Real-time bidding (RTB) versus programmatic direct: The difference is subtle but important.

Buying and selling digital video advertising happens at light speed. But this market still needs definitions and explanation if we are going to extract the most value from premium digital video.

RTB is a non-guaranteed form of trading that’s skewed heavily in favour of the buyer but fails to account for many attributes that are considered valuable in today’s media marketplace, like the quality of video and the niche premium audience it reaches.

Programmatic direct enables a buyer to access advertising inventory and packages through a direct connect technology, eliminating the need for insertion orders or any paperwork. It also enables buying in advance at a pre-determined price for a set group of guaranteed advertising units.

It’s like buying an airline ticket directly through an airline, or booking a hotel room directly from a hotel property, rather than purchasing from an online retailer like Expedia or Hotels.com.

In terms of SendtoNews’ business model, programmatic underpins our strategic goals in a profound way. It allows us to pre-package inventory and sell it around the value of not just the audience, but the value of the content itself — content such as video highlights from the National Football League and Major League Baseball, two of the world’s most successful and lucrative sports organisations, and, more importantly, differentiate this premium content from, say, bland video of a news anchor bantering about morning traffic or weather.

From a value perspective, these are two distinctly different pieces of inventory that RTB doesn’t recognise or value. Perhaps a more applicable example is the video content value difference between a talking head discussing a sporting event versus the actual sports highlight itself. No contest from an audience engagement point of view, and the relative price of this disparate inventory should reflect this.

Enter programmatic direct.

Unfortunately, the waters of this market often get muddied by RTB vendors who use the term programmatic direct erroneously.

For this reason, Adslot, Legolas, ShinyAds, and a handful of other digital ad space retailers met in San Francisco in April of 2013 to derive a clearer definition. They came up with the following: Programmatic direct is the transactional methodology of automated direct sale of guaranteed advertising between advertiser and publisher.

Okay, so now we know what it is. The huge challenge moving forward in this online video advertising landscape is figuring out how to sell unsold inventory without cannibalising already sold inventory, known as back filling.

Each industry has its own way of doing this. Hotels deploy a strategy known as blind buying in which the consumer often doesn't know the 5-star hotel they’ll be staying at for a bargain, deeply discounted rate until they hit click to purchase.

To use a coarser example, the diamond industry does it by controlling the supply of shiny stones, therefore increasing demand for a rock that really has no functional value in the world.

In this light, we can view programmatic direct as a way to ensure premium online video content receives the diamond value it deserves.

It’s crucially important that, while providing automated efficiencies on the back end, programmatic direct mirrors and doesn’t undermine the market offerings from a direct sales team. This type of buying is relatively new, and, with all innovations, there is a behavioural correction that is required.

Changing human behaviour takes time.

But it will happen. And when it does, the days of a human sales forces backing online video advertising may be over, and all premium transactions will be conducted via programmatic direct. Until then, our industry still has some groundwork to do to ensure that the high definition, premium, online video content that consumers can’t get enough of – like a hole-in-one highlight from Port Augusta – doesn’t get squandered in an RTB marketplace.

Editor’s note: For more information on programmatic advertising and RTB, take a look at INMA’s strategic report “Programmatic Advertising Opportunities for Publishers,” released in September.

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