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Programmatic Marketing: Beyond RTB

Understanding the new programmatic direct landscape

Programmatic Marketing: Beyond RTB Understanding the new programmatic direct landscape

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Published December 2013

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Contents

1. Overview .......................................................................... 5

1.1. Methodology ................................................................................ 5

1.2. About the author ......................................................................... 6

1.3. About Econsultancy .................................................................... 6

2. Introduction: Pivoting to Programmatic Direct .............. 8

3. Programmatic Definitions .............................................. 11

3.1. Defining programmatic direct ................................................... 11

3.2. Defining programmatic RTB ..................................................... 15

3.3. Refining and defining by programmatic approaches ................ 17

3.4. Chapter summary: programmatic definitions........................... 17

4. The Demand Side ........................................................... 19

4.1. Agency trading desks................................................................. 22

4.2. Agency culture and personnel ................................................... 23

4.3. Agency pricing models and programmatic ............................... 26

4.4. Fraud: the elephant in the programmatic room ...................... 27

4.5. Standards ................................................................................... 28

4.6. Chapter summary: programmatic direct and the demand side ............................................................................................. 29

5. The Supply Side ............................................................. 30

5.1. New monetisation options: programmatic direct, native, etc. .............................................................................................. 32

5.2. Programmatic direct: a sales channel or real trend? ............... 32

5.3. Programmatic direct and organisational change ..................... 34

5.4. Chapter summary: the supply side ........................................... 35

6. Transactional RFP Workflow ........................................ 37

6.1. Research .................................................................................... 38

6.2. Media planning.......................................................................... 39

6.3. Demand-side order management ............................................. 40

6.4. Demand-side ad serving ............................................................ 41

6.5. Supply-side order management ................................................ 42

6.6. Supply-side ad serving .............................................................. 43

6.7. Billing and reconciliation .......................................................... 44




7. Where Are We Now? ...................................................... 45

8. Contributors ................................................................... 48




1. Overview Programmatic Marketing: Beyond RTB is aimed at marketers, agencies, and publishers

who want to understand the new programmatic landscape and its applications beyond real-time

bidding (RTB). Today, new technologies and approaches are connecting buyers and sellers, and

eliminating many of the manual tasks associated with planning and buying digital media.

In this report, we’ll explore the new programmatic direct landscape, the implications for

demand- and supply-side players, and the barriers to successful adoption of programmatic

approaches. The report includes insights from key executives in ad technology, agencies, and

publishers, as well as daily practitioners, to see where programmatic automation stands today,

and where it is going.

It’s hard to believe, but agencies and publishers are still closing digital media deals with fax

machines. However, large-scale growth in web-based RTB platforms and increasing adoption

from marketers is putting pressure on all sides to automate processes for buying and selling

digital media. This report will explore the following key questions:

What is the difference between programmatic and automation?

What is needed to embrace a programmatic approach?

What are the benefits of a programmatic approach to transactional media?

How will my company’s organisational personnel needs change?

What are the barriers to successful programmatic strategy implementation?

Readers of this report should come away with a solid understanding of current programmatic

direct approaches, available solutions in the space, and how they can structure their organisation

to implement programmatic techniques.

The report contains key insights from some of the most recognised thought leaders and

practitioners in the space from companies, including Adslot, AppNexus, Bionic Advertising

Systems, Centro, FatTail, isocket, MakeBuzz, Maxifier, Mediaocean, OpenX, Operative, Rare

Crowds, Rubicon Project, SAS, Shiny Ads, Strata, True Media, Yieldex, and many more.

1.1. Methodology This report aims to provide an unbiased, balanced look at manual process automation in digital

media, aided by leading practitioners in the space. The author surveyed over 19 senior-level

digital media and ad technology executives who provided detailed, written responses to a wide

range of questions.

In addition, the author conducted extensive phone interviews with programmatic thought leaders,

and drew upon his own previously conducted research. The opinions in this report are the

author’s own, and may not reflect the views of his employer or companies in which he holds

equity.




1.2. About the author Chris O’Hara is the CRO and co-founder of Bionic Advertising Systems,

author of several Econsultancy reports (Best Practices in Digital Display

Advertising and Best Practices in Data Management) and a researcher and

contributor to Econsultancy’s recently published Data Management

Platforms Buyer’s Guide.

A domain expert on advertising platform technology and programmatic

media technology, Chris is a member of the IAB’s Programmatic Task Force, and a contributor to

the recently published Winterberry Group/IAB whitepaper “Programmatic Everywhere: Data,

Technology, and the Future of Audience Engagement”.

He also writes frequently in industry publications including AdExchanger and Econsultancy.

1.3. About Econsultancy Econsultancy is a global independent community-based publisher, focused on best practice digital

marketing and ecommerce, and used by over 400,000 internet professionals every month.

Our hub has 200,000+ subscribers worldwide from clients, agencies and suppliers alike with over

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For the last 10 years, our resources have helped subscribers learn, make better decisions, build

business cases, find the best suppliers, accelerate their careers and lead the way in best practice

and innovation.

Econsultancy has offices in London, New York and Singapore and we are a leading provider of

digital marketing training and consultancy. We are providing consultancy and custom training

extensively across Europe, Asia and the US. We train over 5,000 marketers each year.

Join Econsultancy today to learn what’s happening in digital marketing – and what works.

Call us to find out more on +44 (0)20 7269 1450 (London) or +1 212 971 0630 (New York). You

can also contact us online.

http://econsultancy.com/reports/best-practices-in-digital-display-advertising


http://econsultancy.com/reports/best-practices-in-data-management

http://econsultancy.com/reports/dmp-buyers-guide


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Recommended reports and content from Econsultancy

Best Practices in Digital Display Advertising


Best Practices in Data Management


Real-Time Bidding Buyer’s Guide

http://econsultancy.com/reports/rtb-buyers-guide

Data Management Platforms Buyer’s Guide


Online Advertising Survey

http://econsultancy.com/reports/online-advertising-survey

Improved performance and reduced wastage seen as main benefits of real-time bidding

http://econsultancy.com/blog/63480-improved-performance-and-reduced-wastage-seen-as-main-benefits-of-

real-time-bidding

Four years on: the growing pains of programmatic media (part one)

http://econsultancy.com/blog/63079-four-years-on-the-growing-pains-of-programmatic-media

Programmatic media unpacked (part two)

http://econsultancy.com/blog/63254-programmatic-media-unpacked-part-two

The nuts and bolts of programmatic marketing (part three)

http://econsultancy.com/blog/63464-the-nuts-and-bolts-of-programmatic-marketing-part-three

The future of programmatic media (part four)

http://econsultancy.com/blog/63685-the-future-of-programmatic-media-part-four

How far should programmatic marketing go?

http://econsultancy.com/blog/62082-how-far-should-programmatic-marketing-go

Programmatic premium is not about bidding

http://econsultancy.com/blog/62028-programmatic-premium-is-not-about-bidding

Why you can’t ignore programmatic marketing

http://econsultancy.com/blog/11362-why-you-can-t-ignore-programmatic-marketing



http://econsultancy.com/reports/rtb-buyers-guide


http://econsultancy.com/reports/online-advertising-survey

http://econsultancy.com/blog/63480-improved-performance-and-reduced-wastage-seen-as-main-benefits-of-real-time-bidding

http://econsultancy.com/blog/63480-improved-performance-and-reduced-wastage-seen-as-main-benefits-of-real-time-bidding

http://econsultancy.com/blog/63079-four-years-on-the-growing-pains-of-programmatic-media

http://econsultancy.com/blog/63254-programmatic-media-unpacked-part-two

http://econsultancy.com/blog/63464-the-nuts-and-bolts-of-programmatic-marketing-part-three

http://econsultancy.com/blog/63685-the-future-of-programmatic-media-part-four

http://econsultancy.com/blog/62082-how-far-should-programmatic-marketing-go

http://econsultancy.com/blog/62028-programmatic-premium-is-not-about-bidding

http://econsultancy.com/blog/11362-why-you-can-t-ignore-programmatic-marketing




2. Introduction: Pivoting to Programmatic

Direct Despite almost continuous hype and billions in investment in LUMAscape companies, in 2010

only 25% of $9 billion digital display dollars flowed through programmatic real-time bidding

channels. About 5% was bought on a sponsorship basis, and nearly 70% was purchased through

the manual, highly cumbersome transactional request for proposal (RFP) channel. This ‘middle

slice’ of the market is ripe for automation.

Both buyers and sellers of digital media struggle with the complexity involved in digital media

transactions – planners can easily spend hours manually sorting through available inventory and

discovering prices to begin negotiating deals with the sellers or publishers; and publishers

compete for these sales in a cumbersome, highly manual agency-created RFP process that keeps

them at arms-length from advertisers.

These inefficiencies – coupled with the exponentially increasing amount of inventory to be

transacted online – helped create auction-based approaches to media buying (RTB), in which

today’s programmatic movement was born. These new methods for transacting media rely heavily

on technology and data to efficiently – and often automatically – manage the cumbersome work

of digital media sales.

Growth in RTB technologies, and widening adoption of their use for audience segmentation and

targeting over the past several years has now spurred interest and investment in programmatic

approaches to not just digital display inventory, but content creation and optimisation, and even

workflow and back-end processes. In short, marketers see the potential to leverage digital

addressability, real-time analytics, and granular levels of control to achieve their business and

customer engagement objectives – and do so without the complexity that had previously been

inherent.

Figure 1: The 42 steps involved in the typical display media ordering process has

created an opportunity for ad technology

Source: Bionic Advertising Systems1

1 http://www.bionic-ads.com/2011/05/typical-online-display-media-order-process/

http://www.lumapartners.com/lumascapes/display-ad-tech-lumascape/

http://www.bionic-ads.com/2011/05/typical-online-display-media-order-process/




Considering the complexity of digital media, the variety of creative sizes, millions of ad-supported

sites, and dozens of ad servers, analytics platforms, order management and billing tools, it goes

without saying that digital marketing is a hard competency for any organisation to master. On the

demand side, advertisers have gone from managing the relatively limited number of media outlets

offered by TV, print, and radio to a digital channel with literally thousands of choices. Publishers,

facing a marketplace oversaturated with display inventory and a cumbersome workflow system,

have had to become experts in technology and yield management to realise the most revenue from

their readership.

For both sides, RTB systems offered a way to buy and sell inventory via a web-based interface,

rather than over the phone. From the start, advertisers realised the benefits that data-driven

audience targeting brought, enabling specific audience segments to be found across ad exchanges

– the major transaction platform for programmatic – rather than by purchasing contextually

relevant content, or those whose visitor logs index highly against a desired demographic profile.

Publishers, oversaturated with their own inventory, found a new channel to monetise mid- and

long-tail inventory, which proved difficult to sell on a direct basis.

Most marketers have embraced programmatic RTB vigorously for lower-funnel marketing activity

such as retargeting, enjoying the ability to cherry pick segmented audience members without

making large spending commitments, and have come to expect the kind of robust analytics that

programmatic RTB platforms provide. The pipes have been laid to transact bidded media in near

real-time, there is a seemingly endless amount of third-party data, and an ocean of exchange-

based inventory upon which to place targeted media. Programmatic RTB works, is growing, and it

is here to stay.

That said, there is a reason why programmatic RTB has attracted more direct response dollars

than branding dollars, and that is largely inventory quality. Publishers, afraid of data leakage and

desirous of control over pricing and availability of top-tier inventory, have been unwilling to

contribute premium inventory to exchanges. The most coveted placements must still be

purchased via manual insertion order, and the transactional layer of inventory still commands the

lion’s share of digital display budgets. This dynamic has led to what Bionic Advertising Systems

founder, Joe Pych, calls the “Sutton Pivot”:

“Willie Sutton robbed banks because ‘that’s where the money is’. Today, we are seeing

many companies that provide automation in programmatic RTB pivot to try and

provide programmatic solutions for guaranteed inventory.”

Figure 2: Programmatic is just getting on the radar in 2013, as compared to RTB

Source: http://www.google.com/trends/

http://www.google.com/trends/




Make no mistake about it: there is a race to build technology that can provide programmatic

access to higher classes of inventory, and everyone from small software startups to large service

companies and well-funded leaders in programmatic RTB are looking to get in on the action. But

how will digital marketing automation be accomplished: through new web-based programmatic

direct software built from the ground up, or by leveraging existing technologies, and building

features atop today’s programmatic RTB systems? Also, what side of the transaction will be most

influential in creating the standards and protocols needed to make programmatic direct buying

operate at scale: inventory owners, or marketers and their agencies? Over the next several years,

we will see many of these questions answered, and the proof will be demonstrated by how much

of that middle layer is automated.

For Ian Lowe, CEO of Adslot, the programmatic direct platform which recently acquired Facilitate

Digital2, the automation of this critical middle layer faces three distinct problems. First is the

issue of cost:

“The cost to buy and sell and fulfil of the average campaign schedule amounts to

approximately 28% of the dollar value of the media itself. The vast majority of this is

spent on the manual labour required to create complex iterative documentation, and

manual data entry into multiple systems such as planning tools, ad servers, finance

tools, billing tools and reporting tools.”

The second issue is speed to market, which Lowe described as “agricultural in execution”. And

the third barrier has been the absence of scalability, to wit:

“The economies borne of scale have so far eluded the guaranteed display segment. As

display ad spend scales the $40 billion barrier and continues to grow at 15% CAGR, and

no evidence that our toolset of choice (spreadsheet and faxes) will ever offer us the

scalability we need, we simply cannot sustain this level of inefficiency. More

importantly, the stakeholder that bankrolls our industry – the advertiser – should not

have to fund these inefficiencies.”

Lowe, Adslot, and many other stakeholders are betting on the fact that marketers and publishers

alike will not tolerate high transactional costs, slow execution, and lack of scale when it comes to

procuring higher classes digital media.

What is the dream of a programmatic direct future? The day when a media planner can log into a

system, discover inventory, create an order for a guaranteed amount of impressions, deliver that

order electronically to a publisher who can press an ‘accept’ button, and transmit that order

through to his ad server. It’s a one-to-one transaction that eliminates thousands of keystrokes,

dozens of spreadsheets, hundreds of emails, and even the occasional fax. It is also a future that

both inventory buyers and sellers have desired since the first banner ad was sold nearly 20 years

ago, and today an entire industry is hard at work trying to deliver.

2 http://www.adslot.com/adslot-to-acquire-facilitate-digital/

http://www.adslot.com/adslot-to-acquire-facilitate-digital/




3. Programmatic Definitions The rapidly evolving world of online media has been criticised for its ‘alphabet soup’ of ad

technologies (RTB, DMP, SSP, etc.) and it is no surprise that confusion reigns in the

programmatic landscape. Although the Internet Advertising Bureau (IAB) has recently released

guidelines for nomenclature (see table below), consensus has settled around two types of

programmatic buying: programmatic direct, which focuses on process automation, and

programmatic RTB, which involves real-time, auction-based approaches. In this section, we

will define and discuss both.

