Network goes after big bucks by cutting out the middle man
AOL is set to host a first-of-its-kind “programmatic upfront” for digital media buying. The event kicked off Monday night at Ad Week in New York, and while there will be some of the familiar pageantry around AOL’s forthcoming original programming (featuring the likes of Gwynneth Paltrow, Sarah Jessica Parker and Hank Azaria), the limelight will be on AOL’s integrated ad-buying technology, and its promise of a simpler, more enlightened programmatic experience.
Much like a TV network upfront, the event’s goal is to convince clients to commit a percentage of their annual spend to advertising with AOL. In return for signing, they’ll be able to negotiate bulk rates on reserved inventory on premium AOL properties like the Huffington Post, Tech Crunch and AOL.com, across mobile, tablet and desktop devices.
The similarities to a TV upfront pretty much end there. Signing an upfront contract doesn’t commit a client to a specific slate of programming, or even necessarily a discount rate, either of which might trample on the programmatic promise of buying and optimizing on a weekly or hourly basis.
“All the benefits of serving ads at the right time, right place, to the right audiences remain intact,” said AOL Canada’s director of sales and business development Dana Toering.
But there’s an even more fundamental difference. TV upfronts are premised on the scarcity of commercial breaks, since there are only so many seconds of air-time to sell. Online inventory, even the premium kind, is virtually endless.
Although an argument could be made that AOL’s highest-quality reserved impressions are comparable to primetime seconds, Toering said that’s not what’s most enticing about the AOL offer. The real advantage clients are getting, he said, is a drastic reduction of the time, money and people that buyers need to devote to make effective programmatic buys.
AOL’s many advertising technology acquisitions over the past years – from optimization engine Adlearn, to ad serving platform Adtech, to Adap.tv video network, which the company bought for $405M last month – have put it in the rare position to offer end-to-end programmatic services, which eliminates the need to deal with the expensive and confusing ad technology marketplace. “We’re really trying to simplify the entire process,” Toering said. “We want our clients to be spending more time channeling their energies towards the creation of innovative and engaging campaign strategies and creative.”
“They’re really positioning it like they’re cutting out the middlemen,” said Karel Wegert, vice-president digital solutions and resident programmatic guru at Media Experts. “The actual bid that wins at the exchange might be 25 cents, but the final price that the advertiser pays is $1.50 sometimes. The difference between those prices is that the supply side takes its cut, the demand side takes its cut, then trading desk A, trading desk B… [AOL is] trying to say, ‘If you come through us, you’re paying a lower rate because you’re not paying all these markups throughout the process.'”
From his buy-side perspective, a programmatic contract with AOL is a middle road between cheap but risky open exchange buys and pricy direct-sales bulk impression buys. By committing to a partnership with a premium publisher and/or network, they get the transparency and influence that come from a close relationship, together with the flexibility and fine-grained control offered by programmatic technology.
For many buyers, it’s an enticing offer – and AOL isn’t the first to realize it. Wegert said he’s been involved in conversations with the Globe and Mail and TC Media about similar partnerships. Just last week, Torstar-owned ad network Olive Media added the capability to package inventory and set negotiated floor prices for its private exchange members, services similar to what AOL partners will receive.
However, AOL has been the first to call this kind of deal an “upfront” and use TV vernacular to sell the deal to traditional media buyers. That’s likely because AOL is hoping to convince big advertisers to shift their TV budgets to digital. According to forecasting firm Magna Global, next year advertisers will spend some $197 billion internationally on TV ads, but only $6.6 billion on online video ads. No doubt AOL, and other big digital media companies, hope to win over some of that business.
Toering said AOL will host a similar upfront in Canada as early as Q1 next year, and that eventually, all AOL-owned and in-network inventory, in all markets, will be available through programmatic upfront deals.
If you want to catch up on AOL’s upfront at Ad Week, @AOLNetworks was live-tweeting the event starting at 5 p.m.
