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FT's digital ad operations chief Anthony Hitchings on how fee structure will change in programmatic market

Ahead of The Drum's 2015 Digital Trading Awards (DTAs), created to reward best practice in the digital trading ecosystem and highlight what brands are leading the way with programmatic strategies, The Drum caught up the Financial Times (FT's) digital advertising operations director and DTA judge Anthony Hitchings about his thoughts on the market, including how the fee structure of tech deals will alter.

What are the main challenges in programmatic trading marketing currently and why?

Despite the promise of efficiency, programmatic is at a stage where significant time and effort is required. This effort is part education and part due to the challenges of a technical infrastructure that was designed as an auction model and with a tech fee structure that can mean the buyer having to input a price that is far higher than that agreed with a seller.

There is a lack of high impact formats in the marketplace and the result is a fall back to the lowest common denominator with some of the most successful placements being old school skyscrapers rather than IAB rising star formats.

Ad fraud has emerged as a key issue and until this has been correctly resolved, brand safety will remain a key challenge

To what extent has transparency improved in the value chain over the past year?

Industry awareness has certainly grown and marketers should be having conversations about margins and how trading desks are being paid for their services. The detail and clarity that is available for direct sold campaigns is not easily translated to a programmatic insertion order (IO) when the price paid for an impression is not known in advance, where supply is not agreed up-front and where algorithms are working towards various outcomes. This can lead to programmatic being a single line item on an IO with insufficient detail provided.

What could marketers be doing better to maximise on their programmatic investments?

A clear strategy is needed with regards to when and why programmatic should be used and whether real-time bidding (RTB) is appropriate or programmatic guaranteed. In cases where there is an agency, a trading desk and fees for both a demand side platform and a supply side platform this can result in some 40 per cent of advertiser spend going on agencies and ad tech.

That compares to 15 per cent for direct sold campaigns meaning some 25 per cent less media is purchased if the CPM is the same. Marketers need to understand and track whether programmatic is delivering the benefits to make it worthwhile paying the additional fees. Consider this for a campaign in the region of £500,000 and the implications if 40 per cent of the spend is for ad tech and fees is significant.

What’s the next big thing in programmatic trading?

Expect to see a change in the structure of tech fees with a shift towards a CPM fee rather than a percentage share. Branding spend will see a move from an auction model to a programmatic guaranteed model. There is potential as this happens for the supply-side platform (SSP) platforms to become redundant. Instead demand side platforms could be integrated directly with publisher ad servers on a cpm model and allowed to cherry pick impressions.

To what extent should publishers pool their programmatic platforms to achieve greater scale for premium private marketplaces? What opportunities could be created?

Publishers working together will allow for agreement on high impact ad formats and branding opportunities such as page wraps via programmatic. It will allow for the creation of a fraud free base from which to purchase impressions. It also provides an opportunity for publishers to work together on pooling data and to use shared knowledge to improve the quality of the data used for ad targeting within the marketplace

How much progress has programmatic trading made in shedding its image of ‘remnant, cheap’ inventory? How much further must it go?

There is a long way to go in this regard. For publishers, until there is a guarantee of spend, programmatic orders will not be given priority in their ad servers. Agency trading desks have been aggressive on price floors and as a result inventory quality has been driven down.

The exchanges have not helped the situation and the supply of fraudulent inventory on some exchanges does little to enhance the image of open market place RTB. The market needs to move towards private marketplaces or work out ways to pool trusted inventory sources to create an open marketplace that can be trusted.

What are the remaining barriers to marketers adopting programmatic trading?

Guarantees on quality and brand safety are only just starting to be provided. There needs to be an improvement in the quality of advert placements and the ability to execute creative solutions. The transparency issue and agency margins need to be worked through. Significant education of the marketplace is needed and a common language to aid understanding.

What are the next wave of opportunities programmatic trading can provide in the overall marketing landscape?

The barriers to entry for trading desks are low. This may allow sector specific specialists to operate within niche markets.

There is an opportunity for programmatic to operate in a joined up manner at all stages of the marketing funnel and to use data science to move audience segments down the funnel. This will require different metrics, goals and appropriate CPMs for each stage of the funnel. It should be possible for this model to operate across devices.

What will you be looking for from entries during the judging stages?

Ideas that are repeatable so as to scale. Ideally entries will improve the marketplace for all.

How did you get into digital trading/advertising industry?

Having worked in new product development for some ten year and led several major projects in areas such as personalisation and user engagement, there was an opportunity to manage the operations team at FT.

That was an exciting opportunity to bring product skills and an interest in data and technology to the fore of the sales process. I am surrounded by a team who are passionate about delivering results for advertisers.

As a result there are always plenty of initiatives underway to improve targeting capabilities, develop ways to optimise campaigns, improve the insight provided back to advertisers and push the ad tech pretty hard.

To read the Guardian's global revenue chief Tim Gentry's thoughts on the future of the programmatic landscape click here.

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