Figure 3: IAB definitions

Source: http://www.iab.net/media/file/IAB_Digital_Simplified_Programmatic_Sept_2013.pdf

3.1. Defining programmatic direct Also called ‘automated guaranteed’, ‘programmatic guaranteed’, and ‘programmatic premium’3,

programmatic direct refers to the methodology by which advertisers and publishers automate the

workflow process that exists for buying and selling media. According to an analysis of digital

display spending by Arkose Consulting4, of the $9 billion dollars spent in 2010, nearly 70% were

transacted in the negotiated market, in which buyers reserve inventory from sellers in a highly

manual process. Despite the rapid growth and adoption of RTB over the last two years, the large

majority of digital advertising still happens through the transactional RFP process, rather than in

an automated fashion.

The process for securing reserved inventory is notoriously inefficient, often taking up to 42 steps5

for an advertising program to go from conception to ad serving, and involving multiple systems.

The typical agency will leverage comScore or Nielsen for research; rely on the RFP process to

3 http://www.adexchanger.com/data-driven-thinking/programmatic-direct/ 4 http://www.arkoseconsulting.com/files/42501951.pdf 5 http://www.nextmark.com/wp-content/uploads/2012/06/Online-Display-Media-Order-Sequence-Diagram.pdf

http://www.iab.net/media/file/IAB_Digital_Simplified_Programmatic_Sept_2013.pdf

http://www.adexchanger.com/data-driven-thinking/programmatic-direct/

http://www.arkoseconsulting.com/files/42501951.pdf

http://www.nextmark.com/wp-content/uploads/2012/06/Online-Display-Media-Order-Sequence-Diagram.pdf

http://www.nextmark.com/wp-content/uploads/2012/06/Online-Display-Media-Order-Sequence-Diagram.pdf




discover inventory pricing and availability from publishers, build their media plans in Excel,

transact deals with paper insertion orders, even receiving approvals via fax, and will typically go

on to enter placement details manually in an ad server interface. Once the first ad impression

runs, more manual work ensues, involving manual optimisations, change orders, and the

inevitable billing and reconciliation work to make sure invoices match differing inventory delivery

numbers from demand- and supply-side ad servers.

As other programmatic digital advertising solutions (Google search, Facebook, RTB) have taken

hold, marketers have seen the first hand benefits of data-driven media buying through a web-

based interface. Marketers that have benefited from having fast access to inventory, pricing

control, seamless delivery, and the availability of built-in performance analytics, are increasingly

eager to find similar efficiencies in other channels – especially in terms of reserved inventory.

Increased efficiency has benefits for both sides of the transaction. Larger ad agencies that still

operate on cost-plus pricing models are starting to get pushback from clients who are eager to

shift the 8-12% of budget they are spending on non-working media spend to working media

spend, increase their reach while decreasing their hourly labour bills. Smaller agencies, or those

that operate on a fixed-fee basis, obviously benefit when they can shift low-value labour activity

such as data entry to higher-value tasks (strategy, service) that result in performance gains for

clients.

Table 1: The experts weigh in

What does programmatic direct mean to you? What inning are we in?

Raju Malhotra, SVP, Products, Centro

“It means automated or ‘machine to machine’ transaction. A media buy can be researched, negotiated, purchased, trafficked, optimised and billed all in one cloud-based interface that has a direct connection to the publisher’s ad server. In this model, theoretically, there should be no need for a buyer to ever contact a direct seller or even an ad operations person. Machines conduct this business for you.”

“We are early in the game. Maybe it is the top of second inning, so the heart of the line-up is still coming up, because we obviously haven’t been hitting homeruns in the first inning.”

Eric Picard, CEO, RareCrowds

“There are two key aspects to programmatic direct. One critical aspect of programmatic direct is the automation of the buying and selling of premium inventory. The second key aspect of programmatic direct is ensuring that buyers are able to acquire the precise inventory they are seeking at a valuation that benefits both buyers and sellers. Programmatic direct means bringing a level of automation to the direct sales process and improving the current resource-heavy RFP / insertion order / targeting process of buying and selling ‘premium’ impressions.”

“All media, even ‘traditional media’ will ultimately be bought and sold programmatically. Digital media will be completely programmatic within the next five years, and even traditional will be programmatic within 10 years.”

Tom Shields, Founder and Chief Strategy Officer, Yieldex

“The automation of some or all of the processes involved in buying, selling, negotiating, trafficking, optimizing and billing guaranteed media.”

“Still in the first or second inning, 5-7 years from maturity is my prediction.”

Ben Trenda, CRO, isocket

“Programmatic direct creates interoperability between buy-side systems and publisher-side systems, allowing people to find each other and do business together seamlessly.”

“Second inning. We could get to the fourth inning pretty quickly if some of the largest holding companies move forward with what they are currently working on. I like the analogy of RTB better. We’re at about 2009 on the RTB timeline.”





Roy Pereira, Founder and CEO, Shiny Ads

“Programmatic: server-to-server, automated, real-time.

“Direct: Connect the dots from the buyer to the seller, without any (or much) vendors or people in the middle.”

“Over the next 12 months, we shall see not only small and mid-sized agencies embrace this new way of buying premium inventory, but large agency holding companies and their trading desks, demand-side-platforms, as well as buy-side ad tech vendors.”

Matt Gay, SVP of Customers and Partners, Operative

“We are using the correct terminology in the real world, but not in the way it’s gotten twisted in the media industry. What we are trying to do here (that has been done decades ago in other industries) is transact business in an electronic manner vs. manual manner. [Programmatic direct] means automating manual tasks between buyer and seller.”

“We are in the fourth inning. We’ve had a couple of infield hits, 28 errors, a rain delay, a first-ever manager change in the middle of a game, 16 balks, seen an infield fly rule called (twice), and ejections based on HGH use. My point is, I think we’ve finally hit the ball out of the infield.”

Doug Burke, General Manager and Chief Revenue Officer, FatTail

“We are comfortable with programmatic direct to describe automated guaranteed sales of premium inventory. We only have clients with premium guaranteed inventory. [Programmatic direct means] an automated guaranteed selling solution for premium inventory.”

“We are in the first inning. The media buying behaviour around the RFP process will have to radically change for programmatic direct to become the norm.”

Jason Fairchild, Chief Revenue Officer, OpenX

“Programmatic direct is a phrase aimed at pushing the notion of programmatic beyond the trading of low-value ‘remnant’ inventory on open spot marketplaces/exchanges powered by real-time bidding. The idea is not to automate the selling of all publisher inventory, but to partially automate the sale of ‘the fat middle’: medium-to-high-value, standard-format inventory transacted between known publishers and buyers.”

“Perhaps the third / fourth inning? We’re really yet to see programmatic transactions hit the substantial majority, but if Karsten Weide at IDC is correct, we’ll likely be experiencing 80% of total US display ad sales being traded via real-time bidding by 2022.

6”

Jay Sears, SVP Marketplace Development, Rubicon Project

“Programmatic is the ability to break a buy down to the impression level for decisoning and/or the application of advertiser or publisher data. This is commonly associated with real-time bidding. Workflow is the replacement of manual processes (often phone, fax and email) with a more unified process, often in an easy-to-use user interface. Some companies present solutions that focus only on programmatic or only on workflow. Others deliver solutions that encompass both. Make sure you know the difference.”

“We are in the third inning. Bases loaded, no outs.”

Andy Atherton, SVP, AppNexus

“I still prefer ‘programmatic reserve’. I think most of the market is still conflating two distinct segments: applying technology to improve the efficiency of direct sales transactions – as I have advocated in the past, I would call this ‘programmatic reserve’; enhancing the capabilities of RTB infrastructure to better accommodate creation and execution of custom trading relationships. Call this ‘negotiated RTB’ maybe?”

“We’re still early. I am more of a music guy than a sports guy. I’d say we’re somewhere in the first chorus.”

6 http://www.pubmatic.com/reports/IDC-RTB-2013.pdf

http://andyatherton.com/2012/11/09/can-we-please-retire-premium/

http://www.pubmatic.com/reports/IDC-RTB-2013.pdf





Ana Milicevic, Lead Industry Consultant - Digital Media and Advertising Technology, SAS

“At its most basic, it’s the ability for a buyer and seller to execute a set of insertion orders in an automated way.”

“The majority will shift and embrace programmatic within the next 3-5 years. A large player on the buy side (like an Omnicom) can accelerate this process significantly if they aggressively come out in favour of programmatic.”

Bill Wise, CEO, Mediaocean

“Premium, guaranteed inventory should be available to purchase without an RFP process and should be a direct conversation between buyer and seller, without ANY intermediaries other than true SaaS enablers who don’t have a voice in the transaction. We’ve coined the term RTP (for) real-time procurement.”

“We are very early in the process. The publishers are generally sceptical as they do not want to cannibalise their sponsorships and premium ad offerings. However, we need to get to a point where publishers can confidentially expose their yield curve through technology such that the market can dictate true market pricing. Mediaocean will be enabling this through partnerships with a select few market-leading SSPs in our Avails offering.”

Joe Pych, CEO and Co-founder, Bionic Advertising Systems

“Programmatic direct is simply automating the process of direct buying and selling of advertising inventory. It's just process automation. A defining characteristic of programmatic direct is its focus on standardizing and automating the transactions between buyers and sellers (versus automation inside the walls of an organisation).”

“We're in the top of the second inning. In the first inning, we saw enthusiastic play by rookies who made some comical errors. But we also noticed some solid base hits from the rookies. We also saw all stars getting into the game. I'd score the announcement that AOL, Microsoft, and Yahoo! made during Advertising Week about standards collaboration as a double. But at the end of the first inning, there was no score. As we enter the second inning, the focus is on creating and implementing interoperability standards. Those that get behind industry standards will be the winners of this ballgame.”

Voice of the expert

“We’re clearly in the early days of this space, maybe the third inning. But we’re early partially due to the slow

adoption rate of this new form of media buying. Culture change is really the key issue. I believe that many of the

vendors enabling ‘programmatic direct’ today will be assimilated into larger platforms where their technology is

behind the market need.”

Anthony Katsur, ad tech veteran and former CEO of Maxifier




3.2. Defining programmatic RTB Programmatic RTB is exactly what it sounds like: digital media which is accessed through a

platform where inventory is secured on a bidded basis. With concepts born in search marketing

(biddable keyword terms, sold on a cost-per-click basis), programmatic RTB generally refers to

the method of buying and selling inventory through ad exchanges. On the demand side,

advertisers can apply first- or third-party data segments to find audiences across a large swath of

inventory, and set bid pricing to automatically compete for users.

Programmatic RTB has been a tremendous boon to advertisers, who have increasingly easy access

to vast amounts of inventory (often at a low cost) and widely available third-party behavioural

data to use for targeting. Most marketers now leverage RTB to employ an ‘always-on’ digital

display strategy that retargets existing customers, lookalike audiences, and key segments of likely

‘intenders’.

Programmatic’s first proving ground – bidded media accessed through ad exchanges – has shown

great promise. Despite certain drawbacks (predilection for fraud, lower inventory quality, and

commoditised ad units) – likely the result of the early-evolution stage – RTB is expected to soar to

$3.3 billion in 2013, up nearly 74% from last year and accounting for nearly one-fifth of all display

media sold. 7 These huge numbers are a testament to the fact that marketers crave programmatic

access to audiences.

Growth in RTB has fuelled interest in programmatic access to not only display inventory currently

unavailable in exchanges, but also other media channels – including addressable television – as

well as broad approaches to customer engagement. In short, enabling the discovery, purchase,

and management of targeted audience impressions has quickly become a huge priority for

marketers. This drive for efficiency is rapidly changing the way marketers, agencies and inventory

owners are structuring their businesses and plans for future growth.

On the supply side, large publishers and networks add tags to their site(s), which enable third-

party networks and exchanges to value and sell their inventory to their demand-side users.

Publishers are able to monetise large swaths of mid-premium and long-tail inventory without a

direct sales force, and use supply-side platform (SSP) to manage their yield, and adjust floor

pricing for inventory based on dynamic data.

That said, RTB – essentially the notion of buying audience rather than inventory – has been both

a blessing and a curse to publishers. Larger publishers have often seen premium prices decline as

less expensive RTB alternatives (i.e. reaching the same audience segment elsewhere, for a lower

price) gain demand-side adoption, yet they have still benefited from monetizing more of their

long-tail inventory. Smaller and less known publishers, who find it expensive to monetise

inventory through direct sales, have benefited from being able to programmatically compete for

demand in a variety of platforms.

Programmatic RTB adoption has been rapid, and widespread. Programmatic RTB technology is

evolving rapidly, and participants now have access to several different buying methodologies,

including:

Open auction: The traditional methodology for programmatic RTB, in which buyers

compete for users in an open auction, and the highest bidder wins. In these cases usually a

second-price auction applies, in which the winning bidder pays the second highest bid price.

Invitation-only auction: On certain exchanges, publishers have the ability to set aside

pools of inventory for specific buyers, and thus create private marketplaces. These invitation-

only marketplaces enable specific demand-side partners to get priority in the ad server (a ‘first

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look’ at a publisher’s inventory), and are usually sold at a higher floor price. A smaller amount

of bidders compete in an auction to win inventory inside the marketplace.

Unreserved fixed-rate buying: Despite its name, today’s RTB systems can also be used to

trade unreserved inventory on a fixed (rather than bid-adjusted) rate.

Despite its growing use and functionality for enabling private transactions, programmatic RTB

has its challenges. Challenges for marketers include click fraud (estimated to be as much as $400

million per year, according to an AdWeek report8), privacy concerns regarding cookie-based

targeting and inventory quality concerns. The latter has been the largest barrier to wider adoption

for RTB, as publishers have been largely resistant to placing premium inventory into exchanges.

Larger publishers – especially those with marquee properties in specific verticals such as

automotive, travel, and healthcare – generally retain control over their highly premium inventory,

selling it manually through their direct sales force, and allocate lower classes of inventory to

exchanges. This has made programmatic RTB buying a staple for lower-funnel marketing activity,

judged on direct response performance metrics, rather than a natural channel for higher-funnel

branding initiatives.

Private exchanges are starting to offer publishers more granular control over their inventory and

the ability to manage demand-side partner access, but broader programmatic RTB adoption will

be curtailed until privacy, brand safety, and inventory quality issues are addressed.

Ultimately, whether transactions take place via programmatic direct or programmatic RTB – or

whatever the terminology ends up being – the goal is not just efficiency in the procurement of

digital media, but adding intelligence to the process.

Voice of the expert

“Adding a layer of business intelligence to transactional media is critical because today both buyers and sellers

are faced with overwhelming numbers of choices that are decided mostly in an ad-hoc manner without much

reason. Providing simpler ways to understand how campaign goals can be solved while automating the processes

of spending the budget ultimately creates new opportunities.

“Today the intersection of manual processes with lack of business intelligence and intelligent automation means

that campaigns are naturally basic and not very valuable. Going forward, automation, intelligence and

optimisation technologies driving this process means massive leaps forward in effectiveness of advertising on

almost every conceivable metric. The power of software can be unleashed on this problem in fundamentally

game-changing ways.”

