Programmatic Brings Us Back To 1:1 Deals

hirschData-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 Jeff Hirsch, president at CPXi.

Clichés may feel overused, but there is a reason they become such go-to phrases. At their core, they are expressions of truth so basic that they seem almost comical.

One such cliché is the idea that “everything old is new again.” While true in so many aspects of business and business strategy, for example, nowhere is it more true than in the ever-evolving ecosystem of digital media, where transition to a “newest model” often feels more like a return to familiar territory, only in a super-charged way. Such is the case in the development of private programmatic exchanges, the latest evolution in the programmatic landscape.

In the earliest stages of digital media advertising, the interaction between advertiser and publisher was a classic one-to-one relationship. An advertiser, having decided that a specific site delivered the desired audience, would engage directly with the publisher to purchase inventory. The advertiser could construct a series of these relationships and feel confident that its media spending was focused on a specific audience. In this model, while one half of the ultimate promise of the digital media was achieved – the ability to pinpoint an audience – the second half of the promise – unlimited inventory delivered at scale – was still undelivered.

The organic, if exponential, growth of inventory on the Internet, however, coupled with the rise of programmatic automation in the targeting and delivery of digital ads, has certainly allowed the industry to deliver on the concept of scalability in recent years. Programmatic buying continues to grow at an astonishing rate. Real-time bidding will account for more than $18.2 billion of US digital ad sales in 2018, up from $3.1 billion in 2013, representing a compound annual growth rate of 42%, according to a July 2014 report from Business Insider. And 83% of publishers said they expect to engage in programmatic marketing approaches over the next two years, the Winterberry Group found, as outlined in a white paper on the future of programmatic.

With programmatic media buying all but taking over the industry as the primary means of buying and selling media, advertisers have been put in the position of having to give up much of the value they found in buying directly from specific sites in order to keep up to date in the business of scalable media. They had to give up on one promise, it seemed, in order to reap the benefits of another.

But an interesting thing happened while the industry digested the realities of an automated landscape. Publishers were at first skeptical of the method, even though it promised higher revenue. Typically, they were slow to adopt, at first only offering up their remnant inventory, holding back their premium offerings for their own sales teams. Many publishers have realized, however, that transacting programmatically is lucrative and, as a result of their growing trust of the technology, they have grown more willing to embrace automation, now more willing to put their premium inventory into play.

This being the case, the supply-side platforms have developed new offerings where select inventory from either one publisher’s site or a small group of similarly situated sites is placed into a closed exchange. These private exchanges deliver the benefits of automation to both advertisers and publishers, but return the advertiser to a place of being able to select and know the content on which their ads will be served. The pendulum has swung back toward transparency and perceived one-to-one relationships.

These private deals are happening more often. Much has been made of WPP Group media agency network GroupM's pledge to end its reliance on open exchanges. The long-term impact on the market of these decisions is the decline of open exchange business from brand advertisers. Eventually, private deals may further evolve as publishers themselves cooperate with other publishers to create opportunities, leading to aggregated private deals that have the scale that advertisers desire.

While the underlying method of transaction is drastically different from the early days of one-off individual insertion orders, the fact remains that the digital media advertising landscape now stands closer to where it began than it has in a long time. Advertisers can make efficient buys on limited sites whose audience fits a specific demographic, albeit in a much more efficient way and at a far larger scale.

Though the cliché has proven true, perhaps it could best be rephrased, “Everything old is new (and improved) again.”

Follow Jeff Hirsch (@jkhirsch), CPXi (@CPXi) and AdExchanger (@adexchanger) on Twitter.

 

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