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Technology Transparency Programmatic

Ending the blame game: How to optimize technology to maximize profits

May 22, 2017 | 6 min read

Ryan Kenney, SpotX, vice president, platform services, argues for an end to the ‘us-versus-them’ mentality creeping into the automated trading sector, and offers tips on how best to vet potential adtech partners.

SpotX VP
Ryan Kenney, SpotX, vice president, platform services, argues for a more collegiate approach to the market

SpotX VP

Ryan Kenney, SpotX, vice president, platform services, argues for a more collegiate approach to the market

It’s no secret advertisers are embracing automated buying across all forms of video advertising. Both publishers and buyers, however, are feeling the strain, according to recent reports expressing concerns about arbitrage practices and inefficiencies of programmatic.

Many of the publishers surveyed in Operative’s recent 'Programmatic Is Here To Stay' study reported making less than 10% of their digital net ad revenue from programmatic. Furthermore, even though more money is being spent programmatically, they report it's being lost to middlemen and platforms.

In some cases, these concerns are justified, but more often than not it’s the nature of the partners being employed or an inefficient set-up that’s to blame. One of the major traps publishers fall into is taking on too many adtech partners. Where possible, publishers should limit their tech stack to only incorporate partners that truly add value to their business.

Another common pitfall is outsourcing to vendors that don’t provide full transparency into their practices. This is where arbitrage is hitting the industry hard, with publishers using resellers that buy inventory then sell it at a markup.

In programmatic, particularly in video, revenues are shifting from open marketplaces to private marketplaces aggressively, creating a need for agnostic platforms that give publishers the control to structure custom deals. So far in the second quarter, 57% of deals transacted through SpotX’s platform were executed via private deals. We expect private transactions to account for close to 70% of the business by the end of the year. Programmatic guaranteed – where buyers can reserve inventory from media owners upfront through their demand side platform (DSP) of choice, and then transact those deals programmatically at run time – is also expected to become more widely adopted this year. Publishers need the tools to maximize their revenue from the full array of buying styles – including private deals and automated direct – with full transparency into pricing and performance.

The Scapegoating of Programmatic

Another long-standing complaint re-surfaced in the study, with publishers citing low CPMs as their biggest complaint about programmatic. Half the publishers surveyed quoted their direct traditional sales commanding at least 50% more than programmatic efforts. This is a myopic view, and impacted by how programmatic technologies are deployed. Marketplaces have long been tarred by claims they devalue inventory, but when used correctly, provide meaningful revenue, healthy competition, and act as lead generation and intelligence tools. The idea programmatic marketplaces are all a race to the bottom is a conditioned response, and totally inaccurate. When media owners centralize their approach to demand relationships and properly educate the market on points of access, they can often sell their inventory for as much or more than they do today, by giving buyers the addressability and efficiency that marketplace sales provide.

Misconceptions like this, and others that still abound in the video space, often arise when people fail to distinguish between the very different display and video markets. Premium video is in short supply, with far more variables than display. Advertisers aren’t just targeting by audience, but by placement, format, device, content type, viewability and even consumer context, like propensity to buy or involvement with a brand’s story. Controls are required around first and third-party data in order to execute these buys, and the need to report in real time is also helping to both automate the direct sales process and introduce more sophisticated programmatic techniques.

For a long time, programmatic has been framed as an aspiring successor to direct sales. Our experience across the globe, as a platform that enables all sales executions regardless of transaction type, from a single point, suggests just the opposite. Programmatic and traditional direct should be seen as partners, not adversaries.

We’re already seeing many of our platform customers move past the ‘us-versus-them’ mentality, with many looking towards programmatic infrastructure to help boost direct sales performance. With so much fragmentation in the market, executing a cohesive ad sales process can certainly become challenging.

The steps for optimizing your tech stack and maximizing revenue are simple: limit the number of vendors; accept nothing less than full transparency into yield optimization across screens, video inventory types and sales techniques, and prioritize direct integrations to make it harder for middlemen force their way in. Once you've buttoned down those key steps, the market needs to know how to access your inventory. Clear articulation of how and through which partners buyers should access is crucial. That market education will provide clear direction to brands and expedite getting more of the money in your pockets. Avoiding the automation pitfalls that are currently attracting so much attention is not as difficult a task as it may seem.

Follow Ryan Kenney on Twitter or LinkedIn.

Technology Transparency Programmatic

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