Eric Picard, RareCrowds

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3.3. Refining and defining by programmatic approaches Before arguing which programmatic approaches work best, it is valuable to have a taxonomy that

enables practitioners to discuss the various methodologies. Although the IAB has been helpful in

defining terms (see Figure 3), Jed Nahum, Microsoft’s senior director of programmatic sales, has

added some needed definitions9 which RareCrowds’ Eric Picard has expanded upon, adding

examples of vendors in the space that are engaged with various approaches:

Figure 4: Eric Picard’s expanded taxonomy of Nahum’s programmatic buying

tactics10

3.4. Chapter summary: programmatic definitions Nomenclature: It seems that the industry has coalesced around programmatic terminology

in general, although there are still subtleties in terms of definitions to describe the various

methodologies being used to connect buyers and sellers. One thing has been clear however,

that the players involved in what was called ‘programmatic premium’ have coalesced into two

distinct camps, based on the methodology of approaches:

– Programmatic direct, which loosely describes process automation in media

transactions. From a technology perspective, this is about streamlining formerly manual

processes and creating integrations between systems used to buy and sell digital media.

From a business perspective, it’s about providing programmatic access to media

traditionally bought and sold under the transactional RFP method.

– Programmatic RTB, whose ‘pipes’ can be leveraged to create private marketplace

access to inventory, and perform fixed-rate deals. From a technology perspective, this

means bypassing the traditional transactional RFP process by modifying auction-based

systems to secure guaranteed deals.

Timing: The consensus view is that we are in very early innings of the programmatic direct

game – anywhere from the first to the fourth inning in terms of both technology development

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and ecosystem adoption. All agree that agency holding companies and large marketers will be

the key to pushing for broad scale adoption and moving the programmatic direct needle from

its current early stage into significant growth.

Voice of the expert

“Private exchanges via RTB protocols can be considered a ‘bottom-up’ approach to programmatic direct since

they extend the existing RTB approach currently associated with remnant to higher-value inventory by providing

publishers with additional controls and restrictions that they can apply to their non-guaranteed inventory on

spot marketplaces. Private exchanges are confined trading relationships operating within existing RTB

platforms. As with open RTB exchanges, private exchanges involve the use of audience data (provided by the

buyer and sometimes the publisher), allow buyers to pass on impressions they don’t want and tend to align with

performance goals.

“Programmatic guaranteed via ad server APIs, on the other hand, can be considered a ‘top-down’ approach to

programmatic direct, since it provides a level of automation to traditional, directly-sold, guaranteed sales

between publisher and buyer. Via APIs hooked into the ad server, buyers can discover and purchase inventory on

a guaranteed basis, subject to rules determined by the publisher. Some of these systems also partially automate

RFPs, price negotiation, insertion orders, the trafficking of creative assets and/or optimisation. Like traditional

direct buys, these orders don’t (currently) involve the use of audience data, force the buyer to commit to certain

number of impressions and tend to be used for branding goals.

“Eventually the two will merge to provide the simultaneous advantages of reaching defined audiences at scale

with the volume predictability and spend guarantees provided by forward buys.”

Jason Fairchild, OpenX




4. The Demand Side Recently at an IAB programmatic working session, I overheard a senior-level executive say, “Let’s

face it; any time change comes to this industry, it’s been based on what the buyer wants.” He

was speaking about creating standards for transacting programmatically, and emphatically

dismissing the question of whether publishers could set the ground rules for this new

programmatic direct landscape.

He appears to be correct. Buyers are starting to realise massive gains in efficiency, performance,

and measurability, and are trying to set the terms upon which tomorrow’s advertising spend will

be allocated. Buyers are saying, “Make it easy to buy for me, and you will get more of my budget”

and that assertion has been proven, as more publishers who resisted programmatic RTB have

come back into the fold (e.g. Gawker Media, USA Today, and Turner11). These publishers and

many more have opened up limited amounts of inventory through private exchanges, and now are

looking at making larger swaths of premium inventory available, either via RTB channels or newly

available premium direct channels.

Some direct marketers (most notably Kellogg’s, which has been a vocal advocate of private

exchange buying12) have built their own internal marketing capabilities to have closer control of

media pricing and their first-party data. Agencies have leveraged their access to demand to funnel

huge volumes of spending through centralised trading desks, with some enjoying network-like

arbitrage profits. In short, the demand side loves programmatic marketing: tactics that keep them

firmly in control of media procurement methodology, offers them scale and efficiency in buying,

and the opportunity to profit on a transactional basis.

Marketers and their agencies have accomplished their mission only halfway, though. While access

to lower classes of inventory through exchanges has been affected, along with some select access

to more premium inventory via ‘private deal’ functionality inside RTB systems, the vast majority

of quality inventory remains firmly in control of its owners. The question is not whether access to

higher classes of inventory will be automated, but how: primarily through modifications to

existing RTB methodologies, or through new technologies altogether.

Today, the digital industry is trying to understand how to leverage these individual approaches to

programmatic, and asking whether programmatic direct buying can leverage the existing RTB

pipes – or if we need a purpose-built technology to support programmatic direct buying.

For Eric Picard, “the distinction between RTB and direct technology is essentially meaningless.

There will be convergence in both infrastructure and methodologies, and there will be

convergence of vendors and technologies – no one vendor will remain on one side of a

theoretical ‘fence’. The fact is that RTB technology will need to continually evolve to deal with

the complex and ever-changing nature of programmatic.”

Ultimately, buying higher classes of inventory will involve integrations and connections between a

large variety of vendors that support each buying channel, and marketers and publishers have to

be prepared to partner and plug into multiple platforms that enable programmatic transactions.

To date, almost all programmatic direct success has happened over existing RTB pipes through

the aforementioned private marketplace methodology. These private exchange transactions have

been the first careful stabs at opening up premium inventory to programmatic buying, made

possible because the ‘pipes’ for delivery have been largely put in place through SSP and DSP

connections. Advocates of the RTB approach to programmatic direct have a strong argument,

based on billions of dollars in technology innovation, almost universal programmatic RTB

adoption among publishers, and the embrace of agencies. Media procurement across all channels

11 http://digiday.com/publishers/gawker-ad-exchange/ 12 http://www.adexchanger.com/ad-exchange-news/kellogg-company-is-positive-on-private-exchange-results/

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is seen as going programmatic, and continuing development can modify existing pipes to

accommodate a variety of different buying methodologies that include guaranteed buys.

But can RTB systems be tweaked to effectively enable the programmatic direct vision? According

to Jay Sears of Rubicon Project, “The short answer is yes”. For Sears, automating both workflow

functionality and ad delivery can happen together in modern programmatic RTB systems:

“Buyers – especially the holding companies – need to deliver unique access and this now

includes both media (access others cannot get) and data (leveraging unique publisher

data assets as well as leveraging the unique data assets of the advertising). This

deliverable is core to the trading function run by each holding company.”

Robert Burkhart, who heads up digital initiatives for Strata, order management software used by

over 600 agencies, programmatic RTB does not go far enough:

“We see that programmatic (RTB) buying presents many opportunities and challenges

to both agencies and advertisers. The largest challenge is that there is general feeling in

the industry that things are being rushed to adoption without the proper education of all

parties.”

Burkhart thinks that agencies and brands must be able to differentiate themselves by offering

more strategy, and depend less on leveraging programmatic tactics and platforms that are

becoming ubiquitous. Agencies need to “go beyond the short-term benefits realised through

analytics and reporting and more to developing the most strategic campaigns possible. While

there is merit to programmatic buying, more questions need to be answered before we know its

proper context and true value.”

For Andy Atherton, who heads up programmatic direct efforts for AppNexus, the answer is less

technology oriented, than focused on the end user:

“We need new technology. RTB buying and direct buying are done by different teams

with different requirements. This will all converge down the road, but in the meantime

we need to focus on the direct buyers’ particular needs if we want to drive this

transition.”

Anthony Katsur, former CEO of publisher revenue optimisation platform Maxifier, agrees that

programmatic direct is a subset of the larger programmatic ecosystem that has been raised on

RTB methodology:

“Today’s RTB platforms, namely DSPs, SSPs and exchanges (but aren’t they all

morphing into exchanges?), will adapt through a build or buy strategy to support the

features buyers and sellers require to directly transact media on a guaranteed basis.

“I even believe the deeply integrated sponsorships and home page takeovers will go

programmatic. Buyers can reserve the inventory via programmatic channels and then

let the creative/ops team take over to enable the sponsorship. There’s still significant

plumbing required to support this.”

On the flip side, detractors argue that RTB is fundamentally opposed to the guaranteed

transaction, being neither real-time or bidded in nature. Agencies still secure the vast majority of

digital inventory through a transactional RFP process which is clunky, but still enables a high

degree of human control and personal touch. Why not automate the process for transacting on

premium inventory, rather than a wholesale change in methodology? Also, detractors of the

programmatic RTB approach (largely publishers) are concerned with margin erosion, lack of

pricing control, and data leakage. Carefully curated audiences, monetised by advertising, have

made a lot of content free. Premium publishers are right to demand media rates aligned with the

quality of both their content and audience.




Joe Pych of Bionic Advertising Systems believes that there are too many pieces of workflow

functionality needed to enable true process automation inside existing RTB systems:

“RTB cannot be ‘tweaked’ to support programmatic direct. An entirely new technology

stack is required. Programmatic RTB is all about bidding and transactional execution.

It’s basically, ‘Here’s an impression. In the next 30 milliseconds, tell me how much you

want to bid for this one impression. If you’re the highest bidder, we’ll serve your ad.’

“While I think RTB is an incredible advance, there’s no real workflow involved. DealID

and private exchanges can be part of a programmatic direct solution, but they only

solve for one step in a 42-step process: the execution of the ad. A new technology stack is

required to automate the other 41 steps.”

For Tom Shields of Yieldex, the programmatic RTB approach doesn’t make sense:

“There’s no shortage of people attempting to shoehorn this square peg into that round

hole, and some of them might get it to fit. But it seems pretty inefficient to involve an

exchange, a DSP, and an SSP in a transaction that doesn’t need to involve anyone other

than the buyer and the seller.”

To others, including isocket’s Ben Trenda, the fundamental communication protocol and delivery

mechanisms powering RTB are complimentary to programmatic direct, but auction-based

approaches fail to take many of the nuances of negotiating premium guaranteed inventory into

account, such as context, page content, and placement. For Trenda, a former programmatic RTB

veteran, there are even more fundamental issues:

“RTB is a call/response communication protocol. Imagine a bar with 100 customers

where the bartender pours an old fashioned and then asks each person in the bar if they

want to buy it and for how much. Yes, it would be silly and inefficient. But worse, the

bartender would prioritise accordingly to save time, so they would eventually just ask

the 5 or 10 people who tend to buy most of the drinks.

“This was one of the earliest pieces of logic we built into our RTB system at Rubicon once

we got to 50 or so DSPs. We would predict which bidders would make a bid, and then

we would only call those we thought would bid. This is still happening today, and it

should. But imagine being a customer of one of those DSPs who don’t get all the calls. If

you really want to buy what you’ve decided to buy, one of the core reasons to buy

premium reserved inventory, you’d want to know that your DSP is receiving every bid

request.”

For Centro’s SVP of Products, Raju Malhotra, whose company now owns its own DSP (SiteScout)

and is building home-grown programmatic direct technology (Centro Planner), the answer for

marketers is not so black and white; marketers need to leverage both programmatic approaches

to match differing applications:

“We need a combination of new technology, processes, standards and skillsets to suit the

demands of programmatic direct. RTB technology is good for media transactions that

are based on second price auction mechanics. But it is not designed to solve the

workflow inefficiencies for contractual based media buys. Now, programmatic direct

can solve some of these problems, but it won’t have access to some of the most valuable

custom media available. This requires a different solution. There will always be a need

for custom advertising bought direct from publishers.”




4.1. Agency trading desks You cannot have a discussion on programmatic marketing and not discuss the profound impact

agency trading desks have had on adoption of buying technologies, techniques, and business

models. Only a few short years ago, agencies were the ultimate arbiter of where to allocate digital

marketing dollars. All deals were transacted directly with publishers, and digital agencies were

specialist shops that could help marketers with the discovering media and the complexities of

delivering technically complicated digital campaigns.

That era was brief, however. Ad networks quickly sprang up to take advantage of the ultimate

market opportunity: an infinite supply of banner inventory, the availability of audience data, and

marketers eager to find efficiency, measurability and scale. Networks like Tacoda created new

ways to access audiences, and quickly disintermediated agencies’ monopoly on audience

discovery. Agency trading desks (ATDs) were eventually created to take advantage of the

emerging technologies (DSPs) that would enable them to leverage their access to demand and

turn the tables. They have been extremely successful at doing so. Programmatic buying

methodologies offer some agencies the ultimate in marketing: one-stop shop that gives

advertisers access to a one-to-one conversation with potential customers.

Agency trading operations like WPP’s Xaxis are benefiting from the network effects of

programmatic buying, and earning significant profits from arbitrage – leveraging programmatic

technology platforms to buy low and sell high. With technology poised to deliver programmatic

access to more than just banner ads, trading desks are turning their attention to building a

programmatic technology stack that enables the agency to acquire all kinds of inventory, from

online video to addressable television. At the moment, the lowest hanging programmatic fruit is

premium display inventory, accessible through existing RTB pipes and being made increasingly

available through private marketplaces. According to Shiny Ads CEO Roy Pereira, this is a

relatively recent phenomenon:

“Agency trading desks, much like DSPs, are now recognizing that they need to buy

inventory on more than just remnant-based exchanges. Thus they are now looking at

how to purchase premium inventory for their agencies through programmatic direct.”

Are trading desks a sustainable solution for marketers? For Tom Shields, chief strategy officer of

publisher yield management solution Yieldex, the future is unclear:

“Arbitraging inventory without transparency to the marketer is a problem. But

centralised buying for economies of scale might make sense in the long run.”

Naturally, publishers are eager to benefit from the ‘always-on’ revenue stream that the

programmatic RTB sales channel has been consistently providing, but reticent to expose their

closely held inventory to be purchased on ad exchanges. For Doug Burke of FatTail, a software

provider that helps publishers manage their directly and indirectly sold inventory, the distinction

between the programmatic and direct channel will fade as agencies understand how they interact:

“The agency creates a separation of the guaranteed buying process and the RTB buying

process with agency trading desks that is a historical anachronism at this point. The

two processes of guaranteed buying and RTB buying need to be connected at the agency

to deliver the most effective return on investment to the brand client.”

Although all ATDs add a layer of cost for the marketer (whether through arbitrage, or via a

transparent media mark-up or service change), it is generally accepted that they offer value by

leveraging data and technology to meet specific marketer needs – and deliver digital messages at

scale. For Centro’s Raju Malhotra, the missing ingredient is “transparency and value”, which

clients will increasingly demand. Also, it is obvious that some clients will grab the programmatic

reins themselves:




“Agency trading desks address a business need for marketers. As marketers get smarter

and more comfortable with programmatic direct and ad exchange buying, the self-serve

model becomes easier to use for broader adoption.”

