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]

Pubs that Want Reach Extension Need to Own the Programmatic Channel

CaptureShould publishers go beyond the boundaries of their own inventory to sell “reach extension” packages to their clients? Publishers have long struggled with the problem of how to deliver a $100,000 campaign when they only have $90,000 of inventory. Without a strong partner network, the natural answer to that question used to be click arbitrage, an expensive and risky method of campaign fulfillment that often came with less than desirable site visitors.

These days there are several major factors that make reach extension a great opportunity for publishers, rather than a sales mechanism that strays outside their sore realm of expertise.

Publishers with premium inventory sell in three principle ways: Their best inventory is sold in large, customized “tent pole” sales; their standardized premium IAB units are sold through the transactional RFP process; and the rest is sold programmatically, through their remnant daisy chain. They do the first thing really well, especially for big branded advertisers, where they act like a mini creative/media agency to build custom programs. Publishers are also getting much better at the transactional business by leveraging great tools to bring efficiency to RFP response and enabling better demand-side access to their premium inventory (AdSlot, iSocket). The third thing (“remnant”) is the ball publishers continue to fumble, even though enabling an “owned” programmatic channel is getting easier for publishers every day.

Data management is the obvious solution. With the right tools, publishers no longer have to rely on third parties to understand the composition of their audience. The combination of a publisher’s CRM data and site tag data, ingested into one of a dozen amazing DMPs can enable them to segment and target their audience on the fly. Want “auto enthusiasts” on my site? Not only can I sell you a highly creative, customized program and back it up with a large share-of-voice in standard IAB banners within the site section—but now I can find your own customers right on my site…and on Facebook as well.

The last part of that equation (leveraging the client’s first-party CRM data) is where today’s reach extension differs from sending your excess buy to ContextWeb or AudienceScience, as you would in the old days. Now, publishers can find advertisers’ customers within their own site or publisher network and retarget them.  Better yet, pubs can help advertisers put that same first-party data to work on exchanges, including FBX, where match rates (and performance) are high. Really advanced publishers will leverage their DMP to model the audience advertisers are trying to reach, and build a custom lookalike model which can find “alike” audiences within the publisher network itself, or across the exchanges.

Publishers are acting more and more like agencies when it comes to the big premium sales that take multidisciplinary talent to pull off (sales, media, creative, development). Why shouldn’t they act like an agency (or, more specifically, an agency trading desk) when it comes to helping their clients with reach extension goals? If I am a publisher, and my client comes to me looking for the audience I specialize in, I should be able to tell the advertiser how to reach that audience—starting on my own site, but also across the Web in general. The right data management strategy and tools enable publishers to cover all three legs of the buy: sponsorship, transactional, and programmatic.

[This appeared as part of AdMonsters invaluable Audience Extension Playbook, available here.]

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]

Programmatic Premium is not about Bidding

bid-nobid-article “A market is never saturated with a good product, but it is quickly saturated with a bad one” – Henry Ford

When it comes to digital publishing sales, it seems like many publishers are questioning whether the product they have—the standard banner ad—is what they should be selling. Last month, I wrote that 2013 would be the year of “premium programmatic,” where LUMA map companies who make their living in real time bidding turn towards the guaranteed space, where 80% of digital marketing dollars are being spent. My recent experience at Digiday Exchange Summit convinced me that this meme continues—with an important distinction: “premium programmatic” is not about bidding on  quality inventory through exchanges. Rather, it is about using technology to enable premium guaranteed buys at scale. Here is what I heard:

The Era of the Transactional RFP is Over

Forbes’ Meredith Levien currently gets 10% of her display revenue from programmatic buying, up from 2% in 2011. The rest of her revenue is comprised of 45% premium programs , and 45% from what she calls the “transactional RFP” business. The latter is the type that comes from continually responding to agency RFPs for standard IAB banner programs, with little customization. Levien questioned whether that type of transactional business was completely on its way to becoming driven exclusively by technology.

