by Tom Peacock, global chief operating officer at Facilitate Digital As I see it, the digital media marketplace is diverging into two. On the one side, there is the ‘programmatic’ community which is populated by the trading desks, exchanges, DSPs, and SSPs, and has Google at their helm. These guys buy and sell audiences. You have limited control over where your brand is placed and volume is not guaranteed but the simplicity and targeting are attractive. On the other side is what I refer to as ‘premium publishers’; those who continuously invest in quality content to attract and retain their audience. In Australia, this means publishers like News, Fairfax, Mi9 and Yahoo!7. These guys primarily sell you inventory, which comes with a reassurance that they are being sold a quality product in an immersive environment.
Both sides have their place, but the concern is that the rise of ‘programmatic’ buying is too rapid and that it is seen by many as an inevitable future for our industry despite the fact that there is plenty of evidence to the contrary. In fact, the evidence strongly suggests that the growth of programmatic buying is not only at the expense of premium publishers but at the expense of the industry as a whole.
Let me explain why.
Firstly, as it stands, programmatic buying leads to relentless downward pressure on pricing which in turn leaves premium publishers scratching their heads as to how they can be adequately rewarded for the quality content they invest in. Instead, they see others profit from the value they have created. To illustrate the point, it was recently announced Google made $20.8 billion from display in the first six months of 2012. That’s $1.6 billion more than the entire US print industry.
At the same time, brand advertisers are sitting on the sidelines, seeking to invest their TV dollars in digital but seeing a medium that increasingly caters to their performance-focused counterparts. Brand advertisers need premium opportunities to connect with audiences if they are to justify the shift.
It seems to me that very few are winning with the way things are.
Retaining a strong premium inventory marketplace is in the best interests of the industry. To the publisher, it enables them to maintain a business model that rewards them for the quality of their content. To the media agency, it’s vital as human judgment is central to their value proposition, and media is not a true commodity despite what the exchanges and DSPs would lead you to believe. And finally, to advertisers, it’s important as the majority want control over where their brand is seen. They want to engage with their audience. So why is all this happening?
A key reason why programmatic buying is prospering is because it’s easy for buyers and sellers to transact. In contrast, trading premium inventory is highly inefficient for both sides. There is little standardisation, no automation and no interoperability between systems. It is estimated that both agencies and publishers are spending as much as 25-30% of revenue on transaction costs, compared to 5-10% for traditional media and programmatic buying. As a result, investing in premium goes in the ‘too-hard’ basket far too easily.
So one solution to the issue is very simple; make it easier to transact and more dollars will flow towards premium Inventory. Ironically, it is technology that will deliver this. The good news is Google won’t own it and, as a result, the whole industry will benefit.
Originally posted on http://www.adnews.com.au