Clearly, accessing the large ‘middle layer’ of premium inventory programmatically is and will

continue to be a focus for agency trading desks, who must continue to innovate and provide ways

for marketers to gain programmatic access to consumers across the many digital channels they

are spending time in, including online video, addressable television, tablets, and mobile devices.

With a strong embedded investment in RTB-based programmatic tools, it seems likely that early

efforts at programmatic direct will continue to build upon their existing stacks, rather than

embrace new technologies. However, agencies’ reliance upon legacy order management and

billing systems for media buying across channels will continue to be influential, as agencies seek

to take digital out of its current silo and align processes with traditional media procurement

methodologies.

Voice of the expert

“For agency trading desks to continue to thrive there is no doubt that they will need to address the questions that

some marketers have raised about agency trading desk transparency. Trading desks operate today on an

arbitrage model for the most part, and that won’t be allowed by marketers in the long-term, especially as the

proportion of budget going to RTB has grown significantly.

“Ultimately, trading desks will be absorbed back within the individual media agencies, rather than being held

separately. The approaches, processes, and technologies of the trading desks will become best practices within

media agencies, but the business model will change. Marketers that have significant amounts of business data

that can be applied to digital advertising will likely build out their own stacks of technology and vendor

relationships, and will build their own equivalents of a trading desk but will optimise exclusively for their own

benefit. They will give their media agencies access to their systems and enable them to work within them – but

on a traditional media agency model, not the trading desk model.”


4.2. Agency culture and personnel Another large factor influencing the pace of programmatic direct adoption is within the media

agency itself: namely, the legacy business models of holding companies built around hourly

labour charges, which rely upon a steady stream of young, inexpensive hires. This has given rise

to the popular meme of the ’23-year-old media planner’, often described as an underpaid agency

employee, who wields unusual power over multimillion dollar media budgets, and susceptible to

being influenced by ‘sneaker parties’ and other off-the-books incentives to select one media or

technology vendor over another. Unfortunately, when it comes to selecting guaranteed media, this

unkind assessment of the typical agency is highly valid. Often, agency personnel with less than

five years of media experience are asked to make sophisticated digital investment decisions, and

often at the forefront of vetting new ad technology opportunities.

Moreover, agency media planners are notorious for job migration; a recent Digiday/Bionic

Advertising Systems joint survey found that more than half of agency planners (56%) are either

“actively looking” for a new role, or planning to leave their current job within the “next two

years”.13 This has much to do with long hours and low compensation – but the same study

indicates that media planner unhappiness also has a high correlation with the tools they use.

Around half (45%) of media planners spend between one and four hours per day in Microsoft

Excel performing manual tasks – and over a third (35%) spend over four hours a day in the

spreadsheet tool. The large percentage of that work is concerned with cutting and pasting data

from one system to another (placements from an Excel-based plan into an ad serving interface,

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and then again into an order management system). This modern drudgery manages to get digital

ads from conception to serving, but at a high cost to the agency, who deals with the cost of

constant turnover within the ranks and the accompanying inability to capture institutional

knowledge.

For Joe Pych, whose web-based Bionic Advertising Systems is on a mission to replace Excel at

agencies, the advantages of a programmatic direct approach to planning are clear:

“When a media agency loses a planner, all of the knowledge that planner acquired over

two years goes down the elevator with them. They go to another agency, and lend that

company the sum of their acquired knowledge. The information on the best places to

place media is locked up on computers, ad servers, and various files – but almost

impossible to access and make actionable at the organisational level.”

Programmatic direct approaches that streamline media discovery and acquisition not only add

the critical layer of efficiency necessary to turn grunt workers into knowledge workers, but also

add a layer of business intelligence to guaranteed media selection previously only available in the

algorithms of programmatic RTB systems.

Shiny Ads’ Roy Pereira sees a future with fewer young planners:

“There will be a lot of personnel changes in our industry in the next five years. There

will be fewer media buyers and media planners at agencies and they will have a lot

more technology in their hands to accomplish their buys. The job of a media buyer,

specifically, will need to change as the actual buying process becomes incredibly easy

and quick with just a push of a button. Media planners will be able to discover the right

inventory from thousands of top-tier publishers, get an accurate assessment of

available inventory and be able to create digital RFP or even IOs within seconds.”

For Centro’s Malhotra, younger planners can be activated using easy-to-use technology:

“We need to make the ’23-year-old media planner’ appear like a seasoned executive

using a combination of technology and advanced analytics so they can plan millions in

advertising spend like a true professional.”

If agencies had access to solutions that placed an organisation’s proprietary planning data in an

easy-to-use tool, they would be empowered to act on behalf of agency clients more effectively.

Malhotra added:

“The industry is filled with disparate point solutions that create clutter, confusion and

complexity for them and their agency leaders. Planners and buyers are limited by the

low-quality tools. We are betting in favour of superior, easy-to-use technology

empowering them.”

Andy Atherton, whose company has been empowering agency personnel with programmatic

tools, thinks technology can enable planners to spend less time on manual tasks and actually be

happier in their roles:

“There has been surprisingly little investment in trying to make [planners’] lives better…

and empowering them to leverage their skills and add more value. So I don’t think

today’s buyers are ‘replaced’. I think they will be empowered by technology to become

happier, more productive and more valuable contributors to great business outcomes

for their clients.”

But new programmatic direct approaches for the demand side must involve more than just

efficiency gains that remove manual grunt work and free time for creativity among agency

personnel. Centralisation of the media planning and procurement function must also lead with

data, and add a layer of business intelligence to the process.




In discussing programmatic planning needs with the chief digital officer of a large agency

recently, it was clear that being able to justify media selection was as critical as being able to

produce plans quickly:

“Our clients don’t ever come to us and ask what kind of tools we are using to do our jobs.

They really couldn’t care less. But they do come to us and ask for huge media

recommendations, due within several hours. And they definitely want to know why we

are recommending what we are recommending.”14

Moreover, understanding how much budget to allocate to various inventory partners – a process

now operating largely on gut instinct – must be grounded in data.

Christopher Skinner, whose MakeBuzz platform helps marketers understand how to allocate

branded digital media, believes that a lot of today’s procurement strategies are too heavily focused

on reaching customers already in the market for products and services – and not focused enough

on creating new demand. Because programmatic direct buying can leverage data to make media

investment choices, it has the distinct potential to start helping marketers justify branding efforts

with new metrics.

MakeBuzz, as an example, measures success based on profit potential – the idea that there is an

optimal number of specific customers in a geo-targeted area – and uses that data to drive

investment decisions in display. “Digital marketing is still stuck in a DR (direct response)

mentality. DR accounts for 6% of ad spend globally, meaning that until we start thinking

proactively about creating demand, we’re not going to command the attention and respect of

the boardroom,” remarks Christopher Skinner, the company’s founder and CEO, adding:

“A big part of why many are stuck in this mindset is that they rely too heavily on data of

the past, and we’re including so-called ‘real-time’ data under that heading. What

[programmatic direct must do] is look at potential – using diverse data sets to

understand our client’s potential growth, market-by-market. So we’re looking at upper-

funnel media that can drive demand for our clients, not just capture it.”

“[Efficiency and business intelligence] are inextricably linked. We need to provide the right

technology to get the manual transactions into some sort of system so we have the data

available for analysis,” remarks Andy Atherton, adding, “The creation of basic transactional

efficiency is the foundation for the more transformative improvements that can be driven by

business intelligence (BI). I don’t think you are likely to get the second one without the first one.”

Voice of the expert

“My bet is [that 23-year-old media planners will be] replaced. Like spreadsheets replaced legions of bookkeepers

because the execs could update the sheets themselves.”

Tom Shields, Yieldex

“Most of the ‘23-year-old media planners’ that I have worked with are very smart and talented and there is

always a demand for those types of people in any industry. Automated tools should allow the more traditional

planners to transition into the digital media realm however.”

Sean Cotton, True Media

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http://chrisohara.wordpress.com/2013/10/29/programmatic-direct-isnt-just-about-efficiency/




Voice of the expert

“Some [planners] will adapt and the less qualified will be replaced. I don’t necessarily see programmatic

replacing most roles, but the people and roles will evolve. I believe that there is an opportunity for the machines

to replace some personnel over time, but there is still so much to automate, integrate and build across our

ecosystem that we’re a long way off from that moment.”

Anthony Katsur

4.3. Agency pricing models and programmatic Terence Kawaja, the creator of the famous LUMAscape maps which depict the 300-plus

companies who enable the 20% of display buying that happens programmatically, once said that

“inertia is the agency’s best friend” when asked why holding companies were not doing more to

bring innovation to advertising. I imagine that part of what he meant was that their common

business model (billable hours plus a negotiated margin) does not create an incentive for

efficiency. On the contrary, complexity in media planning means more billable hours – as well as

a built-in need for agencies’ existence. After all, if media buying were easy, then marketers would

do it themselves.

That means today’s large media agencies actually have a perverse incentive to gain efficiency;

because they get paid for planning media on an hourly (cost-plus negotiated margin) basis; the

more time it takes to plan a complex campaign, the more they get paid. The efficiency of

programmatic direct approaches actually hurts the bottom line. That said, marketers – exposed to

self-service tools that enable direct access to digital channels like Google and Facebook – are

pushing agencies to gain efficiency in media procurement. In the effort to take control over their

own data and how they apply it to digital messaging, will brands and marketers build their own

technology stacks and internal practice groups?

OpenX’s Jason Fairchild thinks it’s “more than possible they will”, but stresses that only certain

types of marketers will benefit from such an undertaking – those with extremely large and

valuable first-party datasets. Once marketers adopt data-driven marketing practice groups, and

the technology (especially DMPs) to capture and activate customer and sales data, marketers are

“going to be a lot more particular about what their agencies will do for them once they begin to

develop the strength and skill to build their own customer solutions. It’s likely that some of the

big marketers will begin to invest in buy-side workflows, data management and reporting /

analytics tools that are custom solutions for their unique environment. They will then leverage

these outputs in more sophisticated ways to instruct and utilise agencies.”

Ben Trenda of isocket compares the likelihood of agencies adopting their own programmatic

stacks to early marketplace dynamics in search marketing. Early on, only a few agencies built

their own internal search practices, and an entire “cottage industry” of SEM providers quickly

rose, eventually to be acquired by agency holding companies, once the market matured and

stabilised.

Initially, however, agencies can react negatively to efficiency tools. “Process efficiency might

appear to be bad for agencies at first glance,” says Trenda. “One agency exec once said, ‘I hate

when people say it’s inefficient that we still use fax machines – we like sending faxes’. But in the

next sentence that same agency exec said, ‘but we understand that automation is inevitable so

we want to get involved and get in front of it’. There are some really smart people at the holding

companies, and they’ll adapt to the future.”

For Bill Wise, the Mediaocean CEO whose Prisma platform processed over $17 billion of display

spending in 2013, it is the ad tech ecosystem that is causing the most imbalance in the current

media ecosystem. Wise argues, “ad technology intermediaries are charging a king’s ransom by

combining their tech stack with quasi-planning and media buying. That’s what needs to be

disrupted, not agency business models.”




For Jay Sears, the future seems clear: marketers will inevitably begin to bring on internal

programmatic capabilities:

“Some marketers – especially those that have already taken functions such as search

and social in house – will look hard at bringing automated media in house as well. This

is good for the business as this pressure will force agencies, trading desks and others to

continue to innovate to maintain relevance and grow business.”

But will marketers commit to organically developing and sustaining expertise required to keep up

with the technologies and techniques required in digital? The future remains unclear.

Voice of the expert

“Planning and buying media well is hard work. Digital media is twice the amount of work. I am not sure how

many companies want to bring that in house and try to learn new platforms that would enable them to do that.

What could happen is that more large companies could start working with smaller agency shops that are nimble

and efficient due to implementing automated tools that compensate for the large workforces of the holding

company shops.”

Sean Cotton, True Media

4.4. Fraud: the elephant in the programmatic room Rather than a being a barrier to programmatic direct adoption, the increasingly visible problem of

fraud may end up being its largest driver. Because the overwhelming majority of click fraud and

robotic traffic happens inside of exchanges, it would seem to be a problem inherent in

programmatic RTB. Marketers therefore should be more willing to seek direct connections with

trusted inventory sources to ensure their media investments are not wasted on ‘non-human

eyeballs’.

Some reports suggest that as much as 46% of display inventory is ‘suspicious’, and may be

robotically generated.15 Despite growing awareness of non-human traffic, however, programmatic

RTB buying continues to rise. This can be accounted for by the act that the large majority of

programmatic RTB buying is done on a direct response basis. Centro’s Raju Malhotra questions

how much fraud matters for performance buyers:

“At the end of the day the advertiser is tracking return on ad spend (ROAS) all the way

to a conversion. Therefore all of the ‘fraud’ gets thrown together with the real clicks, etc.

and if the ROAS is there, the advertiser does not care as much as we may think they

should.”

isocket’s Ben Trenda agrees:

“If all you want is to find your cookie pool on cheap inventory, you’re not going to let a

little fraud get in your way.”

Of course, when measuring against cost-per-order or other DR metrics, fraudulent clicks do not

contribute significantly to the marketer’s cost, and can be ignored. For programmatic RTB to

successfully attract branding dollars, direct connections to higher classes of inventory need to be

established along with significant viewability and fraud protection guarantees. Viewability

standards should be embraced by all publishers with quality inventory as a key differentiator.

15 http://www.adweek.com/news/advertising-branding/bots-infecting-nearly-half-web-traffic-report-152300

http://www.adweek.com/news/advertising-branding/bots-infecting-nearly-half-web-traffic-report-152300

http://www.adweek.com/news/advertising-branding/bots-infecting-nearly-half-web-traffic-report-152300




“Every media buyer should question why they are buying non-viewed inventory because they

are wasting money and the attribution modelling vendors are using garbage data if they are

including non-viewed inventory”, said FatTail’s Doug Burke, adding:

“The brand lift and clickthrough rate performance on non-viewed inventory is

zero. Only a spider and bot can click on a non-viewed ad. Premium publishers should

embrace viewability because they will be rewarded for their high engagement; high

view rates of their high quality sites and long tail, non-premium, low engagement sites

will be flushed from the market.”

Today, the digital bifurcation between direct response and branding remains strong. Performance

marketers are willing to tolerate a high degree of fraud when buying against strict ROAS metrics,

and even seem to stomach the inevitable price inflation generated by fraud when buying on a

CPM or CPC basis. The efficiency for reaching audiences at scale, and tactical advantages of

cookie-based retargeting mitigate some of the open issues in programmatic RTB. That said, as

new viewability standards become ubiquitous, and publishers embrace new programmatic

approaches to enabling inventory access, fraudulent traffic will be tolerated less and less. This is

both a challenge and huge opportunity for programmatic RTB providers who are looking to pivot

their offerings to capture more branding dollars through programmatic direct capabilities.