Are publishers really going to be able to abandon the  relentless RFP treadmill where countless hours are spent reacting to agency RFPs—many of which are sent to over 100 publishers, despite the fact that an average of 5 find themselves on the campaign? In order for that to happen, Levien said, the very language we are using must change. The language of the transactional RFP (“GRP,” “CPM,” “Impressions”) must change to the language of premium (“Social Shares,” “Influence,” and “Engagement”). Ultimately, Levien sees a world where there are fewer people managing  RFP response and more multi-disciplinary teams that create super premium tentpole programs for large brands. Forbes’ teams feature copywriters, developers, and creatives who don’t talk about the “buy details” of a campaign, but more about the social and cultural implications a great advertising program can create.

To paraphrase Federated’s CEO Deanna Brown, publishers “really have to question whether sending 100 e-mails to win a $50,000 RFP is worth it.”

Create Scarcity

Gannett’s Steve Ahlberg was even more forceful in his rejection of programmatic buying, and the transactional nature of guaranteed buying. After living in a world of their own creation (pages festooned Nascar-like with low-CPM banners) USAToday.com took the draconian move of removing all below-the-fold ads from its site, stripped every network and exchange tag from its pages, and decided to have one large ad placement per page. The experiment—revenue neutral in the 4th quarter of 2012—has thus far proven that publishers can get off “set it and forget it” SSP revenue by creating the type of scarcity that drives up both rates and demand. According to Ahlberg, the publication is talking to quality brand clients that were not on the radar just months before.

Part of the equation is getting away from standardized IAB units and trying to create a “television-like” experience for brand advertisers. Like Forbes, that means getting RFP response teams away from transactional duties, and leveraging cross-disciplinary teams that think like wealth managers, rather than salespeople. Instead of asking about reach and frequency, USAToday.com asks brands what they want to accomplish, and works with them to craft campaigns that work towards a different set of KPIs.

“If the Premium Publishers’ Product is the Banner Ad, then they are in Trouble”

For Walker Jacobs, who oversees Turner’s digital ad sales, the recent leaps and bounds in programmatic technology has done nothing but “accelerate the bifurcation of the ecosystem” which is divided been the good inventory and the bad. Like Gannett, Turner takes a jaundiced view of the programmatic ad economy.  “Our RTB strategy is ‘no’,” as Jacobs concisely put it.

Going further, Jacobs suggested that “there is no such thing as programmatic premium” in a world saturated with banner ad units, many of which go unseen. Standard banners, therefore, are a “flawed currency.”  It is hard to argue with Jacobs in a world that sees 5 trillion impressions every month.

It is clear that, despite the massive strides being made in programmatic buying technology, there is a very large gap between publishers who control super premium inventory, and those that do not. Publishers in the former want to find more streamlined and efficient ways to respond to RFPs, and ultimately turn more of their efforts into selling creative, multi-tiered, tentpole solutions to major brands. It doesn’t sound like many premium publishers are implementing private exchanges either, despite all of the hype in 2012. As Dan Mosher of Brightroll Exchange remarked, a private exchange “is just a blocklist feature of a larger platform.”

In 2013, it seems like premium publishers are not embracing private exchanges, not because of the technology, but rather because they are rejecting the notion of commoditization of their inventory in general.  For most premium publishers, there are the types of sales: Super-premium programs, that will continue to be handled primarily by their direct sales force; “transactional RFP” business for standard IAB display units, which most see being streamlined by “systemic” reserved platform technologies; and programmatic RTB sales of lower class inventory.

So, is 2013 the year of “programmatic premium?” Yes—but only if that means that publishers embrace technologies that help them streamline the way they hand-sell their top-tier inventory.

[This post originally appearded in the EConsultancy blog on 2/5/13]

Why 2013 will be the Year of Premium Guaranteed

guaranteed_stampFairfax Cone, the founder of Foote, Cone, and Belding once famously remarked that the problem with the agency business was that “the inventory goes down the elevator at night.” He was talking about the people themselves. For digital media agencies, who rely on 23 year-old media planners to work long hours grinding on Excel spreadsheets and managing vendors, that might be a problem.

For all of the hype and investment behind real-time bidding, the fact is that “programmatically bought” media will only account for roughly $2B of the anticipated $15B in digital display spending this year, or a little over 13% depending on who you believe. Even if that number were to double, the lion’s share of digital display still happens the old fashioned way: Publishers hand-sell premium guaranteed inventory to agencies.

