Much, if not most, of the media that advertisers buy today will be automated over the next decade. But it’s not yet clear what that will look like. Will media buyers jostle for the best placements on RTB ad exchanges, or will they faithfully replicate manual insertion orders using automated systems? Of all the buying processes that are being tried, which are the most efficient? And which have the most staying power?
Here in Canada, at this admittedly early stage of automation, the method that’s looking most likely to dominate is programmatic direct. It’s a hybrid of data-targeted programmatic ad delivery and conventional deal-making between publisher sales reps and media planners. There are a few different ways to power programmatic direct, but what they all have in common is that the buyer is given private access to publishers’ top-quality inventory at a pre-negotiated price (or minimum price, in the case of private auctions), and then is able to cherrypick ad impressions based on which audiences they’re being shown to in real time.
It’s called programmatic direct because the catch-all label programmmatic also includes real-time bidding (RTB) on open ad exchanges, where the buyer and seller don’t necessarily know each other, but the inventory tends to be cheaper and there also a lot more of it.
Canada, more than any other market, has taken to programmatic direct as the primary way to buy targeted online advertising. According to 2014 estimates from eMarketer, three times more Canadian impressions are bought via programmatic direct than on open RTB ad exchanges. Data collected from the Microsoft Ad Exchange earlier this year found that Canadians use private auctions for a larger percentage of trades on the platform than any other market they looked at.
No one is more aware of the importance of programmatic direct to Canadian media buyers than Andrew Casale, CEO of Index Exchange, a Toronto-based technology company that facilitates the sale of more than 100 billion impressions globally every month.
Index was one of the first exchange platforms to support Deal ID, a programmatic direct tool that allows sellers to invite selected advertiser partners to private pre-auctions of their best inventory. Today, Casale says, half of Index’s Canadian revenue comes from programmatic direct, compared to just 20% in the U.S.
He says that Canadians have flocked to programmatic direct in part because open marketplaces have gained a reputation as havens of fraudulent, non-viewable and poor quality inventory. The trade press have done a good job alerting marketers to potential threats in the RTB ecosystem like fraud, he says, but in so doing they’ve painted it as an unwelcoming place for brands to put their dollars. In response, marketers and their media planning teams have turned to programmatic direct as a way to tap real-time audience data while still working only with publisher brands that they know and trust.
It also helps that Canada entered the programmatic ring several years behind the U.S. and U.K., so programmatic technology has had much more time to develop, Casale says. Private marketplaces are much more efficient and easy to tap into today than they were even 18 months ago. “I feel like a lot of [Canadian] first-time buyers skipped the scary open market firehose, and just looked at programmatic as, ‘We can buy better, smarter, with data – from the same publishers we know and trust.'”
Other forms of programmatic direct have now also come to the fore, like programmatic reserved (sometimes called programmatic guaranteed, or programmatic preferred). Using this technology, buyers can work with media sales reps to pre-book a specific block of inventory at rate card prices, much as they would an old-fashioned direct buy. But the advertiser still gets to cherrypick only the impressions they want from within the reserved inventory, and the rest are sold to the next-highest priority source of demand. That way the buyer makes sure they get the audience they want, but they don’t have to worry the seller will run out of impressions before they meet campaign targets.
Programmatic direct is often orchestrated by supply-side technology players like Index, The Rubicon Project, or Google’s DoubleClick, but it’s also being organized by agencies and demand-side technology platforms that have struck up their own deals with major publishers. For example, in 2012, Starcom MediaVest, working with Olive Media and TC Media, created its own private marketplace (often called a PMP) where clients could bid on select premium inventory.
Or take Rocket Fuel, a Silicon Valley media buying technology company that recently announced plans to launch a PMP in Canada in Q4. The company’s Canadian country director, Aileen Hernandez-Halpenny, says Canadian advertisers and agencies have been hesitant to experiment with direct response tactics that require complex pixel tracking or the kind of hard-core, acquisition-driven direct marketing tactics that work best on open exchanges with thousands of sites.
For example, product retargeting (where consumers look at a product on the advertiser’s site and the advertiser wants to send them a followup ad wherever they go next) works much better when there’s a lot of inventory from a lot of different sources, because there’s a better chance of catching that consumer on the next site.
The Canadian advertisers Rocket Fuel has worked with are much more focused on branding and for this goal premium inventory on well-known publisher sites tends to be most effective. PMPs are one way to make sure that’s what they’re getting.
But better quality media likely isn’t the only reason that programmatic direct is seeing so much investment. For media agencies (especially large, global holding companies), returning to a buying model based on negotiating bulk inventory deals means they get to leverage their buying power to get better deals. That’s may be one reason GroupM, the largest media holding company, last year said it planned to stop buying on open exchanges while remaining one of the largest private marketplace buyers, and operating its own PMP at Xaxis.
Jeff Green, founder and CEO of programmatic platform The Trade Desk, says that all of the buzzwords about different methods of programmatic and programmatic direct can be boiled down to just two ways of buying media: buying media at the time it’s delivered (a spot market), and buying media ahead of delivery, with guarantees from the seller (an upfront or forward market).
The spot market – which in digital media means the open ad exchanges – democratizes ad buying by putting all buyers in the same bargaining position. But if you’re a buyer with a lot of clout, that’s a disadvantage, Green says. If given a choice, big-time buyers will always choose a forward market, because that’s where they can make massive orders at preferred rates, and get the most value for their dollars. “[Agencies’] future is contingent on their ability to participate in a forward market, because it’s only there you get to leverage your buying power,” he says. “Which is of course the way the bulk of television has been bought.”
Despite the lingering uncertainty, Green predicts that programmatic direct will be one of the dominant forms of online media buying, not just in Canada but globally. And that’s not just underpinned by economic theory. Green says The Trade Desk has seen five times the growth in programmatic direct transactions through its platform that it has on the open market.
