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Redefining the future of programmatic

 Patrick Darcy

The only thing limiting programmatic trading’s potential is the way we’re currently defining it.

As an industry we need to stop labelling certain aspects of programmatic trading as if they were different products, like ‘programmatic premium,’ and shift our focus to how we can all benefit from incorporating technology and automation as part of a complete trading strategy.

Programmatic technology will become the enabler that helps advertisers, agencies and publishers execute significantly more effective advertising. As always buyers will only pay a premium if they see value in the solution. Premium publishers have been trading programmatically for a while now. But we haven’t done a good enough job of differentiating ourselves from the long-tail or demonstrating the value for advertisers when their ads are delivered, programmatically, into contextually relevant brand-safe environments.

The Australian market’s approach to programmatic is still quite inconsistent. At one end of the spectrum you have some media agencies with trading desks operating like an old ad network, where “a cookie is a cookie” so, why pay $15 CPMs when you can get the same user on $0.50 inventory and make more money from it? At the other end you have premium publishers, who through fear of yield degradation are only making “less premium” inventory available at a certain point in their monetisation waterfall, but at rates well below their direct sales channels. Then we listen to panels at industry conferences talk about the fact programmatic is commoditising the industry and asking the question “when will premium come to programmatic?”

The fact is, it’s already here - but publishers and agencies have not yet been able to show advertisers how effective programmatic trading can be when combined with all that Australia’s top premium publishers have to offer.

The projected growth figures for digital media that will be traded programmatically in the next three years say it all. Magna Global predicts the channel will account for $32.5 Billion globally in 2017 up from $12 Billion in 2013 and will exceed 50% of all Australian display, video and mobile advertising spending by 2016*. If we don’t shift the mindset, the greatest beneficiaries of this growth are likely to be the non-agency trading desks and the larger DSPs, who will go direct and at the risk of premium content no longer being profitable to produce. Agencies are working hard to differentiate, and given the scale of undifferentiated supply available at low cost programmatically, premium publishers need to reaffirm the value of context and brand safety.

The change has to be publisher-led and it needs to be an “all in” approach, working from the top down instead of the current strategy focussed on monetising unsold inventory. What’s becoming clear is; a programmatic strategy that involves only making some of your inventory available at the bottom tier in your sales hierarchy is no longer the best strategy. If you recognise how quickly the channel is growing, this strategy means you’re in fact just encouraging the commoditisation we all fear.

Mi9 has certainly been guilty of this since first launching our exchange two years ago. In fact, you could say that we were one of the pioneers of a bottom-up strategy. Like many others, fear of price erosion, loss of control and choosing the path of least resistance meant we continued with the wrong strategy for too long and now we’re faced with the challenge of how best to pivot the business as quickly as possible.

Programmatic buying has evolved, and so at Mi9 we’re now fast moving away from a vertical waterfall structure, where value is dictated by the point at which the impression is utilised, to a horizontal structure where programmatic technology will allocate inventory across channels, in real time, based on a list of sophisticated variables and rules. Most traditional ad servers will allocate impressions based solely on delivery. Now we have the ability to create rules that allocate impressions across channel based on yield, inventory scarcity, delivery, trading terms - and the possibilities and level of accuracy will only continue to evolve.

Where we’re headed means remnant inventory becomes a thing of the past and as yield is managed holistically, there’s no risk of channel cannibalisation. Mi9’s vision is to redefine the way programmatic is viewed by opening it right up across channels, so we can establish the true value for premium context, regardless of how you buy it.

Most of the fears associated to the rise of programmatic trading have failed to be realised. None more so than the fear of losing control. To think you maintain more control over pricing and yield by having only a team of sales people sell your premium assets, who no matter how good they are, are still only human is tough to argue. Technology removes the gamble, especially technology with controls as sophisticated as you see in most Supply Side Platforms.

So are sales people still necessary? Yes, absolutely. Our industry is built on relationships, and this is especially true for premium publishers where it’s important to showcase great content, integration and innovation. Technology alone will never be able to sell a fully integrated sponsorship campaign with rich media and custom formats - but it will be able to execute it far more efficiently than we are able to do today. And this is where the real benefit of programmatic is realised. A world where technology helps agencies and publishers automate the trading process and lower the cost of transacting, meaning we can re-invest in people who spend their time pushing the envelope of creativity and executing amazing digital advertising.

As premium publishers, we invest heavily in premium content so brands can reach their customers in the right context. Why have we allowed the industry to think the value of this premium context is any less just because technology executed it? We need to pull ourselves up from the world of undifferentiated, commoditised digital media where fraudulent clicks and masked URLs are the cost of doing business – to a world where technology is simply the enabler that, in fact, helps us drive more value for our advertisers than ever before.

*Source: Magna Global research figures 2013

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