Non-futuristic look for a programmatic market – what could be expected as The next effective model.
Programmatic, called a few years ago as “the apex of advertising technologies”, is a rapidly growing market expanding 20% a year on average. It is expected to reach $45 billion in 2019 (according to recent eMarketer estimate), but, despite its irresistible growth, the participants of programmatic ecosystem stumble upon multiple problems, which definitely would lead to new market configuration and combined selling models sooner or later.
What goes wrong?
Programmatic bottlenecks are lying on the surface for content producers which attract end-users – in this the article, we’ll consider all issues from the publisher’s point of view. Programmatic advertising has grown from a tiny part of a publisher’s advertising activity – just a couple of years ago top publishers received from programmatic ads only 10% of their total digital ad revenues, according to the survey conducted by ad tech firm Operative. The year passed, but still, according to the study by IAB Europe, only 25% of the editors surveyed rated programmatic as a priority, while the other recognized it as a non-strategic. It is hard to believe, until seeing another estimation from marketing-intelligence firm Warc which claimed that of every dollar spent by advertisers worldwide last year on programmatic ads – just 40 cents on average came to a publisher. Advertisers spend 60% of their budgets for a “tech tax” to the sophisticated chain of vendors between them and publishers. Therefore, the most natural publishers’ desire is to sell inventory, especially premium, on much more fair conditions, that programmatic could offer for now.
Programmatic is not Automatic
To avoid selling premium inventory to Open auctions for non-predictable results and, considering the continued emphasis on advertising quality and brand safety, the growing part of publishers are now setting up programmatic direct or private marketplaces (PMP) deals to control which buyers can entrance their inventory and at what price. By 2019, the combined share of these two transaction types will be (forecasted) up to 80% of the total programmatic pie, which means that the line between direct and programmatic sales will blur.
More and more publishers also adopt Header Bidding model, the part of the programmatic advertising process where publishers offer inventory simultaneously to multiple buyers before addressing their ad server – giving publishers a lot more control over the process, including the choice of buyers. It shortens the supply chain, but still has some limitations, e.g., it can get down the site’s speed.
From a technical point of view, publishers have two main options to join and operate at the programmatic ecosystem, and both of them are, again, far from ideal:
- to sell independently to numerous demand sources (DSPs) which means a significant waste of time and human resources for manual technical and processing management. Making PMPs, in fact, is the same handiwork, as processing direct campaigns in an old-fashion manner
- to join some SSPs and rely on their decency, hoping that received profits would be fair and taking for granted that there are no ways to control profits level (except Bid floors).
Getting back to premium inventory – programmatic (HB including) still doesn’t propose the variety of creative ad formats, as it’s all about more standardized and simple ads – which is not quite satisfying both for Advertisers who get less user attention, and for publishers, who are losing their apparent profits.
Summarizing all mentioned programmatic bottlenecks above, it looks that for publishers effective selling in the new market reality is a matter of:
- shorten of the supply chain – the closer Advertiser is – the better for all parts;
- an effective combination of different selling models (direct, different programmatic models, HB);
- financial transparency and reliable buying partners (less is better);
- simplicity in execution and management;
- wider use of non-standard creative ad formats.
A way out?
Technically, “effective combination of different selling models” means that here we come back to not-quite-well forgotten waterfall model where publishers inventory is divided to multi-level slices to be sold for highest CPMs: premium inventory might go to direct (if sold by their own) or practically direct advertisers with minimum middle-smth in between, less premium and remnant – to be sold automatically through PMPs and open auctions to multiple demand sources.
Publisher’s inventory pool
To manage inventory this way, publishers, again, have two options:
- to sell independently – this option is open for a minority of Top publishers who could afford own sales, tech and integrational teams (and, practically, build own ad network with owned media and attracting external ones)
- to join some vendor who could offer both direct and programmatic demand with transparent financial conditions.
In any case, a publisher has to be armed by effective ad serving solution, allowing to build the “new-waterfall” between direct, RTBs and Header Bidding. The ideal scenario is when technology provider also gives access to demand, taking full control over publishers` monetization and offering multiple advancements, including:
- the minimum supply chain with access to multiple demand sources;
- transparent financial conditions;
- different selling models: direct, RTBs (PMPs, guaranteed, open auction), HB, etc.
