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Media Buying Digital Advertising Programmatic

Why we in digital advertising need to stop talking like bankers

By Caspar Schlickum

October 9, 2015 | 7 min read

An odd thing is happening. Despite all the negative press and lost reputations that our friends in banking have suffered following the crisis that brought the world to its financial knees, the media industry seems enchanted with presenting itself as following a similar model.

Caspar Schlickum departs Xaxis for Wunderman

Caspar Schlickum

How often have I heard media people talking about how trading ad impressions is going to be just like banking, with high frequency trading systems making profitable calculations at such speed that humans can only look on in wonder.

The problem is that the trading of media bears little if any resemblance to the trading of financial assets. In fact, I would go one step further and say that it is precisely this kind of talk that raises the trust issues with brands and clients that we are all trying so hard to avoid.

The first difference is that the underlying asset in a financial transaction is completely homogenous. If you’re trading XYZ company stock, you don’t get “good” or “bad” shares, they’re all the same (unless they are clearly marked as different e.g. preferred versus ordinary shares, etc). We know from the viewability discussions alone, that this is far from the case in media. There are many, many formats, every page is different, every ad unit behaves differently. It is almost impossible to group or classify them. And we keep inventing new ones. So the underlying asset in media trading is highly variable.

Second, in a financial transaction the counterparts to the transaction are agnostic as to each other’s existence. I don’t care whom I am buying from or selling to – as long as the price is right.

This is very different in media. Brands care deeply in most cases about where their ads go. Again, you only need to look at the hot topic of fraud, and the fact that brands (often via their agencies) are engaged in a lively discussion with publishers to ensure they have the placements they want.

And just as brands care about where their ads are appearing, publishers care about the advertising experience they are delivering to their audience. Having quality advertisers providing quality ads is an important element to a site’s overall success. As such, many media companies audit the creative and (often via agencies) actively pursue the brands and their advertising spend that will be most desirable and resonant with their audiences.

There is nothing in this important relationship that is less important today than it was in the past, even if the application of technology creates new opportunities for how we trade.

In other words, none of this means that technology shouldn’t be used to enhance this process, it just means that the end goal of financial traders and the end goal of advertisers and publishers aren’t as similar as some would have you think.

In finance, the only reason for a transaction to take place is for financial gain. More importantly, every party to the transaction is aware of this. It’s the entire point of buying/selling/shorting etc a financial asset. Maybe it’s for dividends. Maybe for capital gain. Maybe it’s as insurance. But it’s never about things like “building a relationship” or “delivering a good experience” or “meeting consumer needs”.

And while finance isn’t necessarily always a zero sum game, it’s heavily weighted towards a “winners” and “losers” approach in that either the buyer or seller is going to come out on top. And in order for me to win, someone else usually has to lose.

Does that sound like media? Does the New York Times want ad buyers to lose? No, the New York Times not only wants advertisers to be successful; it wants readers to be presented with the best, most relevant ads available. On the flip side, if I’m a brand, I want the Times to be successful so I can continue to advertise on its high quality properties.

Financial trading is the opposite. If I put you out of business, or “blow you up” or “rip your face off” it just means more money for me. Is it any wonder that clients don’t trust us when we’re presenting this world as our blueprint?

Further complicating the comparison is how data is used to make decisions and measure outcomes in the world of finance versus the world of media. For financial trading, especially high-frequency trading, which at any one time may represent up to 50 percent of all trades in US equity markets, decisions are focused on exploiting miniscule price discrepancies nearly instantaneously after they arise. The impact is fully and permanently measurable as money moves from one place to another. It can be modelled, and often is, billions of times per minute.

As any marketer knows, we can’t ultimately judge the success of a media campaign in a day or a week, much less a fraction of a second. Someone who sees a display ad today, a video ad tomorrow and a mobile ad next week, may decide to buy an advertiser's product. Meaning we have no way of knowing in real-time whether a media buy (or buys) has been successful.

Because helping marketers and brands succeed isn’t a function of simple, binary trading, presenting programmatic media buying as such is both inaccurate and harmful to the industry. Solving real-world marketing problems isn’t something that can always be measured constantly and in real time. Brand preference. Engagement. Consumer sentiment. Consideration. Offline sales. Online sales. The list across the funnel is very long, and none of this is data that can be used to underpin a high frequency trading type approach to the trading of media.

In fact, with all of these nuances and the variety of outcomes we’re optimiSing to, we might even say that the application of technology in marketing is actually HARDER than it is in finance, lacking as it does a simple P/L column letting you know exactly where you stand at any given moment.

Don’t get me wrong. Technology has an incredibly important role to play in media. But the end game cannot be about leaving the transacting of media to machines. Technology can help optimise the placement and the creative, and should be deployed to do so. But a model that looks to the world of finance for its inspiration, while perhaps providing an imprimatur of master-of-the-universe swagger, isn’t one that is ultimately going to bring clients running – unless it’s in the other direction!

Caspar Schlickum is CEO of Xaxis EMEA. He tweets @CasparSch

Media Buying Digital Advertising Programmatic

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