Last year, American Express’ B2B division – a unit that delivers 40% of the company’s total billings – saw serious results from its programmatic advertising strategy.
On Wednesday at the Programmatic I/O conference in San Francisco, American Express VP Tatyana Zlotsky revealed that the financial services company had quadrupled programmatic media spend in 2016. The move resulted in a fivefold lift in response and fourfold increase in ROI.
But it wasn’t easy getting there. Zlotsky and the B2B digital marketing team she leads faced challenges buying on the open exchange – particularly around dealing with the complexity of the vendor landscape and a lack of transparency in pricing.
One of Zlotsky’s first steps was whittling down American Express’ long list of demand-side platform (DSP) partners. She wasn’t sure why there were so many, but her team worried they’d lose scale if they cut back.
“But how would we know?” Zlotsky wondered. “Have we tried? Maybe we can find a couple of partners who’d be most [likely] to reach our target audience, and we can only work with them.”
Worried that doing so would negatively impact business results and they’d miss their numbers, her team balked – until Zlotsky reassured them that she’d have their back.
Having made the decision to streamline, American Express reached out to the agency where it had been outsourcing most of its digital media-buying activity. Zlotsky wanted to deepen the partnership to figure out how American Express could take more control.
So the agency and American Express sent a 70-question RFI to each DSP partner, trying to figure out how exactly these platforms technically differed.
DSP differentiation isn’t easy to understand. During an intro-to-programmatic session on Tuesday, Chris Kane, founder of the consultancy Jounce Media, said DSPs differ based on how well they can handle incoming bids and determine whether available impressions are appropriate for their advertiser clients.
After American Express vetted its buying partners, it culled the number “quite dramatically,” Zlotsky said.
“Not only did our scale not go down, but our ROI went up,” she added.
Zlotsky’s other task was evaluating how each impression was being priced. American Express had little insight into the nature of the auction.
“We didn’t always know why we won, why we lost or how the inventory was priced to begin with,” Zlotsky said.
She understood that the tax on ad tech partners kept getting higher, which would affect the prices American Express paid for media.
“So for the partners we left on our business, we demanded transparent pricing and data,” Zlotsky said. “That’s good advice for all marketers trying to figure it out.”
Zlotsky was dismayed by her findings. She’d assumed, for instance, that American Express was participating in second-price auctions, only to learn the company was actually involved in what she called “a hybrid first-price auction.”
In a second-price auction, if American Express bids $10 and a second advertiser bids $7, one would expect the bid to clear for about $7.01.
But that wasn’t happening. Instead, the bid would clear for $9, due to hidden rules that American Express didn’t know existed – and a glut of middlemen, each of whom took a cut. In the end, the advertiser was left with as little as one working dollar of media.
“And that was tough to hear,” Zlotsky said. “We need to wake up to the pricing challenges that exist and demand change.”