One of the topics we covered in our recent INMA Advertising Master Class was programmatic advertising — a hot top topic inside ad sales departments across the world now. It’s emerged onto the scene in recent years, but there is still much mystery around whether it is a long-term sustainable and most profitable way of selling your advertising inventory.
In the digital space, standard methods of selling (via sales team direct), is where digital ads are traded manually by ad buyers and publishers. Whereas programmatic is where digital ads are traded in an automated manner, in real time. “Direct programmatic” is based on a fixed price agreement, whereas with the real time bidding (RTB) variant, highest bidder wins, often done in milliseconds.
Digital ads first came on the scene on 1994, and it took 15 years (in 2009) before programmatic first began. Programmatic advertising gave publishers an alternative way to sell via ad exchanges with the ability to sell high volume, lower-cost digital ads with the knock on of being able to either reduce or shift human selling resource. Less salespeople. The placement of a DSP and SSP at either end aids the process.
DSP v SSP: the difference
A DSP (demand side platform) lets advertisers buy across several different ad exchanges at the same time, whereas an SSP (supply side platform) lets publishers sell their ad inventory across different ad exchanges. An easy way to think about it is that DSPs are for advertisers, SSPs are for publishers.
Since then, programmatic hasn’t (yet, at least) proved to be the holy grail replacement in terms of providing similar revenue streams than the traditional, sales teams direct way. But it’s become a valuable piece of the revenue jigsaw.
Benefits of programmatic advertising
Programmatic advertising uses computer software to sell digital display ads and has enabled media companies to reduce a significant amount of manual, administrative work from its sales teams. Manipulating data, bespoke algorithms, and open auctions have also aided sales teams to be able to reduce the number of e-mails, calls (phone and personal visits), and the sometimes tedious and drawn out negotiations with agency ad buyers.
The result has allowed publishers to shift their efforts on delivering expertly targeted/optimised advertising campaigns, as well to create a better customer experience through a more first-class, quality customer service level.
Programmatic helps the advertisers, too. Programmatic enables agency media buyers, for instance, to easily buy impressions over a range of multi-channel, multi-publisher Web sites, and reach a bigger/wider range of people whilst still representing highly targeted audience(s).
It’s true that programmatic still requires some time and resource from the publisher, i.e, the human element remains important to set up, monitor, and expertly comment on in the reporting stage. But it is seen by many as a more important use of resource.
Benefits of direct advertising sales
In my last newsletter, you maybe recall my comments around Futurist Gerd Leonhard’s view on human insights being important in the future. This was based on his view that everything that can be automated will be. So what becomes important are the things that can’t be automated, namely things like insights, experiences, storytelling, ethics, diversity, etc.
In advertising specifically, the human sales element remains core in media organisations and should complement programmatic via a continued, direct sales approach. This is especially important when it comes to big budget spending and large brand campaigns. It remains important to keep “close” your most important client relationships, and direct ad sales still ticks the box.
Omni channel and guaranteed inventory?
Agencies who buy direct can run personalised, custom campaigns across omni channels and tap into a guaranteed inventory for an agreed price on specific Web sites (or take their chance with RTB) — but whoever uses it is still guaranteed a specify audience. (With RTB, price can change rapidly where the general laws of auctioneering kick in).
Confidence in these guarantees is a big plus when it comes to things like brand safety — itself a key issue for both advertisers and publishing companies.
Of course, “going direct” means sales team need to spend much of their time and effort delivering and pleasing advertiser needs and wants. They must spend time negotiating, for instance, as well as dealing with the constant, accompanying e-mails, calls, etc. (as mentioned earlier).
Human error and discrepancies
All the above is not to mention the thorny subject of human error, which can sometimes creep in, and the arguments over “discrepancies.”
I spent much time in my career inside one of the big UK publishers, where an internal weekly ad sales meeting ended every week with a review on where we were with these discrepancies. (This is essentially a serious look who said and agreed what, with whom and by which method, in terms of ad campaign contracts … versus what the advertiser/agency counter view is, which could be a discrepancy of hundreds of thousands of pounds.) It was always baffling to me how such large sums could be contested after supposed cast-iron and assumed unambiguous contracts where already in place. (Programmatic, of course, eliminates that. There is an electronic trail that both parties see, and there is no argument later).
So, while all of advertisers, without question, should receive excellent customer service (it should go without saying), levels of service should nevertheless be appropriate to each advertiser. (It probably takes the same amount of effort to process a small client order as it does a large one).
Also, with programmatic, media buying becomes more effective when the right strategic targeting and algorithms are applied. That’s, of course, if all is set up correctly in the first place.
The programmatic advertising dilemma
So, you can see the dilemma. Which model is right?
In the end, it will all come down to you as an individual publisher. How are your sales teams structured? How reliable is that structure to pivot to new ways of working? How is your revenue curve moving (direct v programmatic)? What’s the opinion/preferences of your advertisers and agencies of programmatic?
Self-service: an alternative opportunity for publishers
One alternative is to offer your clients a self-service solution (particularly relevant for smaller campaigns and minor advertisers). Advertisers here are able to launch campaigns automatically optimised in real time and be able to review performance as it progresses, in a smaller but still impactful scale, whilst allowing your sales teams to focus on the bigger, perhaps more complicated clients that ultimately generate more revenue for the company.
Both models living in harmony?
It seems to me that sales teams will be an essential part of the selling process for the long-term future. What they actually sell over time may change (see below in this newsletter). But, as programmatic changes and morphs over time (into who knows what presently … maybe more honed private auctions via Real Time Bidding, special category deals, specific advertiser-centric campaigns, etc.), we need to fully understand how programmatic selling versus direct fit in and morph too, and how the two very different models can work in tandem.
What we also don’t know yet is if the revenue model around programmatic can replace the traditional revenue stream. But it seems both models have their place for some time to come.
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