Voice of the expert

“Greed outweighs fear of fraud. But it is a real problem, and will come home to roost.”


4.5. Standards One of the biggest barriers to achieving programmatic direct adoption at scale is the fact that

there are no standards. Buyers in other fields, such as print and direct mail, have access to

directories that make finding pricing and audience reach easy. Digital has lacked a similar

directory, largely because publishers would rather get a phone call than expose their rate card.

Complexity in ad sizes, differing technical requirements, and the lack of an accepted taxonomy

make it difficult to create an electronic order. The IAB has been trying to engage the industry on

this effort with various committees over the years (see Section 7), but progress has been slow.

What is clear is that, without standardisation that can enable electronic transactions,

programmatic direct cannot achieve significant scale.

Voice of the expert

“Industry standards are absolutely critical to the success of programmatic direct. Without widely adopted

standards, it will fail to live up to anywhere near its potential. The IAB has been trying to set standards for years.

Although they are very polite about it, I think they are frustrated by lack of motivation and involvement by the

players in the industry. But I’ve seen a huge change recently as a new breed of hungry challengers have entered

the market with lots of energy and smart ideas. This has woken up the incumbents and they are getting more

involved. You are going to see more progress on industry standards in the next six months than you’ve seen in

the last 18 years.”

Joe Pych, Bionic Advertising Systems




4.6. Chapter summary: programmatic direct and the

demand side While marketers and their agencies seem poised for broader adoption of programmatic direct,

there are still barriers to broader adoption, although none significant enough to slow the rapid

pace of technology innovation.

Technology approaches unclear: When it comes to where the experts think

programmatic direct success will be found, there is a bifurcation between those who see

higher inventory classes being accessed through new systems, aided by direct API connections

to existing ad serving systems, and those who think programmatic RTB pipes can be activated

to create discrete one-to-one guaranteed transactions. Others see both technology approaches

needed for future success. Today, there is no accepted standard for programmatic direct

transactions, no accepted standards and protocols, and few success stories to build broad

models upon. It’s very much an early market with huge upside for startup layers and

established ad tech companies alike.

Trading desks will be hugely influential in determining how quickly programmatic direct

buying methodologies will be implemented, and also help determine which underlying

technologies will be adopted in the near future. That said, the adoption of new programmatic

direct platforms will eventually result in less centralisation among large agencies, as media

shops within the holding company who own relationships with premium inventory owners

seek to retain control over buying higher classes of inventory. Programmatic direct platforms

– especially if tied into legacy agency operating systems that handle order management and

interface with billing systems – may be the starting point for decentralisation of

programmatic buying.

Culture: The only certainty of programmatic direct adoption is that it will be painful and

probably slower than expected. Programmatic direct buying represents a wholesale change in

the way digital media buying has been performed for nearly 20 years, and getting media

planners off spreadsheet-based, manual approaches will require significant culture change.

The dynamic of the ‘23-year-old media planner’ may not go away, but roles will shift, leading

to personnel needs more closely aligned with data, analytics, and creative and away from

manual tasks. The way in which guaranteed media is ultimately discovered, selected, bought,

and optimised will also be informed more by data than by instinct and habit – a welcome

change for mid-tail publishers with less sales penetration into media buying agencies.

Fraud: The entire programmatic space is rife with click and impression fraud, mostly found

in the programmatic RTB channel. This is keeping higher classes of inventory out of

exchanges, and making demand-side players wary of paying premium prices in auction-based

systems. This dynamic has given new (non RTB-based) programmatic direct players an edge

in terms of publisher adoption, but has not managed to impact the growth in programmatic

RTB for direct response buying. The divide between DR and brand buying remains wide.




5. The Supply Side Publishers struggle with the same inefficiencies as agencies when it comes to implementing

campaigns in the transactional RFP channel. A recent study by Digiday and Adslot16 showed that

the average publisher in North America spends up to 1,600 man hours per month responding to

RFPs, which accounts for 18% of sales (excluding commissions). Publishers who connect with

demand through the transactional RFP process also spend 22.1 hours on RFP-related

transactions, and only win 35% of the RFPs they respond to. Of the winning deals, another 24%

will be cancelled for performance reasons. With those kinds of numbers, it is not surprising that

publishers are also seeking programmatic efficiencies for selling their premium inventory.

Unlike other media industries, such as direct mail, which expose pricing and inventory availability

information directly to their demand-side customers, digital media sellers continue to reserve

their premium inventory to the manual sales channel. Discovering pricing and availability is often

only available through the RFP process, effectively gating access to select inventory behind a

human sales force. Buyers are also subject to a widely divergent set of standards for each

publisher: common ad units have wildly different creative specifications from publisher to

publisher, terms and conditions of sales vary between publishers and publishers leverage a wide

variety of tools for delivering various types of ads. This makes achieving scale in guaranteed

digital placements highly manual, difficult, and expensive.

“The fact is that a significant portion of most salespeople’s work day involves far too much

clerical work. Managing RFPs, IOs, billing, pacing reports, change orders, inventory queries

and reporting all consume a significant part of the typical sales person’s time. Reducing or

eliminating these repetitive clerical functions will allow publishers to hire more talented and

high-end salespeople,” says Eric Picard, adding, “There will be less need for low-end salespeople

and the number of supporting staff will be reduced significantly – at many major publishers

there is a 10:1 ratio between a senior sales person and all the supporting staff such as account,

sales planning and ad operations teams needed to execute against campaigns.”

Operational inefficiency has much to do with how a publisher’s inventory is represented in

programmatic channels, according to Jason Fairchild of OpenX:

“Realistically, there are a bunch of options readily available for publishers to use today

to control their inventory. What’s holding them back is often the reason that there’s not

enough information that can get through the programmatic ‘pipes’ to the buyer – [an]

above-the-fold [or] below-the-fold flag… doesn’t always get through or isn’t trusted. A

lot of the information that you would typically see on a manual IO still isn’t getting

through, and that’s a problem. Until programmatic platforms do a good job about

conveying information in a transparent way, publishers will continue to be frustrated.”

While this is true for all inventory, the challenges in securing premium inventory at scale has

created a two-tiered monetisation dynamic: publishers hand-sell premium inventory with a high

degree of control, and let a chain of networks and tech vendors monetise their remnant, unsold

inventory. There has been little middle ground. Previously, publishers with lots of site visitors and

quality demographics could benefit from their scale and offer marketers relatively inexpensive,

quality reach. Today, however, the story has changed: marketers have easy, cheap access to

cherry-picked audiences through exchanges, and it takes strong share-of-voice in a category for

publishers to command premium pricing.

Moreover, today’s digital publishing landscape is a tale of Haves and Have-Nots; publishers with

category-specific content and quality demographics have been able to command relatively high

CPMs for their guaranteed inventory (e.g. WebMD, TripAdvisor, ESPN) and publishers with

broader content and wider demographics (such as news and entertainment sites) have struggled

16 http://www.adslot.com/blog/study-confirms-rfps-a-time-sink-for-digital-publishers/ and http://www.adslot.com/soti/

http://www.adslot.com/blog/study-confirms-rfps-a-time-sink-for-digital-publishers/




to sell directly at premium rates. This dynamic leaves a lot of quality inventory on the table for

marketers, albeit that which is more difficult to access at scale – what isocket founder Jon Ramey

has described as the ‘fat middle’ in the inventory yield curve.

Figure 5: Today’s digital buyer buys super-premium inventory from publishers manually through

the transactional RFP process, and finds reach with RTB audience buying on long tail inventory,

leaving a relatively unexploited ‘fat middle’ of higher class inventory.

Although it is unclear whether buyers will find ‘mid-tail’ inventory a place in media plans between

super premium display and the long tail of exchange inventory, what is clear is that today’s buying

methodologies and technology have not enabled access to the ‘fat middle’ at scale. Earlier

platforms such as TRAFFIQ (since pivoted to become a digital media agency) tested the concept

of premium mid-tail marketplace aggregation as early as 200917, but failed to gain traction as RTB

took over. Nearly five years later, newer programmatic direct technologies are still trying to solve

for the ‘yield cliff’ that exists today.

That said, technology availability might not matter for every publisher, according to SAS’ Ana

Milicevic:

“It’s really an issue of how premium is your inventory: if you’re not on the comScore

100 probably not that much, and while you can probably gain some operational

efficiency by adopting programmatic, the reality is that it might not make that much of

a difference over current situation. To put it simply, there are many publishers who

should continue to focus on the AdSense check. There’s a reason there’s a ‘premium’ in

‘programmatic premium’.”

17 http://www.adexchanger.com/data-driven-thinking/the-fat-middle-and-other-programmatic-direct-myths/

http://www.adexchanger.com/data-driven-thinking/the-fat-middle-and-other-programmatic-direct-myths/

http://www.adexchanger.com/data-driven-thinking/the-fat-middle-and-other-programmatic-direct-myths/




5.1. New monetisation options: programmatic direct, native, etc. Today, publishers who hold premium ‘mid-tail’ inventory have access to programmatic direct

technology, but have yet to see enough demand to move the revenue needle significantly. What is

missing is the connection to demand-side buying systems. Shortly, we will begin to see deals

between supply-side technologies who have amassed large publisher portfolios, and buying

platforms.

Ian Lowe’s Adslot has recently tied this together with the acquisition of Facilitate Digital. For him,

programmatic direct is a global opportunity worth $20 billion dollars:

“Ultimately, the entire programmatic direct opportunity is about contemporizing a

global industry. Not a trivial undertaking, but one that is entirely inevitable. For

publishers, it’s more than just a margin play. The sustainability of their forward

booking revenue model is at stake and with it their capacity to fund quality content with

the confidence of foresight. And making guaranteed display easier to buy can only help

close the $20 billion opportunity gap and grow revenue.”

Connections between the demand and supply side will test the idea of true programmatic direct

buying from both a business and technology perspective. Firstly, can the technology work

effectively enough to provide demand-side customers with access to guaranteed premium

inventory at scale? Secondly, will publishers embrace this as a sea change in monetisation, or

continue to view programmatic direct as just another channel to exploit, like ad networks?

The answer to the first question is that programmatic direct technology will work. The answer to

the second question is more important; it means the difference between wholesales change in

supply-side inventory economics, and just another ad tech fad. For FatTail’s Doug Burke,

connections are key:

“The ecosystem of guaranteed media buying and programmatic direct selling has to

form the connected scalable systems in order for programmatic direct to accelerate.”

As Jason Fairchild explains:

“Publishers aren’t putting much of their inventory in these programmatic guaranteed

platforms just yet in part because agencies haven’t started using them at scale, but that

will change as existing companies like Mediaocean, newer players such as isocket, and

the DSPs figure out how these buys will be executed by agencies and trading desks.”

5.2. Programmatic direct: a sales channel or real trend? With the right technology, enough marketplace participation by quality publishers, and demand-

side interest, the programmatic direct ‘channel’ looks quite compelling. Buyers are able to string

together a portfolio of guaranteed buys on premium inventory often with lower purchase

minimums and short out-clauses, and sellers retain control of pricing and availability.

Easing the friction of the overcomplicated manual RFP process also means being able to optimise

plans in-flight more seamlessly, opting out of lower performing buys, while being able to easily

add budget to higher performing line items on a plan without ‘change orders’, more manual

insertion orders, and the rest. Newer programmatic direct technology also empowers sellers,

keeping salespeople in the process, and giving publishers a way to compensate their sales staff for

driving demand through the channel.

The future is real from the standpoint of technology, and large publisher adoption of such

platforms shows that publishers are keen on trying programmatic direct (or any methodology,




really, that offers new ways of discovering demand). But the outstanding questions are whether

programmatic direct business models are appropriate.

Some programmatic providers are charging up to 12% transactional costs, which may be entirely

appropriate when originating new business for a publisher – but would be difficult to justify for

enabling an existing account through programmatic direct. However, taking the viscosity out of

the transactional RFP channel by making it easier to respond to RFPs, manage deal flow, and

increase speed to market may justify higher transactional costs for programmatic direct selling.

Ultimately, the market will determine how much to award the programmatic ‘middleware’ that

sits in between buyers and sellers.

Adoption of new programmatic direct technology is also complicated by the overall economics of

ad monetisation, explains Mediaocean’s Bill Wise. Fragmented point solutions and intermediaries

sucking margin out of inventory transactions have resulted in a lot of innovation – but little in the

way of revenue gains for publishers. “First, the economics need to be fixed,” says Wise. “Secondly,

8-10% of the publishers’ inventory is driving up to 35% of their revenue, so publishers need to

figure out how to monetise the remaining 90% of inventory without cannibalizing their

premium demand or creating sales channel conflict.”

For FatTail’s Doug Burke, this will be determined by the inherent design of platforms. “Not all

programmatic direct sales systems are designed the same way. Many are simply creating

another channel to sell to unsold, or remnant inventory at excessively high prices similar to ad

networks”, says Burke, stressing that the systems that will be successful will operate as “a sales

extension tool of the premium guaranteed selling processes [that offers] greater operational

efficiency.”

Voice of the expert

What about new, programmatic direct technologies? Are publishers really putting their

inventory into these platforms, or are they viewing these ad tech opportunities as yet another

channel for unsold inventory? In other words, is this a ‘real’ trend, or another ad network

disguised as a technology?

“The inventory sold through these platforms can compete with hand-sold orders at the same high levels in the

primary ad server, so no, this is not just another ad network. The real question is how long do the sales teams get

compensated on these deals? I’d guess another year or two.”


“It’s not a network model. The reason we call it programmatic direct is that there has to be a connection between

the advertiser/agency and the publisher. There is also much more transparency into fees relative to ad networks.

The revenue that publishers are getting out of private exchanges is also still relatively small, mainly due to

barriers on the buy side (lack of standards, poor deal discovery, etc.) and publishers needing to figure out how to

balance exclusivity and scale.”

Jason Fairchild, OpenX

“Programmatic direct technologies do not rely or needing the publisher to ‘allocate’ inventory as they reserve

inventory on demand when new orders come in and are approved. These technologies are not being used for

unsold inventory and are instead being used as a companion selling technique to traditional sales teams selling

direct. Any programmatic direct technology that is based on, or behaves like, an ad network, will not succeed.”

Roy Pereira, Shiny Ads

“This is a ‘real’ trend with a big potential but the current availability of inventory is not at scale. If the buy side

adopts these technologies, the sell side will follow. Suppliers are making their inventory available, and there is a

plethora of enablers in the market. But they all need integrations with entities with buying clout. However,

publishers are taking a wait-and-see approach because they do not see enough demand in the system to make it

worth their while to take this initiative.”

