“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Jed Nahum, an independent consultant and former head of Microsoft’s global programmatic sales team.
Every year in digital advertising, we seem to have a new issue or two bubbling up and occupying our collective consciousness. For 2015, I think of ad blocking, viewability and header bidding.
Back in 2013 and 2014, there was a lot of talk about programmatic direct, a method by which a publisher ad server – or really any ad server – exposed APIs in order for buyers to upload campaigns and line items.
We in digital get more and more items on our plate every year so let’s agree to stick a fork in this one and call it done.
Back in the day, there was a lot of buzz about programmatic direct. Remember when Microsoft, AOL and Yahoo agreed on an API standard? And even a year ago it was in the news when Rubicon bought iSocket and ShinyAds. PubMatic exposed a similar API, too. This was a big deal.
And what has transpired since then? A lot of cricket song.
Why We Thought Programmatic Direct Would Be Helpful
Programmatic direct is mostly about API access to the publisher’s ad server offerings. Because publishers are well positioned to forecast, their ad servers are good at offering forward contracts, essentially the reserving and guaranteeing of inventory. Since we’d been doing guarantees in our business since the 1990s, we thought it was probably important. We need that functionality, right?
Media planners enjoy the simplicity and lowered risk of guarantees. Programmatic direct also enables automation that should lower the overhead associated with insertion orders, RFPs, negotiation and the like. Beyond guarantees, marketers get access to the publisher’s context and segments. They can push them to marketers in an allocated fashion, giving marketers nice stuff like smooth, predictable delivery.
But maybe the most valuable attribute of programmatic direct is the ability to offer a first look at inventory. When I was selling, the No. 1 thing partners asked me for was first look. Until header bidding came along, first look was difficult for programmatic.
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RTB Pushes Power And Control Toward The Buy Side
I’ve argued in other articles that RTB has created a war over whether the buy side or the sell side defines what is being sold. The nutshell of my argument is that RTB has made it possible for buyers to select specific impressions for their buying. This is “decisioning.” In RTB, the buyer does it, and in traditional ad sales the seller does it. I think the real battle is about who gets to decide. Will buyers define the audience they want to reach and bid on it or will sellers define the context they wants to sell and package it up?
When buyers decide, every buy potentially delivers data to their data management platform (DMP), enriching their knowledge of their audience and making them better marketers. The problem with programmatic direct is that it doesn’t incorporate the DMP in the same way RTB bidding does. And since buyers control the spend, they’re looking for ways to feed the data beast.
I learned this talking to buyers. They told me that the real value of programmatic to them was being able to buy only the stuff they wanted and none of the stuff they didn’t. With programmatic, there are two kinds of efficiencies at play: automation and selection. The word “programmatic” makes it sound like automation is the big deal, but I argue impression selection is far more important.
Hence, demand-side platforms (DSPs) and agencies realize they might not like programmatic direct because it takes decisioning away from them. They aren’t interested in being “order takers”; they want to be order makers. When DSP vendors talk about “powerful bidding algorithms” or “expressive bidding,” they’re pitching their ability to engage in good decisioning. Similarly, agencies and media services companies want to manage that decision-making to provide more value for their clients. They don’t want to limit their influence by putting control back into the hands of the sell side with programmatic direct.
And now there’s this thing called header bidding. It enables a publisher to offer first look in a bidded RTB environment by moving supply-side platforms (SSPs) up in the delivery priority of their ad server (it’s more than that, I know). Because bid requests are still being made and users are still being mapped, the data beast gets fed. Though header bidding has some pitfalls for the buy side, it’s much preferable to the programmatic direct alternative.
Where Programmatic Direct Still Fits In
All that said, there are still a few places where programmatic direct may prove valuable. For example, environments where user identification is difficult, such as mobile, can stand to benefit from programmatic direct’s efficiency of automation. Further, when scarcity drives up the price of a reservation (video) and pushes power into the hands of the sell side, programmatic direct might fit in. And seriously concentrated publishers, including Facebook or YouTube, can do whatever they like and may use APIs to sell their stuff.
I’m not saying slapping an API on an ad server or a DSP is a bad thing; in fact, it can be quite helpful. But I am saying it’s not as revolutionary as enabling buyers to define audience and bid against it. Buyers can take note when publishers expose APIs. They can decide case by case whether to integrate. But the programmatic revolution is being driven by audience, not automation.
Follow Jed Nahum (@jednahum) and AdExchanger (@adexchanger) on Twitter.
