Three programmatic fears of APAC publishers dispelled

Inventory growth is simply not keeping up with ad spend growth in Asia. Although quarter-over-quarter growth rates in APAC match and largely surpass that of Europe and North America, APAC’s share of global programmatic inventory was only a third of North America’s in 2014. Considering that APAC is home to more than a third of the world’s active internet users, this result is quite poor.

Sure, it takes two hands to clap for growth in a market – demand and supply. But with spends (demand) growing two to three times faster than inventory (supply) in APAC, it seems fair to conclude that this region’s programmatic supply ecosystem is more static and slower to adopt than its demand-side counterparts, which in turn is preventing programmatic in APAC from expanding as quickly as other regions.

The overarching reason is that APAC publishers are hindered by fear and a lack of education by the major supply-side platforms (SSPs) in these markets. Let’s dispel these obstacles with a better understanding of the fears and realities in programmatic in APAC today.

1. APAC publishers fear new, unfamiliar technology in general

It is normal to be wary of new technology at first, but we’re now approaching 2016, not 2010. With so many great success stories from both the supply and demand side, we are now far past the season to doubt the efficiencies that programmatic can bring. Advertisers and agencies in APAC went through a similar period of skepticism as well; today, the rapid increase in actual and projected programmatic ad spend is proof that programmatic has successfully earned its place as a permanent fixture among digital marketing strategies. For example, real-time bidding (RTB) is expected to make up more than 30 per cent of total display spend in Malaysia and Singapore by 2018.

The demand-side in APAC is signaling to the market that programmatic works, and is asking for more supply. Now publishers only need to respond to advertisers by opening more inventory to programmatic.

2. APAC publishers fear the cannibalization of direct inventory sales deals

To dispel this fear, we simply need more education about the possibilities of programmatic buying agreements that are available to publishers today – a task that has certainly not been handled well in the region by SSPs like Google.

Publishers are often connected to a SSP to sell inventory in real-time auctions. Most SSPs will have mechanisms in place that help prevent sales channel conflicts. Every modern ad server’s backbone is to give publishers the option to prioritize direct deals over other sales channels. If a publisher has a direct deal with an advertiser, the publisher can assign highest priority to it while ensuring that the ad server attains the fill rates of the direct deal. Programmatic can be added at low or high priority, as the publisher wishes. To further reassure publishers, they can simply ask SSPs to block specific advertisers within the open auction completely.

Furthermore, new deal types such as programmatic direct deals make it possible for publishers to exercise more control than the open auction, by enabling the freedom to prioritize advertisers even within programmatic ecosystem.

In summary, publishers have full flexibility with programmatic as their single most effective lever to maximize yield without harming direct deal revenue.

3. APAC publishers are risk-averse and fear loss of guaranteed revenue

There is comfort in knowing that revenue is guaranteed from trading ad inventory at prices pre-agreed between publishers and media buyers. But programmatic offers publishers an opportunity to maximize yields beyond those prices. Advertiser A may have direct deals to buy ad impressions at a cost-per-mille (CPM) price of $10. However, in a real-time auction, it is possible for the publisher to double its revenue if Advertiser B is willing to pay $20 for the same ad impression, and price floors provide the protection that the minimum $10 spend would be reached.

When buyers in private auctions (ie programmatic direct deals) are given the same priority as direct deals, it unlocks a win-win-win situation whereby publishers get better yield, buyers get access to quality inventory, and advertisers get improved ROI from programmatic advertising. For example, features like Header Bidding, Google’s Enhanced Dynamic Allocation or First Look put programmatic clearing prices (the final price paid for an impression) up against direct deals to make sure each impression generates the highest possible revenue.

Just as publishers are connected to SSPs, advertisers are often connected to demand-side platforms (DSPs) to optimize their media buying. DSPs with advanced buying capabilities take into account factors such as supply transparency, performance and inventory quality to determine when and how much to bid for an impression. With such quality assurance mechanisms in place, many advertisers are willing to pay a premium for inventory. Publishers are more likely to access this premium in a free market than from a static buyer in direct deals.

So what is the biggest challenge that the programmatic industry faces? A poll from the US asked this question and only six percent of publishers cited “publisher reticence to make inventory available” as the biggest challenge in 2015, compared to 13 percent in 2014 (The State of Programmatic Selling 2015, AdExchanger). Since APAC has been a “follower” market in programmatic to date, we can only hope that the trend in APAC will follow.

To close the gap, SSPs in Asia must continue to innovate solutions that will give publishers the control they need while still allowing them to take advantage of the pricing benefits of programmatic, and must invest in the education necessary to help publishers – and advertisers – benefit from these solutions.

Rosmayati Tay is APAC partnerships development manager at Sociomantic Labs

Join us, it's free.

Become a member to get access to:

  • Exclusive Content
  • Daily and specialised newsletters
  • Research and analysis

Join us, it’s free.

Want to read this article and others just like it? All you need to do is become a member of The Drum. Basic membership is quick, free and you will be able to receive daily news updates.