Ben Pashman, Centro




Voice of the expert

“Publishers are happily putting their inventory in these technologies at over-inflated rate card pricing. There is

no drawback for them to do so. The main problem is that ‘rate card’ is a non-starter for programmatic buying,

and just invites negotiation. Negotiation leads to an RFP. Premium inventory will start to be transacted in this

manner when publishers are comfortable enough to put the price they are willing to transact the inventory on –

their true yield curve. Think SABRE reservation systems and pricing for airlines. This is where RTP (real-time

procurement) comes in…”

Bill Wise, Mediaocean

“Publishers are pushing packages of inventory into programmatic direct, but not in ways that solve the problems

mentioned above. The packages tend to be very ‘summary level’ rather than granularly created to match against

advertiser goals. The right long-term answer for programmatic direct is to assemble packages based on campaign

goals – much like is done in the RFP process today – but to do so in a fully automated way. Again – this needs to

resolve somewhere between the needs of the buyer to ensure they get the best available inventory and the needs

of the seller to ensure that there is enough competition over that inventory to get significant yield.”


5.3. Programmatic direct and organisational change On the flip side of the ’23-year-old media planner’ is publishing’s ‘$200,000 salesman’, the highly

compensated digital seller responsible for getting premium inventory into an agency’s media

plan. Often derided for their outsized compensation and the high cost of travel and entertainment

expenses (T&E), some of which funds the ‘sneaker parties’ at the heart of the transactional RFP

negotiation, digital salespeople are wondering whether new programmatic channels will replace

them. There is a clear incentive for publishers to do so; sellers with an average tenure of 7-10

years make a median income of $200,000, not including benefits.18 Even when handling a quota

of $2 million or above, sales personnel adds significant cost of sales – in an ever shrinking

‘premium’ channel that is being supplanted by programmatic RTB sales, much of which go

uncompensated.

Before programmatic direct solutions gain significant adoption within the overall supply-side

monetisation playbook, publishers have to reconcile the impact this new approach has upon the

existing organisational structure. Most specifically, publisher organisations have to decide how to

compensate sales personnel for managing programmatic channels, and driving demand inside

them.

For Anthony Katsur, just because the transaction takes place programmatically doesn’t change

the overall sales dynamic:

“Salespeople are still needed. We’ve all heard the old adage about advertising, ‘this is a

relationship-driven industry’. Show me one that’s not. The salesperson creates and

cultivates relationships constantly. They are the tip of spear. Just because the

transaction is realizing efficiencies, it doesn’t mean the salesperson is any less

important in driving awareness of the publisher’s product and working with the client

to understand their goals.”

“I don't see the death of the $200k salesman. I see the birth of the $300k salesperson,” says

Bionic’s Joe Pych. “Programmatic direct can unleash the full potential of a salesperson. There’s

only 24 hours in a day. Good salespeople are held back by cumbersome processes and high

transaction costs that keep them out of a lot of deals. With efficiency, they can do more deals per

quarter and bring in more revenue to the publisher. And get paid more to do it.” Of course, the

future of the “$300,000 sales person” depends on whether or not he or she is getting

compensated for driving growth in programmatic buying, which is critical to wider adoption.

18 http://digiday.com/publishers/what-digital-ad-sellers-make/

http://digiday.com/publishers/what-digital-ad-sellers-make/




This sentiment is shared by most interviewees, including Anthony Katsur, who sees compensation

as a “massive barrier” to achieving programmatic change on the supply side:

“[You must have] compensation for all deals, programmatic or not. Sales are driven by

quotas. Quotas equal their paycheck. Logic would dictate that if you tell someone if

revenue comes in through X channel, they’re not going to get paid on it, how supportive

do you think that person would be of that channel?”

Bionic’s Joe Pych agrees:

“Would you compensate a salesperson differently if the insertion came in over the fax

versus email? Of course not. Likewise, they should be compensated the same when it

comes in through the programmatic direct wires.”

More important in terms of overall organisational change is the composition of the entire sales

and delivery organisation, which must include new data-centric leadership. For isocket’s Trenda,

publishers have been greatly impacted by RTB, and need to adjust to service a new type of

customer that impacts every aspect of inventory sales – the media trader:

“The most interesting recent phenomenon we’ve started seeing is the birth of the media

trader. Not an official title (yet anyway), but these people aren’t simply setting nobs and

dials in their DSP and hoping the inventory comes through. Instead, they’re making a

commitment to some well-defined guaranteed piece of inventory, and then delivering it

via their DSP. They’re simply providing a way to allow these campaigns to get access to

much more premium inventory than they would otherwise get via a private exchange.”

This represents a sea change for publishers. Instead of evaluating media investment decisions on

panel-based measurement data and publishers’ own information on audience composition and

reach, they are leveraging all kinds of data to make premium inventory investment decisions. In

order to be successful, publishers must increasingly speak the same language – a language of

trading rather than sales. This requires different personnel, specialist groups within a publisher,

or a significant re-training of existing staff.

RareCrowds’ Eric Picard summarises this dynamic precisely:

“Publishers that are doing this right are investing in both people and technology –

creating significant senior and executive roles for people with the right experience and

empowered to create organisational change. These people also need to have the funding

and resources to implement the right technologies to ensure that every open channel of

demand gets access to the inventory – ideally in a way that drives competition across

channels to increase yield. This is a big departure from the older approach of protecting

individual channels from competition – which actually artificially reduced competition

and has stifled yield.”

5.4. Chapter summary: the supply side Adoption of programmatic direct low: Publishers continue to struggle with the high

cost of sales related to the manual transactional RFP channel for selling premium inventory,

but are hesitant to place higher classes of inventory into programmatic RTB systems without

having more granular control over pricing and data. Publishers are still struggling to quantify

all of the various programmatic direct monetisation technologies available to them, and how

they will fit into existing ‘stacks’. Additionally, publishers seem content to take a wait-and-see

approach to programmatic direct, and are making moves largely influenced via buy-side

pressure to make more inventory available programmatically, rather than taking the initiative

on sales monetisation approaches that have not been tested at scale.

Interest high: While the supply side has fully embraced programmatic RTB for

monetisation of unsold remnant inventory, publishers have just started to test programmatic




direct tactics via private marketplaces and invitation-only auctions through exchanges. While

there remains confusion around the terminology to describe various programmatic direct

sales tactics, there has been a growing consensus that API-driven programmatic direct

solutions (isocket et al) are a compelling alternative ‘middle ground’ for premium

monetisation – and maybe even a wholesale solution, if embraced at the enterprise level.

However, it is early days in terms of adoption, and not enough agency demand has been

aggregated through programmatic direct platforms to warrant serious consideration.

Debating programmatic direct as channel or enterprise technology: Publishers like

the idea of programmatic direct from an efficiency standpoint, as it offers more control over

pricing and partners, but most (excluding Google) do not have the market power to dictate

how their inventory can be purchased. Buyers are firmly in control of the inventory

procurement process, and have been steadily pushing their inventory suppliers to create

programmatic access to their inventory. Buyers clearly would like programmatic direct to

happen inside of existing RTB pipes, where agency trading desks and marketers’ in-house

programmatic buying teams have already created investment. From a process automation

standpoint, agencies also desire programmatic direct API-driven solutions, but are wary of

price inflation – and unwilling to embrace such solutions without them being tied into their

legacy systems. Publishers therefore are currently treating programmatic direct as a channel,

and waiting for systems integration and buy-side adoption before reconfiguring at the

enterprise level.

Publishers must adapt to new investment dynamics: Publisher salespeople are not

going away, but their roles are quickly changing. While demand still must be generated, the

modern programmatic sale organisation must understand the new media investment

dynamics happening within agencies, who are increasingly embracing a trading culture that

looks holistically at reach and performance across a wide portfolio of opportunities.

Management, sales leadership, on-the-ground sales staff and operational personnel must also

foster a culture that can rapidly position inventory based on rapidly changing demand, and

manage yield across existing premium inventory, the fast-moving RTB channel – and new

programmatic direct channels. Ultimately, automation will weed out personnel who cannot

adjust from transactional duties to more analytical roles, and the winners on the sell side will

be those publishers who take a data-driven approach to serving their advertisers.

Voice of the expert

“Ad technology – largely as part of a cloud of arrogance that floats over many companies – has forgotten a very

key component: PEOPLE. Many an ad technology executive, usually one at a small, emerging, overcapitalised,

unprofitable company with an alpha stage product has taken to Twitter or the trade press and declared the death

of salespeople, of media planners, of media buyers. That’s not a great idea. As we all move out of the auction

market and into direct deal automation, into automating the rest of it: we need to empower people, we need to

empower sellers, we need to empower buyers. We need to push the technology down and pull the buyer and

seller closer together.”

Jay Sears, Rubicon Project




6. Transactional RFP Workflow There’s been a rise in programmatic direct software solutions seeking to automate manual

processes between buyers and sellers, and create improvements throughout multiple phases of

the transactional RFP workflow. This section will take each phase of the transactional RFP

process, and discuss how programmatic approaches are impacting them, from both a demand-

and supply-side perspective.

There are significant opportunities in each distinct piece of the transactional RFP workflow, and

there seems to be increasing motivation for stakeholders on both sides of the media transaction to

embrace new technologies that promise efficiency and cost savings. Agencies, used to having

more and more programmatic access to inventory, want similar efficiencies in managing reserved

buys. Publishers, who enjoy the ability to easily monetise remnant inventory in programmatic

RTB systems, also want to be able to reduce the cost of direct sales – and the pain caused by

transactional RFP churn.

We will look at each segment of the transactional RFP workflow, examining the current paradigm

and challenges, what is coming next in terms of technology and solutions, and potential game

changers.




6.1. Research

Current paradigm

Currently, for buys on premium publishers, agencies and marketers use research tools from

comScore, Nielsen, Quantcast, Compete and others to understand demographic viewership

trends, and see what websites match their targeted audiences. Although this has been the way

media discovery has worked across many channels (even traditional media), digital programmatic

RTB buying has completely disrupted this notion. By separating audience from the media,

programmatic RTB enabled pure audience buying for the first time, eliminating need for panel-

based measurement to provide a proxy for audience. Currently, audiences are discovered in vastly

different ways for RTB and guaranteed buying.

As recently as 2011, it was estimated that 70% of digital display dollars were still contracted on a

guaranteed basis, with 20% flowing through programmatic RTB pipes, and the remaining 10%

spent on sponsorships/native ads. This paradigm is rapidly shifting as more dollars are allocated

to RTB and native, but digital media budgets in the transactional RFP space will remain strong,

and capture as much as 50% of digital dollars until publishers expose considerably more premium

inventory into RTB channels.

Challenges

On the demand side, agencies and marketers love the direct access to audience that programmatic

RTB provides – but can’t apply audience segments to premium inventory that remains unexposed

in exchanges. Therefore, marketers are increasingly buying in two channels and methodologies:

using panel data for premium, guaranteed buying and leveraging third-party data segments for

exchange buying. On the supply side, publishers are challenged by new viewability standards

from measurement companies that threaten revenue, as the standards for viewable ad

impressions increase and billable impressions decline. Also, publishers face pressure to enable

more programmatic ways to discover their inventory – which is impossible without exposing it to

third-party systems and risking ‘data leakage’.

New datasets are also bringing about new opportunities to discover audience unrelated to both

traditional panel-based measurement and third-party audience data. Social affinity data providers

such as Colligent recommend sites based on brand affinity, and companies like MakeBuzz

leverage profit potential metrics to select digital media. These and other new discovery

mechanisms may replace – or be used in conjunction with – traditional measurement to inform

media plan creation.

What’s next?

New programmatic direct planning platforms are increasingly integrating research data,

providing planners with ‘one screen’ access to planning and research tools in the same interface to

increase workflow efficiency. New web-based planning systems, by aggregating structured data,

can also start to relate traditional demographic data with ad performance and pricing data, tying

media discovery to performance for guaranteed buys. New planning and buying systems are

leveraging multiple datasets to enable programmatic media recommendations. Ultimately,

aligning audience research more closely with the digital planning process will yield greater

efficiencies and offer more opportunities for data to be applied before initial impressions run.

Watch out for

Dismantling of current cookie system (via legal process, or wide adoption of newer ‘unique

identifier’ technologies from large publishers like Google, Microsoft, Apple and Facebook)

creates increased demand for programmatic direct, and less within programmatic RTB –

making media research more important than ever.




Newly emergent data for page scoring (measuring viewability, ad adjacency, relevance, etc.)

increasingly become embedded in research and planning tools, further segmenting premium

inventory from exchange-based remnant inventory. Companies such as Moat and Evidon

collect such data.

6.2. Media planning

Current paradigm

According to recent research by industry journal Digiday and Bionic Advertising Systems , 76% of

agencies report using Microsoft Excel as their primary planning software, with MediaVisor

running a distant second with around 10% market share. Complicated digital plans require a

flexible format, and 89% of agency planners report spending more than an hour per day in Excel

– with 35% spending over four hours every day in the software. Plans are created manually in

Excel, pitched in PowerPoint, sold over phone and email, and deals are signed with PDF

documents – or even fax machines.

While ironic, the highly manual process of digital media planning and buying today has created

the opening for the ascendancy of programmatic RTB, whose obvious efficiencies appeal to

marketers who want the lion’s share of their media budgets spent on the media itself, rather than

planning (which the same study indicated might cost between 8-12% of a campaign’s total

budget). The legacy paradigm offers scant ability to leverage data-driven insights for planning, as

much historical pricing and performance data is stored on different systems, and not centralised.

Challenges

Because they are compensated by the hour (mostly on a cost-plus billing model), large agencies

have a perverse incentive to change. Agencies make money on complicated media engagements

that take hundreds of hours to plan, and this dynamic has led to a labour model in which younger,

largely inexperienced and lower-paid media planners work long hours to execute plans. While

large agencies benefit from this model, small- to mid-sized agencies, many of which get

remunerated on a percentage-of-spend or flat rate model, suffer margin degradation from lack of

efficiency. At this time, choices for demand-side platforms are relatively limited, and agencies are

challenged culturally to adopt new web-based tools.

From a tools perspective, programmatic direct adoption has been severely limited by the legacy,

server-side agency operating systems upon which they depend for order management and billing.

Agencies want a single, seamless ‘operating system’ that includes programmatic direct planning

tools, but are hesitant to adopt solutions that do not integrate with their legacy software.

What’s next?

For the demand side, programmatic direct technologies are looking to replace Excel with web-

based planning tools that centralise workflow, and also connect to the rest of the tools in an

agency’s stack, such as the ad server and order management systems.

Agency clients are rapidly adopting new programmatic technologies, and starting to build in-

house media practices by taking advantage of SaaS model applications. While this is almost

exclusively on the programmatic RTB side, agencies are starting to feel pressure to bring their

clients other programmatic solutions that offer transparency and cost efficiency.

Smaller agencies with data-driven digital practices will lead the charge in programmatic direct

adoption, and large holding company shops will not engage in a significant way for 18-24 months.

Watch out for

Legacy systems acquire a programmatic direct technology and quickly prove model by linking

their large demand-side customers directly to publisher inventory via application

programmatic interfaces (APIs).

The Sutton Pivot (see Section 2) is realised. If a big supply-side platform (SSP) can quickly

modify its offering to enable publishers more granular control over direct channels, its strong




links to demand may generate out-sized market share quickly, and sideline pure-play

entrants.