Kawaja map companies, founded to apply data and technology to the problem of audience buying, have gotten the most ink, most venture funding, and most share of voice over the past 5 years. The amount of innovation and real technology that has been brought to bear on audience targeting and optimization has been huge, and highly valuable. Today, platforms like The Rubicon Project process over a trillion ad bids and over 100B ad transactions every month. Companies like AppNexus have paid down technology pipes that bring the power of extensible platform technology to large and small digital advertising businesses alike. And inventory? There are over 5 trillion impressions a month ready to be purchased, most of which sit in exchanges powered by just such technology.

All of that bring said, the market continues to put the majority of its money into premium guaranteed. They are, in effect, saying, “I know I can buy the ‘sports lovers’ segment through my DSP, and I will—but what I really want is to reach sports lovers where they love to go: ESPN.com.”

So, while RTB and related ad technologies will grow, they will not grow fast enough to support all of the many companies in the ecosystem that need a slice of 2013’s $2B RTB pie to survive. NextMark founder and CEO, Joseph Pych, whose company focuses on guaranteed reserved software, has been calling this the great “Sutton Pivot,” referring to the famous remark of criminal Willie Sutton , who robbed banks “because that’s where the money is.”

In order to better inderstand why this is happening, I have identified several problems with RTB that are driving companies focused on RTB to need to pivot:

  • There’s a Natural Cap on RTB Growth: I think today’s RTB technology is the best place to buy remnant inventory. As long as there are low-value impressions to buy, and as long as publishers continue to festoon their pages with IAB-standard banners, there will need to be a technology solution to navigate through the sea of available inventory, and apply data (and algorithms) to choose the right combination of inventory and creative to reach defined performance goals. While the impressions may grow, the real cap on RTB growth will be the most important KPI of them all: Share of time spent. Marketers spend money where people spend their time, whether it’s on television, Twitter, radio, or Facebook. When people spend less time on the inventory represented within exchanges, then the growth trend will reverse itself. (Already we are seeing a significant shift in budget allocation from “traditional” exchanges to FBX).
  • The Pool is Still Dirty: It goes without saying, but the biggest problem in terms of RTB growth is brand safety. The type of inventory available in exchanges that sells, on average, for less than a dollar is probably worth just that. When you buy an $850 suit from Joseph A. Bank—and receive two free suits, two shirts, and two ties—you feel good. But it doesn’t take much figuring to understand that you just bought 3 $200 suits, two $75 shirts, and two $50 ties. Can you get $15 CPM premium homepage inventory for $3 CPM? No…and you never will be able to, but that type of inventory is just what the world’s largest marketers want. They would also like URL-level transparency into where their ads appeared, a limit on the number of ads on a page (share of voice), and some assurance that their ads are being seen (viewability).  Inventory will continually grow, but good, premium inventory will grow more slowly.
  • It’s Not about Private Exchanges: Look, there’s nothing wrong with giving certain advertisers a “first look” at your premium inventory if you are a publisher.  Auto sites have been pursuing this concept forever. Big auto sites guarantee Ford, for example, all of the banner inventory associated with searches for Ford-branded vehicles over the course of a year. This ensures the marketer gets to his prospect when deep in the consideration set. Big auto sites may create programmatic functionality around enabling this type of transaction, but private exchange functionality isn’t going to be the savior of RTB, just necessary functionality. Big marketers want control of share of voice, placement, and flexibility in rates and programs that extend beyond the functionality currently available in DSPs. As long as they are spending the money, they will get—and demand—service.

What does all of this mean? RTB-enables ad technology is not going away, but some of the companies that require real time bidding to grow at breakneck speed to survive are going to pivot towards the money, developing technologies that enable more efficient buying of premium guaranteed inventory—where the other 85% of media budgets happen.  I predict that 2013 will be the year of “programmatic guaranteed,” which will be the label that people apply to any technology that enables agencies and marketers to access reserved inventory more efficiently. If we can apply some of the amazing technology we have built to making buying (and selling) great inventory easier, more efficient, and better performing, it will be an amazing year.

[This post originally appeared in ClickZ on 1/22/12]