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Is programmatic trading the solution for publishers' online financial model conundrum?

By Angela Haggerty, Reporter

February 26, 2014 | 9 min read

Publishers are juggling several balls as they try to establish a trick that will conjure up the answer to the online financial model conundrum. Angela Haggerty takes a look at how programmatic trading could prove the solution.

Be it paywalls, native advertising or every trick in between, publishers are still stuck in trial and error mode. And the industry’s relationship with programmatic trading is no different, with publishers jostling to find the right strategy and squeeze the biggest benefits, and in turn looking inwards to establish exactly what they can offer advertisers that bigger sites, such as Facebook with its envious number of page impressions, can’t.Take the Financial Times, for example, which is on a more solid ground with its programmatic strategy than some publishers have managed so far. The FT sits confidently behind its paywall, and when it comes to advertisers, brand quality matters. The benefit of being a high quality publication is that high quality – and better paying – advertisers will be interested. For programmatic to be a real benefit for publishers, the key is filling unsold inventory for a good price, not for rock-bottom scraps.“We approach programmatic from a sales perspective on a par with directly sold campaigns,” says Anthony Hitchings, digital advertising operations director at the Financial Times. “That means the same level of audience targeting is available – it’s the same price and it’s the same quality of service. Our focus is on private marketplace deals and basically guaranteed buys.“It’s really a channel for advertisers to efficiently work with us on a premium offering rather than an open market offering. It’s mainly private, but it’s available on the market – at the standard price. We don’t have a bargain basement price.”Private is the buzzword for publishers in programmatic trading. Last August, chairman of the Association of Online Publishers (AOP) John Barnes urged publishers to follow in the steps of News Corp, which had teamed up with the Rubicon Project to launch a global ad exchange which let advertisers buy across its online and mobile portfolios, cutting out third parties from accessing its inventory. Barnes maintained that the rise of online ad exchanges had “tipped the balance of power” when it came to determining the value of media from the publishers to the advertisers, and that private exchanges could help publishers take back control of this process. The Guardian has also made strides in this area, having recently launched a private video ad marketplace with AOL-owned to drive programmatic trading revenues. The move marked a major step in the publisher’s video ad programmatic strategy. Programmatic trading has previously focused on display inventory, but increasingly brands are putting money towards trading video ads via this method. That said, many brands remain sceptical about whether video, which is regarded as a premium form of advertising, can be trusted in an open ad exchange environment.Some argue that it should be reserved for private marketplaces that have the scale to guarantee enough audience reach. The private marketplace would host trading within controlled, quality advertising environments suitable for premium video ads, which would then enable publishers to charge higher rates.“Any advert needs compliance and any programmatic system needs a review and monitoring dashboard to ensure that the adverts coming through are of a good quality,” says the FT’s Hitchings. “For FT, because we’re dealing with premium advertisers and we’re using private market places, that’s less of an issue for us than if we were on the open market place. That’s where you start to see adverts coming through for casinos and bingo. “From our perspective we want to protect the environment in which the adverts are displayed; a luxury advertiser doesn’t want their adverts to appear on the same page as a low quality advert, so that’s partly why we have the private marketplace policy.” The problem publishers are likely to encounter, according to Jon Baron of Tagman, is convincing advertisers that they really are worth the money. Why, when advertising on Facebook can offer a real-time bidding, super-targeted approach with oodles of inventory guaranteed to be seen by thousands upon thousands of eyes, would advertisers instead opt for publishing brands that, while they may hold a reader’s attention for longer and boast a more sophisticated reputation, have a lot less to offer in terms of scale?“Publishers have a real tough time making money online,” argues the marketing data firm CEO and co-founder. “The problem is that if they’re setting the price, they have to explain why their per-eyeball value is 10 or 100 times more valuable than an eyeball looking at Facebook.“Everything I read about publishers today suggests that, out of all the inventory they have, they maybe manage to sell 30 or 40 per cent of it directly to advertising agencies. The rest of the inventory is put into ad exchanges and the money drops below a pound, so they’re putting maybe 60 or 70 per cent of their inventory in a real-time bidding ad exchange at a fiftieth of the cost. That’s the kind of economics they’re playing with.”However, Baron believes that there are opportunities in the programmatic space that publishers can bring around to their advantage and use to promote their inventory as more influential. This is where the context of advertising becomes key, and where advertisers’ interests perk up. The evolution of native advertising – the wide-ranging term used to describe anything from advertorial to full blown branded content solutions that are contextually relevant within the editorial environment – in the digital landscape is capturing a lot of attention, but to pull that into programmatic presents some challenges that Baron says publishers must find a way to overcome. “Tying this into native advertising is where it gets interesting,” he continues. “If you’re going to have a native advert, the editorial team is really going to care who that advertiser is. One, publishers want to make sure the content is relevant to the advertiser, and two, they want to make sure the brand is reflective of the quality of the publishers’ brands. A lot of the big advertisers on the web look low budget – they spend a lot of money, but they look low budget.”The main problem with native advertising through programmatic – that is, native display advertising rather than built within editorial – is the need for editorial sign off, which leaves the attractive instantaneous programmatic buy a little redundant and ineffective. But Baron thinks a quick turnaround system could still be effective and be the first step towards building the necessary technology to make the process fully digital.“Native advertising in programmatic is still very young,” he explains. “If you do programmatic, as long as the templates to the native ads are pretty standard, you could have someone in advertorial or editorial just emailed through the programmatic buy for an immediate yes or no response.“Where I think it’s really going to move to is the real-time bidding environment, and instead of relying on editorial to do the sign off they’ll use technology. By moving into the RTB environment, publishers would have the ability to open up ads at a higher price point, and if all the pages have contextual relevance those prices could be kept up across the board.”Dipping toes into RTB and native could be done as a pre-planned exercise, through forward feature planning, for example – a process that would give all parties in the process an opportunity to trade with a safety net and identify any problems.While publishers and advertisers continue clearing the path ahead for programmatic strategy, any publisher that has not yet established a strategy is well behind the times, according to Shaun Jordan, digital sales director at Trinity Mirror. Unlike the FT, Trinity Mirror primarily trades on the open exchange, but Jordan says things are speeding up in the private market landscape. There is broad agreement that the advancement of technology is key to establishing a workable system.“I think it’ll definitely gather more and more momentum across this year,” explains Jordan, who joined the company a year ago. One of the first things he did at Trinity Mirror was employ someone to take direct control of the programmatic strategy, and that team has grown to three in the last year. “If you haven’t got a programmatic strategy as a publisher you’re definitely behind the curve now. In terms of being in that game it’s something that is important and when you look to the future it’s not something that’s going to go away.”Jordan goes on to explain that “agencies have only really started to gear up in that space over the last six months of 2013,” adding that it has gathered momentum and will become more prominent in 2014 as the agencies look to drive more revenue through their trading desks. “I think trading desks will continue to evolve in terms of the technology they use, that will only improve as more and more data becomes available,” he says.How to approach open or private marketplace strategies, alongside traditional inventory trading, while establishing whether native advertising can have a place in the programmatic landscape, are just some of the decisions publishers must make if they are to reap the full benefits of the market. But one thing is for sure, programmatic trading is here to stay and will continue to evolve, and for publishers, every strategy must be explored as the digital dust continues to settle.This article was first published s part of The Drum's digital trading feature in the 19 February issue.
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