Newly emergent pure-play programmatic direct systems gain adoption from holding company

player(s), threatening the current paradigm, spurring M&A activity as entrenched workflow

systems move to acquire programmatic direct media planning tools and embed them.

6.3. Demand-side order management

Current paradigm

Traditional software systems such as Mediaocean (the combination of Donovan Data Systems and

Mediabank) and Strata have long dominated the inner workflow of agencies, which use the

systems to process orders and align actual ad delivery versus that which was ordered. Currently,

these traditional systems are not integrated directly into planning tools, and media planners find

themselves manually entering approved plan details in these systems. Both the traditional

software companies and new entrants are trying to create programmatic workflow efficiencies

which seamlessly connect planning data with order management software to eliminate duplicative

work and manual data entry.

Upstart software players like Centro and Bionic have created agency workflow systems from the

ground up, seeing adoption in the regional agency market. Adslot’s Symphony product (acquired

through the merger with Facilitate Digital) is an enterprise-class system meeting large agency

needs that has seen strong adoption in the Asia-Pacific region, and is well positioned for growth

in the US. That said, Mediaocean continues to have a stranglehold on workflow management for

the holding companies, and is looking to modernise its platform with its new Prisma tool.

Challenges

Legacy systems dominate agency workflow, but their architecture makes them difficult to

integrate with. Agencies, desirous of a single ‘operating system’ to run their businesses on, find

themselves reluctant to add another login and further complicate a media procurement process

that includes a high level of complexity and multiple systems.

Understandably, the leading systems have little incentive to be extensible, as they would like to

protect their market share, and provide internal innovations for their customers, rather than

enable smaller technology companies to plug in and disrupt traditional processes. Agencies who

want to innovate in workflow face a dilemma: whether to disrupt existing models with innovation

now, for perceived performance gains later; or to pressure incumbent systems to innovate, and

risk missing new technological advances offered by more nimble startups.

What’s next?

Legacy systems are slowly innovating, while controlling the amount of new entrants that can ‘play’

within their existing ecosystems, and looking to create the standards and protocols needed to

make programmatic direct solutions universal. Younger startups and smaller players will look to

exploit the small- to mid-sized, regional agency market (those that do not need or cannot afford

enterprise-class systems), and look to gain adoption. Ultimately, successful innovation in the mid-

tier agency market (and among a handful of in-house planning teams from direct marketers) will

lead to more legacy system integrations – or, more likely, the acquisition of programmatic direct

technology companies.




Watch out for

Google updates Campaign Manager (including MediaVisor functionality), and makes their

stack available for planning and buying media outside of the Google media ecosystem.

Although there is a low probability of this happening, a free Google entrant could challenge

large legacy players and quickly disrupt many smaller software entrants. Currently, Campaign

Manager is configured to be more of a configuration interface for DoubleClick for Advertisers

(DFA), with limited media planning functionality.

Centro, having recently shown a commitment to owning its own stack by purchasing the

SiteScout DSP and indicated interest in acquiring a DMP, is also a player to watch. An

aggressive move away from services and into software-as-a-service would make them a

credible threat to challenge legacy software players in the regional agency market.

6.4. Demand-side ad serving

Current paradigm

The linchpin of the workflow process, agency ad serving technologies (such as Google’s

DoubleClick for Advertisers, MediaMind, and Atlas) have experimented over the years with

building agency workflow tools into their systems (e.g. MediaVisor). Today, web-based

programmatic planning tools are plugging into ad servers via API, pushing planning data into ad

servers – and pulling key pricing and performance data back into planning tools to enable

smarter approaches to media selection, based on historical performance data.

Today, ad serving technology is both the biggest hindrance to programmatic direct success – and

the most critical component to its eventual success. On the demand side, inputting negotiated

placements in DoubleClick or MediaMind requires much manual work, and is often subject to

error.

Challenges

Ad serving has become increasingly complex. According to a recent study by MediaMind, today’s

top advertisers are running campaigns that are six times as complex as the average campaign. The

study also indicates that over a third of ads have more than one tag, and the amount of campaigns

with five or more tags increased by nearly 500% over the last several years.

Demand-side ad serving is only growing more complex as new native opportunities appear, the

expansion of new advertising formats (such as Rising Stars) gain traction, and new display video

formats increase. Publishers, who all seem to have proprietary ad unit specifications, have added

to the complexity by not embracing standards. The result is massive ad operations complexity,

which creates a great deal of technically complicated, manual work for demand-side ad operations

teams, adding to the overall cost of campaigns.

What’s next?

Programmatic RTB has gained fast adoption in a large part due to the naturally occurring

standardisation around IAB ad units; marketers know that they can access large swaths of

exchange inventory by leveraging the most popular units. However, ‘banner blindness’ is pushing

marketers to look for higher impact creative units and new native opportunities often require

bespoke creative development, meaning complexity continues to grow.

On the transactional RFP side, new programmatic direct technologies are enabling demand-side

customers to access marketplaces and upload creative directly into platforms that connect via

APIs to supply-side servers such as DFP. Additionally, more web-based planning and buying

systems are connecting via APIs to demand-side servers, and eliminating duplicative manual

entry of placement-level detail, creating more streamlined workflow.

More importantly, ad server connectivity is enabling pricing and performance data to be more

closely aligned with planning systems – adding a layer of business intelligence to the process of

securing guaranteed inventory.




Watch out for

Cookie crumbling: One of the biggest problems bringing efficiency to ad serving is the

complexity created by cookie-centric targeting. The introduction of unified identifiers from

large players like Google, Apple, Microsoft and Facebook may reduce cookie complexity, but

necessitates adoption of varying user IDs and separate reporting/measurement platforms.

Measurement: New viewability standards such as comScore’s VCE and Nielsen’s OCR gain

rapid adoption, and all ad servers start incorporating such metrics on a default basis. Recent

tests between Nielsen and Google indicate that we are rapidly moving to a world in which a

Gross Rating Point (GRP) equivalent provides a standard reach and frequency metric for

display advertising. Because this is critical for cross-channel campaign measurement, ad

servers and the systems they connect with that support such measurement will be ascendant.

6.5. Supply-side order management

Current paradigm

On the supply side, larger publishers have embraced order management tools that integrate the

publishers’ CRM, ad serving, and finance systems to centralise operations and improve workflow

processes. Premium publishers, who still realise the large majority of their revenue from the

transactional RFP process, realise lower margins on premium inventory, due to the high cost of

sales personnel and inefficiencies in proposal management and delivery. A recent joint study

between Adslot and Digiday revealed that publishers spend over 22 hours responding to a single

RFP – with win rates as low as 35%. Combine that with a high cancellation rate once impressions

start running (up to 25%), and publishers are spending an average of 18% of revenue on the

transactional RFP process.

Publishers have benefited from the seamless monetisation offered by SSPs, ad networks, and

exchanges (place a tag, get a check) for their lower classes of inventory, and are seeking more

programmatic ways to sell inventory to enhance margins. Today’s programmatic options are

largely limited to working out ‘private deals’ inside of exchanges, but some new programmatic

direct opportunities have emerged which offer a deeper layer of sales control over pricing and

inventory availability and are gaining mindshare from inventory owners reluctant to cede more

power to technology companies.

Traditional order management tools are trying to connect to demand-side systems to provide

publishers with order fulfilment operations that are aligned with the agency’s planning and

buying process (e.g. Operative and Mediaocean collaborating on electronic ordering and invoicing

standards), and also looking to tie into publisher ad serving systems, to align pricing and

availability data with common CRM tools.

Challenges

An improved DFP API means that it is easier than ever to tie into the publisher ad server and

expose pricing and availability detail, and newer technology such as that offered by Adslot, Shiny

Ads, and isocket can enable demand-side partners’ direct access to premium inventory without an

insertion order.

While the technology hurdles to programmatic direct adoption seem surmountable, the largest

barrier to programmatic adoption for higher classes of inventory has been the publishers’

reluctance to cede sales control. Organisations are challenged from a compensation standpoint

(whether or not to commission sales of programmatically acquired inventory), and also

challenged to gate access to preferred buyers in a non-RTB environment.

Publisher monetisation has been largely a tale of two silos: an expensive sales force selling

expensive inventory and technology-enabled aggregators selling low-CPM remnant inventory.

The challenge is to streamline premium sales by leveraging the efficiency of network monetisation

without ceding control of pricing and availability.




Increased focus on robotic inventory and new measurement tools are starting to pressure pricing

for lower classes of inventory.

What’s next?

Publishers hate the low CPMs offered by networks, but love the fact that they aggregate

significant demand. What has become the SSP sales channel is now an indispensable part of

publisher monetisation.

Order management systems’ next logical evolution is to go beyond connections to billing and

CRM systems, and plug directly into programmatic direct solutions that expose pricing and

availability to demand-side systems, to enable a new channel of deal flow.

Watch out for

‘Systems of Record’ for publishers (such as OperativeOne, Fivia, and FatTail) start to connect

directly with demand-side platforms, enabling electronic ordering, seamless ad delivery, and

connections to the publishers’ CRM. Once this ‘middle layer’ becomes entrenched, it will be

hard for competitors to dislodge.

Demand-side platforms leverage their aggregated demand and build their own publisher

marketplaces, and pivot buyer transactional technology to help publishers manage multiple

channels of inventory.

6.6. Supply-side ad serving

Current paradigm

Currently, most publishers employ Google’s DoubleClick for Publishers (DFP), which gives them

the ability to seamlessly tie into AdSense, and offers a flexible API for extensibility into other

systems. Other popular ad serving solutions include Open Ad Server (OAS), ADTECH, and

OpenX, among others. Many systems also include the ability to tie into marketplaces which help

them monetise remnant inventory, along with tools to help optimise and prioritise programmatic

sales. The last several years have seen significant innovation in terms of bringing the ad server

beyond a delivery system, and tying ad serving more closely to overall monetisation strategies

through yield management.

Challenges

Aligning advertiser ad tags with publisher-side ad serving can be highly manual, and create

discrepancies in reporting that take many hours to reconcile. Adding to this is the amount of

third-party technologies that ride alongside ad server tags, creating more complexity and room

for error. Publishers can also employ multiple ad serving technologies for standard display, video,

and rich media, adding to the complexity.

What’s next?

Google’s DFP has commanding share of market in supply-side ad serving – but also an advanced

API, which enables any tools to integrate seamlessly. Yield optimisation tools like Yieldex have

leveraged direct ad server connections to enable publishers to get the maximum amount of money

from advertisers, based on competing demand profiles and inventory type. Programmatic direct

software providers believe building connections between demand- and supply-side servers can

make seamless ad delivery a reality.

Watch out for

The recent Adslot acquisition of Facilitate Digital will prove to be an early testing ground of

the seamless delivery theory.

Possible acquisition of key players that enable yield management and optimisation within the

publisher ad server. With commoditised ad serving prices and slow tools innovation, major ad

serving providers may look to add value through acquisition.




6.7. Billing and reconciliation

Current paradigm

Although modern ad technology has infinitely increased the flow of ad impressions, it seems to

have had the opposite impact on the flow of dollars between marketers, their agencies, and

publishers. Agencies struggle to gather data to create monthly invoices based on delivery

numbers, publishers are challenged in terms of invoicing the correct amounts, and cash collection

has turned into a waiting game, with receivables aging 120 days or longer. Currently,

reconciliation in the billing process is done manually, using data pulled from order management

systems and pulled from large financial systems (such as SAP for a large agency) or agency-

specific financial solutions (such as Advantage for independent agencies). To date, there have

been few efforts to link this critical part of the media procurement process to overall workflow.

Challenges

For both sides of the equation, much time and effort is expended trying to reconcile the monthly

delivery numbers between an order management system, the demand-side ad server, and the

publisher’s ad server. That means matching order and vendor numbers across systems, and often

manually negotiating final delivery numbers when discrepancies arise. Complications in

reconciliation also slow down payment times, and increase billable hours for some clients, making

digital less efficient.

Although the IAB has been helpful in terms of creating the terms and conditions necessary to

assist with reconciliation (the standard 10% delivery discrepancy allowance), needed system

integrations have not been adopted at scale that would allow for reconciliation for guaranteed

buying to occur dynamically.

What’s next?

Today’s programmatic direct technologies are helping with billing and reconciliation in several

ways. Supply-side solutions offer distinct advantages: first, by tying directly into the publisher’s

ad server, there is a direct connection between impression availability and ordering, ensuring that

delivery goals can be met. Secondly, because such systems effectively create an electronic ‘order’,

there is a single system of record, simplifying bookkeeping.

Demand-side programmatic direct solutions are developing an electronic alternative to the

insertion order that can deliver both campaign and invoicing details electronically to publishers

for acceptance.

Watch out for

Look for massive strides in this area to be made over the next six to nine months by industry

leaders, along with possible participation on the implementation of such standards by the IAB,

AAAA, and possibly others.




7. Where Are We Now? Taking cues from our interviewees, and applying their observations to Gartner’s hype cycle model,

it looks as though we are indeed in the early innings of the programmatic direct game.

Figure 6: This version of the Gartner Hype Cycle shows that programmatic direct

is at an early stage, and still requires significant marketplace changes to grow in

size and gain velocity

The technology triggers that enabled programmatic buying of higher classes of inventory (decent

ad server APIs, and private deal functionality inside of RTB systems) have happened relatively

recently, and are just getting some early market traction. Before programmatic direct volume

rises, a lot needs to happen:

Standards adoption: After nearly five years, the IAB’s Digital Advertising Automation Task

Force is not much close to its original mandate (when it was started as the “eBusiness Task

Force”). Its stated mission: “Updating the XML schema and implementation testing for the

electronic delivery of digital advertising business document.” Those documents include

Requests for Proposals (RFPs), insertion orders (IOs), and invoices – documents that must be

standardised in order for adoption of programmatic direct buying to occur at scale. Although

the group has reorganised some new member initiatives and technology changes, it seems

clear that stakeholders will ultimately work to build workable API standards, implement

them, and let market adoption dictate how specific standards and protocols are implemented.

Connections: Another significant barrier to rapid adoption of process automation

technology is the fact that legacy order management and billing systems are not extensible,

like modern cloud-based platforms. The key to programmatic direct buying is being able to tie

specific systems in the media procurement workflow together, and buy- and sell-side systems

are not speaking to each other yet. When large agency operating systems like Mediaocean

integrate directly with large publisher order management systems such as OperativeOne,

adoption will proceed more rapidly. This is happening among innovators on the edges, but

true connectivity is just beginning to be established among the larger, legacy players.




Demand aggregation: Beyond the holding company level, another factor that could drive

rapid programmatic direct adoption is the aggregation of demand from regional agencies.

With less need for large-scale order management systems, but the same need for

programmatic access to quality media and efficiency, there is the opportunity for demand-

side planning and buying platforms to aggregate demand, giving the sell-side a single

technology-based integration point for regional agency demand. Success in aggregating hard-

to-get small agency budgets for publishers would incentivise more rapid adoption and drive

process automation to scale more rapidly.

