Programmatic as a driver of digital sales
News Publishers in today’s globalized and mobiled world face are struggling to defend their revenues. Their business model consists of creating great content and establishing the right structure to monetizing it. Digital advertising is becoming the largest revenue stream for News Publishers (1). Digital Advertising includes both Direct Sales and Programmatic Sales.
Direct Sales are generated when the publisher communicates directly with the buyer, defines conditions to show their ads (such as volume of impressions) and collects payments afterwards. This operating model involves: sales, ad implementation (otherwise known as ad trafficking), campaign performance reporting and payment collection. Large teams manage each of the previous tasks and manage only significant deal sizes to break even in their operations.
Programmatic refers to the fully automated and individualized purchase and sale of advertising space in real time (1). The combination of type of inventory, pricing and participation determines the different forms of programmatic advertising.
The resulting combinations are the following. Exhibit 1. Source: IAB (3)
A new sales channel with increased operational efficiencies
In other words, we can define Programmatic Sales as additional tools that allow the sale of inventory in a more automated way. Programmatic software stacks technology so that operating times in the direct sales model are reduced. Some operational improvements are the following:
- Ad Trafficking is integrated server to server, which means that the advertiser uploads the creatives and can choose when and how to serve them.
- Ad Reporting is also integrated, so both advertiser and publisher can create their automatic reports and the reporting discrepancies are reduced
- Payment collection is guaranteed by the service provider. Note that fees for ad serving and collection service are involved in the process. Fees depend on the ad stack used and can be estimated with IAB’s calculator (4)
- In addition to these efficiencies, total impressions can be maximized by reducing the percentage of lost impressions. A BCG study shows that these can stack up to 10% of total impressions (5)
So why isn’t Programmatic the preferred choice for Publishers?
Some publishers have started to push Programmatic sales, but the current problem most organizations face is that they aren’t extracting enough value out of it. Still today, most of the work in programmatic is being spent in low value tasks. According to a BCG study in Programmatic, “publishers in a typical month spent an average 11 hours (19 percent of the total staff hours spent on regular programmatic tasks) on value-creating activities, such as generating leads by analyzing bidding data, and 48 hours a month (81 percent of the total) on such purely administrative tasks as monitoring, billing, and reporting. And this does not include the time it takes to make the sale and set up the deal, only about 20 percent of which is spent creating value.”
This is a huge problem, because the main value in programmatic is to relegate these tasks to the system and invest time in value adding activities: analyzing bidding data to find additional sales, understanding the sites audiences and packaging them for sale or reviewing bidding strategies to increase CPM’s.
A Brighter Future ahead
Moving forward, publishers should invest in transforming their teams to focus in the high value activities that are available through the Programmatic ecosystem. This would be a combination of data scientists and sales experts.
Sales Experts help blur the difference between Programmatic and Direct Sales, focusing on what’s most suitable for their clients. Experts set up programmatic deals faster and spend fewer hours monitoring, billing, reporting and in other less valuable tasks. Less time is spent in these activities and can be used to create new sale offers and to drive more revenue.
Data Analytics teams make sure that data coming into the system is clean and accurate, sift through mountains of data to discover the useful parts, put the discovered data together and organize it so that it’s ready to analyze, take this organized data and create sophisticated analytics models and finally turn the models into results (6).
The final step looking ahead should be to include Data Analytics as part of traditional publishers’ teams. One that is leading the effort is the Financial Times, that leverages their analytic capabilities to improve on their journalists’ investigations. Their team includes data analysts, SEO experts, engagement strategists, social media managers and journalists. The ultimate objective is to get the newspaper out to more people and evolve the newsroom with digital readers in mind (7)
I see a much more promising future for publishers that are focused in reshaping their organization to embrace new technologies. Hopefully this will empower them to deliver outstanding journalism.
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(1) “Digital revenue is making up an increasingly large portion of publicly traded newspaper companies’ ad revenue” – http://www.journalism.org/2016/06/15/newspapers-fact-sheet/
(2) https://en.wikipedia.org/wiki/Programmatic_Advertising
(3) PROGRAMMATIC AND AUTOMATION – THE PUBLISHERS’ PERSPECTIVE https://www.iab.com/wp-content/uploads/sites/4/2015/06/IAB_Digital_Simplified_Programmatic_Sept_2013.pdf
(4) https://www.iab.com/guidelines/iab-programmatic-fee-transparency-calculator/
(5) “Our analysis found that less than 0.5 percent of “discrepancies”—ad impressions that are lost as they pass between different technology platforms—occur with unified technology stacks, while with other technology setups, 3 to 10 percent of impressions are lost between the ad server and the exchange.“
(6) HBR “Five Roles You Need on Your Big Data Team” – https://hbr.org/2013/07/five-roles-you-need-on-your-bi
(7) The Financial Times has a 30-person data team for edit and marketing – http://digiday.com/publishers/lessons-financial-times-data-maturity/
Programmatic ad buying is a great example of the profound effect the digital economy can have on industries. In this case, software has been designed that has disintermediated sales teams. In an automated sales world, the market is able to match buyers and sellers in a way that creates for a market nearer to equilibrium. It also reduces frictions and evens the playing field for all buyers regardless of size of spend or sales force. It will be interesting to see what other industries may be able to benefit from a programmatic marketplace matching buyers and sellers. The stock market and digital advertising have both been transformed with this technology. What is next?
Is the Financial Times seeing an increase in readership with programmatic sales? Worried that focusing on the high value activities may detract from the journalistic authenticity the publishers are seeking.
Hey J B, one question that sprung to mind as I was reading your post was how Programmatic Ad Sales in the context of journalism can be made to prevent inappropriate ad placement. BuzzFeed has a list of 101 unfortunate internet ad placements [1] which, in addition to being funny, poses a very serious questions for publishers: How can they ensure that their editorial integrity isn’t hurt by an unfortunate algorithmic decision? While adding a layer of human oversight would likely solve the problem, it’d also take away from much of Programmatic’s value proposition.
[1] Matt Stopera, “101 Really Unfortunate Internet Ad Placements,” BuzzFeed, January 27, 2011, https://www.buzzfeed.com/mjs538/101-really-unfortunate-internet-ad-placements?utm_term=.efeBWJXaE#.emkeDXwYB, accessed November 2016.