasingly going to other (non-RTB) platforms, then it follows that there is very little “premium” inventory available to be bought in the programmatic channel.

The middle layer—deals that are currently being done via the RFP process, is where “programmatic premium” is going to take place. In this type of buy, a demand-side platform will create efficiencies that eliminate the cutting and pasting of Excel and faxing and e-mailing of document-based orders, and a supply-side platform will help publishers expose their premium inventory to buyers with pricing and availability details. That sort of system sounds more like a “systematic guaranteed” platform for premium inventory.

So, is programmatic premium? Not the type of programmatic buying happening today.

[This post originally appeared in ClickZ on 2/18/2013]