- ad serving solution available to semi-automatically optimize all demand from mentioned sources and models;
- support of all needed media (desktop, apps, video, CTV, etc.);
- premium ad formats;
- multiple targeting options;
- data management tools;
- as an option – full-service model when a vendor takes full control over publishers` monetization, on a practically outstaffing model.
New Ad networks approach
Before Programmatic Era, Ad networks existed to connect the myriad of Advertisers and Publishers, acting as brokers between the supply and demand. Now, when this process was programmatically automated, some believe the role of ad networks has diminished. However, how strange it may sounds, but the number of ad networks is continuously growing (based on Thalamus Advertising Database). Ad networks, as a source of added value to direct advertising, now re-become the substantial part of the programmatic ecosystem – actually, a combination of these two is a key, as ad networks provide some manual management that cannot be replaced by programmatic tech excellence.
New Ad Networks place in the programmatic ecosystem
Modern model for Ad networks is – besides of being a direct broker between two parts, become also a full-service vendor and ad tech provider, which could fully meet the needs of participating publishers and give them all-inclusive approach. It is a combination of direct management and programmatic options with the means of technologically advanced waterfall model supporting different selling options.
Publisher’s inventory pool managed by a single vendor
For small and mid-size publishers it must become a single-point counterpart, closing all monetization issues. For top publishers – provider of maximum possible services and technologies, leaving an opportunity to participate effectively with own demand partners.
To meet such market expectations a modern ad network should provide the following must-haves:
- Effective monetization – if ad network is linked to a large variety of demand sources: direct advertisers, marketplaces, exchanges and other ad networks – it could offer close to 100% fill at the most optimal rate. Ad networks operate with high-end technology solutions to help them effectively measure their inventory (e.g., viewability, data gathering, predictability tools, etc.), allowing them to sell publisher’s inventory at the highest-valued CPM
- Transparent financial conditions – it’s more convenient for publishers to have one monetization gateway taking all risks (regarding all ways of interplay with multiple demand sources)
- Support of all existing inventory types – display, mobile, video, native, CTV and so – enabling publisher to concentrate all of his activity in one place
- Ad serving option for publishers – with all possible ad management tools for own campaigns (with different targeting options) and semi-automatic demand optimization
- Own DMP – a proper tech vendor should give a possibility to operate your own data in the ways you want. To depend less on data provided by global suppliers about your own users and taking part of your money, publishers should be able to collect user’s data and create own segments, onboard advertiser’s data, build look-alike audiences and use third-party data to enrich existing segments
- Brand/inventory protection – ad networks also have to add extra protection for the publishers and their users in terms of quality assurance and brand safety (while programmatic is still unsafe). Such an environment provides publishers with more control over who can buy their inventory and with what advertisements
- System accounts for supply-side and demand-side with detailed reports for performance control
- Personal assistance – although the digital world is becoming more automated and technology-based, the human touch is still needed to make corrections, customization and take advantage of all opportunities
- Localized (or local-based) ad networks could offer more effective cooperation in terms of language, customer support, billing and financial aspects. You could read a proper case study about such a local ad network on Admixer Blog (“Case Study: how to build and grow your Ad network”).
To be able to provide such a level of service, an Ad network company should have a very strong and reliable ad tech provider, ideally – with proprietary programmatic and ad management ecosystem (you could find a detailed description in “How to choose a technology for digital ad network?” article).
To Sum it up
Ad networks must adapt to the new market reality, using programmatic for its own good as an additional demand source and focusing on values that come with a network technology (optimization, customization, brand safety, localization, etc.) and personal assistance to participants.
Being considered from a globally-market point of view, such networks could compete in their niches or local markets with global leaders, having more direct relationships with advertisers and demonstrating a more client-oriented approach to the publishers.
And don’t let the tech-evangelists to scare you with global automatization and overall programmatic-forces – there will always be types of business where more human and personalized approach is still needed. Until AI will take care of everything, of course 🙂
If you want to know more about Ad Networks or just exchange thoughts about the future of the online advertising market – please meet me at DMEXCO 12-13th September! Book a meeting!