Donovan Crosses The Rubicon, Deal Gives Agencies Direct Access To Online Publishers Inventory
The new platform is significant, because Donovan is the leading supplier of systems and software used by Madison Avenue to process media buys, and the move will put billions of impressions of online display inventory right at the fingertips of an estimated 50,000 planners and buyers worldwide.
"Our agencies control about 80% of the display marketplace," says JT Batson, who joined Donovan as president of its burgeoning digital division last year from The Rubicon Project, the company it partnered with to create the new display advertising gateway.
Batson said the development of the system actually began when he was still with Rubicon, and that it is just one of a suite of new digitally-focused media processing systems he has been developing through a new unit dubbed DDS Labs. Earlier this week, Donovan announced another new system spawned via that lab - a deal with digital TV set-top data aggregator Rentrak that for the first time gives agencies audience data other than Nielsen's ratings directly in their planning, buying and billing systems - and he says several more are close to being unveiled.
The flurry of announcements is both breath-taking and uncharacteristic for Donovan, which since the 1970s had been a near industry monopoly servicing big agencies, but moving methodically slow in terms of enhancing its systems to keep up with the age of digital media. They also coincide with the emergence of Donovan's first viable competitors, venture capital-backed Mediabank, which has been moving aggressively to innovate the market for agency enterprise software systems, and which last year recruited its own digital media star, former Yahoo executive Bill Wise, to run it.
The new display advertising gateway, meanwhile, is a significant advancement for the industry, says Batson, because agencies currently using Donovan's systems control an estimated 80% of all online display advertising buys.
"It's $6 billion of $8 billion," Batson says, referring to the current estimated total of online display advertising buys in the U.S.
That number may be surprising to many in the online media community, because big agencies are known to control a much smaller share of the rest of the online marketplace, especially paid search, because systems like Google's self-serve AdWords have made it so easy for other players to buy keywords directly.
That's not the case in the online display marketplace, which has become one of the most complex and confusing market matrixes ever in any industry, and as a result, has spawned hundreds of new intermediaries to help connect media buyers with unsold display advertising inventory.
While big publishers maintain their own sales organizations that call on agencies directly, they sell only about 20% -- the most "premium" one-fifth - of their inventory directly to media buyers. The other 80% has created its own ecosystem of so-called "non-premium," code for remnant, or "secondary non-premium" inventory that has been trying to enhance the value of unsold online impressions by appending data about online users that would make them more valuable to specific advertisers.
That ecosystem currently is comprised of hundreds of vertical advertising networks and dozens of big demand side platforms, or DSPs, which have shifted control of much of the publishers' inventory to the buy-side, until a new breed of aggregators such as Rubicon, Pubmatic and AdMeld entered the fray to give control back to publishers.
But despite all the technology, and billions of dollars of venture capital investment, the online display advertising marketplace has remained a largely manual process for most big agencies, which until the creation of Donovan's new gateway, had been faxing invoices to publishers or third-parties representing, and manually keying their buys into their internal systems.
Those processes of increased the amount of manpower and time agencies spend processing online display buys, but they also have increased the amount of so-called "discrepancies" involved in those buys. Discrepancies are disputes between what an agency planned an ordered from a media outlet, and what the media outlet ran on its schedule, and often take weeks or months of manually back-and-forths to resolve, creating more labor costs for both sides.
Batson says the new gateway does not replace agency trading desks that have been launched by the major agency holding companies, and he said they most likely would be among the first big customers to utilize the new system. Over time, he said, Donovan might take a direct position in the online trading marketplace, but only if its agency customers asked it to develop a system for that.
The deal also is a coup for the publisher's side of the equation, because by working through Rubicon's systems, publishers have more direct control and transparency about what the agencies are buying and how much they are paying for their inventory. Rubicon has built a system that enables publishers to set specific "controls" on the type of inventory and the pricing "floors," or minimums, publishers will accept for their inventory. That's not always the case via other third-party intermediaries, says Rubicon founder and CEO Frank Addante, claiming the new system will enable a better marketplace equilibrium to evolve between buyers and sellers of online display inventory.
Both Addante and Batson claim the gateway would not squeeze out other third-parties, especially ad networks and DSPs, so long as they continue to add value to display buys that could not be created via agencies buying directly from publishers.
More importantly, Addante says that by taking much of the "friction" out of the process that agencies use to buy online display advertising, the gateway will help grow the amount of advertising dollars they put into the marketplace, raising the size of the total marketplace for all the people who sell online display inventory. He says it was that kind of ease of use, and especially the automated, real-time bidding nature of Google's search advertising systems, that enabled so much money to come into the search advertising business, which currently dwarfs display. And he predicted that things like the new Donovan gateway would actually help money shift from search to display.
"All this automation will enable a certain shifting of search to display," he asserts, citing data indicating that "only about one third of the dollars spent on search were intent-based," meaning the other two-thirds were using keyword advertising as a "proxy" to reach online audiences that might otherwise have gone into display advertising if it was as easy and efficient to buy.