Will Programmatic Buying Be The Death Of Direct Sales Forces?
Federated Media (FM) announced layoffs last week, including its 24-person direct sales force. With CEO Deanna Brown betting the company’s future on “native advertising” and “programmatic buying,” some like Brian Wieser think that native advertising won’t be enough to save publishers’ bacon.
Programmatic buying (PB) is an automated approach to media buying through demand-side platforms, trading desks and advertising exchanges at the expense of traditional methods (RFPs, negotiations, IOs).
Native advertising (NA) originates from Fred Wilson’s concept of “native monetization,” which Sharethrough CEO Dan Greenberg promoted as “a form of media that’s built into the actual visual design and where the ads are part of the content.” While Greenberg sees a distinction between native advertising and content marketing, others don’t. Ultimately, it depends if the property in question produces content or only aggregates it.
Are these two things really going to kill direct sales forces?
Everyone likes a good excuse -- just ask Karl Rove.
If you’re not seeing the ROI from your direct sales force, then PB and NA are good explanations. But as in politics, that’s spin.
The reality is that
- NA is nothing new. Pick up any magazine or watch any television show; the practice is as old as the medium. It’s not even all that new in digital media, it’s just the latest buzzword for the shiny new thing that excites investors and media.
- PB is efficient but not necessarily effective (mortgage securitization anyone?). There are “case studies” touting both its effectiveness and ineffectiveness, depending on whose interest is at stake.
Ultimately, to quote Eric Schmidt, advertising is the last bastion of corporate unaccountability in corporate America (well, that and election spending; ask Karl Rove). Since its Doubleclick acquisition, Google’s leading the PB charge.
Way to miss the greater issues
The far greater structural change to media, publishing, marketing and advertising is that everyone is a content producer: brands, media companies, regular users. While the production level and costs vary enormously, the quality and appeal are subjective. However, marketers favor more polished content even though increasingly there’s no direct correlation between audiences size and production level.
Things won’t change anytime soon. We’re still waiting for ad dollars to move from television to the Web; they’re not. Similarly, the democratization of ad dollars (where ad dollars flow to audience regardless of production budget and polish) won’t happen anytime soon.Those crazy YouTube personalities will remain too fringe in the eyes of 80% of marketers while “sitcoms that nobody watches” will continue to get outsized love from Madison Avenue.
As my four-year old daughter has learned to say, “that’s life” -- so live with it.
So why the impact on premium publishers?
Online, broadcasters will do just fine as they leverage their television programming. Portals remain very much relevant thanks to their brands, relationships, and reach (despite the challenge they otherwise face: reduction in the average time users spend on their site). In video, YouTube and Hulu are firmly in the driver’s seat. But there’s no guarantee that top-tier publishers are necessarily considered by marketers, who can reach “similar audiences” elsewhere. Your average 24-year-old media planner has multiple places to spend her multi-million-dollar media buys. That’s life, and that’s why my company has built our business to make money before the first ad dollar hits our coffers; the ad business is too unpredictable and expensive.
There’s a bigger love/hate relationship with advertising than with anything else; most publishers are in denial about that.
Exacerbating matters is that video is publishers’ great hope, but most remain text-centric content producers whose video offerings lack scale to match either their articles, or the reach of video-native players. Most publishers have under-invested in video, so they’re now being squeezed on multiple fronts.
Death of the ad sales exec?
The Web 2.0 boom ushered in an era of APIs and MRSS feeds that killed the traditional business development role in many companies. It’s not outrageous to envision that PB will kill the ad sales executive role. After all, building a world-class direct sales force is expensive. Base salaries range from $100,000 to $300,000,with total compensation ranging from $200,000-$500,000, with a salesperson’s first deal taking months to close.
Most publishers can’t afford that kind of cost-return tradeoff, so they turn to ad rep firms like Federated Media. But ad rep firms have models that are doomed, as well. FM’s decision to drop the direct sales force is a combination of PB and NA driving more revenue, but the fact that its margins were compressed didn’t help. Larger publishers have the scale and better margins to maintain direct sales force, but that doesn’t mean business as usual.
Paging Dr. Schmidt, paging Dr. Schmidt.