Client embrace: Perhaps as significant as the adoption of standards, and overall

marketplace dynamics, is being embraced by the ultimate financing source: the marketer

itself. Marketers have already shown they are willing to look at taking the programmatic reins

when it comes to RTB, giving themselves more control over their first-party data, more

granular control over media pricing and placement, and – most importantly – a 15% ‘agency

discount’ they can apply to building internal capabilities. Marketers who use agencies to place

direct digital buys are increasingly looking at new programmatic solutions that can streamline

access to quality, brand-safe inventory, while lowering the cost of procurement. Clients with

internal media buying teams can quickly move the needle on programmatic direct adoption.

Voice of the expert

“We in digital advertising and especially ad tech have a tendency to go gaga over the next shiny object: recent

examples include social, RTB, mobile, and it seems the topic for 2014 will be programmatic. To ensure that this

is not simply another hype cycle, we need to be very clear about what we mean when we say programmatic: is it

automating direct sales of premium inventory, a marketplace for automated buying, a private exchange, or

something else entirely?

“Outlining these distinctions can help all sides of the ecosystem understand better what applies to them and how

to practically tackle programmatic so I think you have to start from the basic definitions in every thought

leadership piece. When it comes to challenges, understanding what demand, supply, and technology players

perceive as barriers to adoption is critical. The question I’d really like to ask is – is it worth it? How can we

illustrate and clearly articulate the value proposition for demand, supply, and technology partners and is there a

formula for efficacy based on amount of premium inventory or amount of spend managed?”

Ana Milicevic, SAS




Figure 7: The Picard workflow model for programmatic direct, inclusive of RTB

infrastructure




8. Contributors Andy Atherton is SVP at AppNexus, the world leader in real-time

advertising technology, where he is driving delivery of innovative new

technology for programmatic direct. Andy is also spearheading the

development of the AppNexus office in San Francisco, where he is based. A

well-known and respected executive in digital advertising, Andy previously

spent four years as COO and cofounder of Brand.net, a pioneer in

programmatic reserve technology and leading digital media buying solution

for top brands. Prior to Brand.net, he was Vice President of Pricing & Yield

Management for Yahoo!, responsible for maximizing monetisation of a global portfolio of display

inventory worth $2 billion annually. Prior to Yahoo!, Atherton was president and co-founder of

Optivo, a venture-backed startup that developed price optimisation software for ecommerce

retailers. Andy received a B.S. in Mechanical Engineering from M.I.T.

Doug Burke is General Manager and Chief Revenue Officer of FatTail,

where he is responsible for sales, corporate strategy and business

development, marketing and recruiting. FatTail is a leading provider of

software to help online publishers price, plan and sell premium guaranteed

inventory. Prior to joining FatTail, Doug was a Managing Director in

investment banking in the software and media verticals at Morgan Joseph &

Co., Tucker Anthony Sutro and Montgomery & Co., where he specialised in

working with entrepreneurs in online media. Doug holds a BA with honors

in Economics and German from Dartmouth and an MBA from the Amos

Tuck School at Dartmouth.

Robert Burkhart joined STRATA in 2004 where he served as Director,

Business Development and led the product management team that

engineered development of STRATA’s digital platform for agencies.

“STRATA has always been an industry leader and we are proud of our

digital product, it truly is second to none.” Burkhart led the project

management teams to also build out STRATA’s digital outdoor and National

TV buying platforms along with modifying the architecture approach to

leverage high volume cloud computing. Burkhart definitely knows what

agencies are looking for, having spent the better part of two decades in strategic

media/advertising information technology. A former Senior Vice President and Director of Media

Systems for Universal McCann, he developed and supported strategic systems for all media

disciplines across the country. He continues that leadership with STRATA where he represents

the company on some of the top industry committees including IAB, ANA, 4A’s and the TVB.

Sean Cotton is Interactive Director at one of the fastest growing media

agencies in North America, True Media. He has worked closely with many of

the leading digital technology companies in the marketing industry to

advance the implementation programmatic solutions for agencies in the

areas of search marketing, display advertising and online video.

http://www.appnexus.com/

http://www.fattail.com/

http://www.gotostrata.com/

http://www.truemediaservices.com/




Jason Fairchild is the Chief Revenue Officer of OpenX, where he is

responsible for strategic partnerships, publisher network development,

supply and demand relationships for OpenX Market, and all forms of

monetisation/revenue. Prior to OpenX, Jason was a Senior Vice President at

Claria, a behavioural marketing pioneer. Prior to Claria, he was a Vice

President at GoTo.com/Overture/Yahoo! (Overture) for six years, where he

built and led the business development/affiliate team responsible for

developing, executing and managing all of that company’s paid search

partnerships and global strategic relationships, helping the company evolve from a destination

site to the largest distributed search network on the internet, generating $1.5 billion+ in annual

revenues. Before Overture, Jason co-founded an affinity-based ecommerce company, CU

Shopper, which developed and distributed co-branded shopping portals to more than 100 credit

unions nationwide, and was an early team member at EarthLink Network.

Matt Gay is Operative’s SVP of Customers and Partners,

overseeing strategic client relationships and technology partnerships. While

at Operative, Matt has also managed a new business venture as well as the

marketing function. Prior to Operative , Matt was SVP of Global Media

Systems for Mediabrands Worldwide, where he was responsible for

implementing and integrating systems in order to create efficiencies within

and across agencies. Prior to his stint at Mediabrands, Matt was Vice

President of Media Advertising Operations for Martha Stewart Living

Omnimedia, Inc. and also served as Manager of Technology Integration at Deloitte

Consulting. He holds a B.S. in Electrical Engineering from Bucknell University and sits on

Bucknell’s Alumni Board of Directors. In 2008, he co-founded Bucknell’s Media and Technology

Network and is active in media industry standards initiatives.

Anthony Katsur is a well-respected ad tech veteran with wide industry

experience encompassing ad serving, media buying platforms, real-time

bidding and optimisation technologies. He brings more than 16 years of

experience in building digital media and content delivery solutions. Most

recently, he was CEO of Maxifier, a publisher campaign optimisation

platform. Having previously served as GM of MediaMath, he led all aspects

of the TerminalOne platform. Prior to MediaMath, he was at DoubleClick,

where he managed all levels of the engineering division, improved and

managed its real-time ad serving infrastructure, directed the software development process for

enterprise software applications, and led the client services group, and Panther Express, a CDN

he helped build from the ground up and where he had similar operations, engineering and client

services roles.

Ian Lowe joined Adslot as CEO in October 2012, bringing over 20 years

media industry experience and 13 years managing high growth media and

media technology companies, both privately held and publicly traded.

Immediately prior to joining Adslot, Ian was CEO of Facilitate Digital Ltd

(ASX:FAC), where he launched Symphony - the world’s first workflow and

trading platform for media agencies - and led the company’s international

expansion into Asia, Europe and North America. Prior to Facilitate, Ian was

CEO of ad measurement company Traffion Ltd, and Managing Director of Red Sheriff Ltd, a

global pioneer of web measurement technology. Ian has held senior management roles in a

number of media and media agency organisations including George Patterson Bates and PMP

Ltd.

http://www.openx.com/

http://www.operative.com/

http://www.adslot.com/




Raju Malhotra is Centro’s SVP, Products. Raju Malhotra joined Centro as

Senior Vice President of Products to lead the development of features and

functionality for its cloud-based software applications. Raju had an

illustrious career at Microsoft, growing several business units. As Director of

Products for Bing Shopping, Microsoft.com and International Search, he

grew customer engagement, conversion and revenue for many of Microsoft’s

key products. He also led product management for Visual Studio and

Enterprise Services. As a management consultant with McKinsey &

Company, he advised VC-funded companies in Silicon Valley on their

product strategies. Raju mentors software developers and entrepreneurs for startup accelerators

including TechStars. He earned an MBA from the Wharton School of Business (University of

Pennsylvania) and an undergraduate degree in Computer Engineering from National Institute of

Technology (NIT) in India.

Ana Milicevic has been building digital products, strategies, and content

experiences since 1997 with special focus on digital media and advertising

technology. An entrepreneur at heart, Ana founded her first technology

company while at university, and has held key executive roles in several

media and entertainment startups in Europe and the United States. She

currently heads up SAS’ digital media and advertising technology industry

consulting practice. Prior to joining SAS, Ana was responsible for product

development and management of the Demdex platform (part of Adobe’s

Online Marketing Suite) and pioneered the field of data management in

online advertising. Ms. Milicevic is the co-chair of the New York chapter of

the Digital Analytics Association, serves as a mentor at Entrepreneurs’

Roundtable Accelerator, and is an advisor to several startups on scaling, go-to-market strategy,

product, operations, and global market penetration. Ana was the recipient of the Open Society

Foundation’s academic scholarship, and holds a degree in Computer Science from the American

University in Bulgaria.

Ben Pashman is Centro’s SVP of Business Development. Ben Pashman

leads the company’s strategic partnerships with emerging media technology

companies in the areas of video, social, mobile and digital out-of-home,

among others. Ben is also responsible for evaluating strategic investment

opportunities for Centro. Ben has 15 years of digital media marketing

experience, including 10 years in internet advertising sales and business

development. Most recently he served as the first business executive at

Gigya, a leading social media SaaS technology company. Previous positions

include senior sales and product management roles at DoubleClick, Conde

Nast and Travelzoo.

Eric Picard is CEO of Rare Crowds. A Microsoft veteran and the founder of

Bluestreak, an early venture-backed ad technology company that was one of

the first rich media advertising technology companies, Eric brings over 16

years of industry experience to his role at Rare Crowds. Prior to Rare

Crowds, Eric led advertising platform strategy at Microsoft for six years. He

was part of deal teams on all ad technology acquisitions between 2004 and

2007, including Massive, Screen Tonic, AdECN, and aQuantive. In 2010 Eric

left Microsoft to become Chief Product Officer at TRAFFIQ, where he led

product management and engineering. He was responsible for their programmatic direct media

management products that provided a unified interface for managing media planning, RFP

management, media buy execution, real-rime bidding, ad serving, optimisation, campaign

management and reporting and analytics. Eric has been active in advising startups for his entire

career, and he has been writing about advertising technology since 1999, you can read the archive

of his trade columns at http://springload.com. He has undergraduate degrees in History and Fine

http://www.centro.net/

http://www.sas.com/industry/media/index.html

http://www.centro.net/

http://www.rarecrowds.com/

http://springload.com/




Arts from the University of Rhode Island, and a Master of Fine Arts in Photography concentrating

on Digital Media from the University of Cincinnati.

Roy Pereira is the CEO and founder of Shiny Ads, an innovator in the

programmatic direct advertising space. Roy has a background in

technology startups and large companies as a technology and marketing

executive. He has several patents and has received several awards for his

innovative products.

Joe Pych co-founded Bionic Advertising Systems as a business unit of

NextMark with the mission of streamlining the digital media buying and

selling process. Prior to Bionic, Joe founded NextMark which provides

marketing automation systems. Prior to that, Joe built some of the world’s

biggest marketing databases while with Exchange Applications and two

mobile computing platforms while with Travelers. Joe holds three US

patents, has been awarded the Marketing EDGE Rising Stars Award, and is

among BtoB Magazine’s Who’s Who List. Joe holds a Master’s Degree in

Computer Science from Rensselaer Polytechnic Institute and Bachelor of

Arts Degrees in Mathematics and in Computer Science from Cornell University.

Jay Sears is SVP Marketplace Development for Rubicon Project, working

with management, business unit heads and business development across the

company to expand Rubicon Project’s potential market. Sears has also

served as GM, REVV Buyer, where he was responsible for global relations

with the buy side, including ad holding companies, ad agencies, agency

trading desks and demand side platforms headquartered in North America

Prior to joining Rubicon Project, Sears was General Manager of the

PulsePoint Ad Exchange for PulsePoint (formerly known as ContextWeb,

Inc.). At PulsePoint, Sears brought new products to market and drove key

strategic relationships resulting in audience and revenue acquisition. He co-chairs the Interactive

Advertising Bureau’s Advertising Technology Advisory Board and is the former co-chair of the Ad

Networks and Exchanges Committee and helped write its Quality Assurance Guidelines. Sears

received the 2009 President Award from The Advertising Club. He is the hyperlocal publisher

behind the local media site MyRye.com, provides commentary at JaySears.com and tweets from

@jaysears. Sears holds a BA in political science from Kenyon College. He lives in Rye, NY with his

wife Lauren Rosen and their three boys.

Tom Shields is co-founder and chief strategy officer of Yieldex. Tom is a

pioneer in internet advertising, having co-founded NetGravity in 1995 to

create the world’s first internet ad servers. As CTO, Tom developed mission-

critical real-time ad server software that was successfully deployed at over

300 customer network operations centres. This rapid growth led to

NetGravity’s IPO in 1998, and subsequent acquisition by DoubleClick in

1999 for over $500m. Tom also received a Service Award from the IAB for

leading the group that created the first ad impression counting standards.

Christopher Skinner is a frequent speaker at Google conferences and

other digital industry events, and believes that the dominant methods for

measuring digital media are limiting business growth. Christopher

founded MakeBuzz in 2001 and has worked with over 250 leading

companies, including Vodafone, Target, United Airlines and Oreck. He holds

three patents in marketing automation. His MakeBuzz software is a reliable,

simple and affordable profit optimisation platform that helps business seek

http://www.shinyads.com/

http://www.bionic-ads.com/

http://www.rubiconproject.com/

http://www.myrye.com/

http://jaysears.com/

http://twitter.com/#%21/jaysears

http://www.yieldex.com/

http://www.makebuzz.com/




out maximum profitability through digital marketing.

Ben Trenda is CRO of isocket, the first and largest marketplace for

programmatic direct. After initially considering isocket as an acquisition

target for Rubicon Project, Ben joined isocket to launch programmatic direct

in 2011. Prior to isocket, Ben was VP Marketplace at Rubicon Project. Under

Ben’s leadership, Rubicon launched one of the world’s largest RTB

platforms, and developed the first private exchanges for several major

publishers. Before Rubicon, Ben served as VP of Global Alliances and Agency

Partnerships at AOL, and held various roles in Strategic Alliances at Yahoo

after Yahoo acquired Overture, which was Ben’s third startup role.

Bill Wise is CEO of Mediaocean, the largest independent advertising

technology company in the world. Mediaocean processes approximately

$130 billion in annual ad spend across all media channels, from television to

print to out-of-home to radio to all forms of digital. Bill has spent over a

decade leading and unleashing the potential of revolutionary advertising

technologies, overseeing more than $3 billion in mergers, acquisitions, and

public offerings during that time. He comes to Mediaocean from his role as

CEO of media systems provider MediaBank, which, along with Donovan

Data Systems/DDS, was one of Mediaocean’s two founding companies. Bill

was named Ernst & Young Entrepreneur of the Year for Technology in 2013.

http://www.isocket.com/

http://www.mediaocean.com/

Programmatic marketing

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