Programmatic advertising technology, which automates the trading of digital ad inventory, continues to assert itself over the digital advertising landscape and shows no signs of abating.
According to an eMarketer forecast, 75% of all UK digital display ad spend will go through programmatic channels by the end of this year - up from 44% in 2015. It is therefore not surprising that many advertising executives are expecting that all digital advertising transactions will become automated in the near future.
However, it is becoming clear that there is a significant hump in the road in programmatic’s onward journey to market domination. It is to be found in publishing’s long, fat tail.
Analyses of programmatic ad spend focus on just that - money spent. The majority of the spend is taken by a few, super-large publishers, most notably social networks, that largely trade in this way. A statistic that is often overlooked is the number of actual publishers that are adopting programmatic technology, which is lower than the revenue would suggest.
One of the key drivers behind the current rate of adoption lies in the access to market leading technology. Many mid- and small-sized publishers are finding it hard to gain entry to programmatic trading channels due to their comparatively low traffic volumes. When it comes to gaining access to the larger supply-side ad platforms (SSPs) they often find themselves falling below the required threshold. Often the only way in is by bundling your inventory with a partner or utilising a third party that works on behalf of a number of different sites. Ultimately volume and scale (and the corresponding commercial opportunity this represents for the SSP) plays a significant role in determining whether you can go and play with programmatic’s “big boys”. There is, of course, no official line in regard to these traffic thresholds. From our own conversations with such publishers, we have heard that some of the larger SSPs (where the vast majority of the demand resides) will not entertain anything under one billion monthly impressions.
To avoid any ambiguity, when I say “mid-sized”, I’m not referring to minnow bloggers; I’m referring to well-known household names that boast millions of monthly readers. Whilst they may cater to more niche subjects, their audiences are of good quality and highly engaged. For an advertiser, such publishers represent a strong opportunity to engage with an audience in a creative way that is aligned with the specific niche interest. There is also value from a broader demographic perspective. Many niche interest areas are often occupied by audiences of similar demographic and lifestyle characteristics. Thus these audiences offer the potential for an advertiser to engage with not just the niche special interest but also a broader (yet specific) demographic/gender/age segment too. There is value from both perspectives.
That is why publishing’s long and mid-tail stands to gain so much from programmatic, not just commercially but organisationally. There will always be advertiser demand for the niche audience segment. A good example of this is luxury brands and their continued spend in the more glossy areas of digital where they have always spent. They will always have a demand for the niche and contextually relevant publishers that are aligned to their brand. However, programmatic, and more audience led campaigns, have the ability to provide the publisher with an incremental revenue stream above and beyond the core IO business. It can help them ensure that nothing is “left out on the table”.
Additionally, in the long run, as more advertisers move into the programmatic space and become better accustomed at trading and deploying campaigns in this way, there is some strong potential to streamline and drive efficiency in the buying process - even for those campaigns that were traditionally traded using paper insertion orders. The continuing rise of private marketplaces and more recently programmatic guaranteed (where rates, running dates and volumes are agreed upfront with the advertiser) are good examples of how programmatic technology is driving time/labour efficiency as well as broader commercial benefits for publishers.
There are solutions for publishers who find themselves with access challenges.
Smaller supply-side platforms are generally welcoming but they often lack the presence of the top buyers. It is, therefore, difficult for the publisher to know if they are getting exposure to the widest scale of demand.
Many of them also choose to bundle together branded content and ad packages where the use of a traditional insertion order is more appropriate. This, of course, fails to realise the efficiencies that can come with buying programmatically but still represents a good commercial deal for the publisher; bigger content integrations are often more lucrative than a straightforward ad campaign.
Audience cooperatives, collectives that pool inventory from multiple, similarly-sized publishers and represent it to the larger SSPs are also proving to be a popular way of entering the market. Many of these companies also offer a whole suite of services such as operations and trafficking resource, analytics and site optimisation and top line finance functions such as invoicing and collection. However, working with such companies places another link in the chain and requires some margin to be sacrificed for the services rendered.
A number of our publisher conversations over the last year have shown us that the path to programmatic trading is one of incremental steps - start small and scale over time. The way the landscape has evolved, thanks to mechanisms such as private marketplaces and programmatic guaranteed, a publisher can now gain access to a walled garden bidding environment at the request of the buyer if their inventory has been proven to be a channel that works and yields results. This, of course, requires the two sides have already been transacting. In the beginning, the most frictionless path for kicking things off can be found in the old traditional IO model; it is a simple commercial exchange with no technical integration required. I would argue that there is definitely still plenty to be gained from striking conventional deals first as leverage for then progressing the automated trading conversation.
Entering into the programmatic market is not a binary “all or nothing choice” and there is definitely some scope for publishers to be creative in how they go about navigating the road ahead. Ultimately publishers look for the optimum yield from their inventory whilst not cannibalising or devaluing the experience for the user, without whom they have nothing. The optimum yield could well be found in swapping traditional contracts, in the open exchange or in private marketplaces. In a world where the machines are progressively taking over, I would argue that the age-old question of “does it make commercial sense?” still acts as a beacon that lights the way for most through the cluttered and progressively more automated digital trading landscape.
However, to answer that question effectively and from the most informed position, one needs access to the broadest range of market participants. This is currently a challenge for the smaller and mid-sized publishers. But such conditions often act as a catalyst for innovation and give rise to new creative ways of trading and interacting. Adtech is an industry characterised by its ability to move and change rapidly. The pioneering and entrepreneurial spirit of its participants also has a natural aversion to roadblocks and is accustomed at overcoming obstacles. Change in the industry is often driven by those who are smaller and more agile; those who can pivot faster. If those in middle or towards the smaller end of the spectrum find themselves shut out, it often isn’t long before they have found a way in.
By Pete Emms, UK managing director at BillFront
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