Will Programmatic Buying Be The Death Of Direct Sales Forces?

by , Nov 13, 2012, 9:05 AM
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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.

9 comments on "Will Programmatic Buying Be The Death Of Direct Sales Forces? ".

  1. Douglas Ferguson from College of Charleston
    commented on: November 13, 2012 at 11:10 a.m.
    This could have been a more persuasive read without all the cute jabs at Karl Rove. You might consider your audience when you write about a serious topic (selling), not to be mixed in with gloating over a 51% outcome.
  2. Ashkan Karbasfrooshan from watchmojo.com
    commented on: November 13, 2012 at 11:22 a.m.
    Douglas, thanks for your comment. I fully realize that while President Obama won, a fairly large percentage - possibly even a majority - of readers of a business column may have voted for "the other guy." I always try to connect - light-heartedly or seriously - what I write about with something happening in the broader landscape (hurricane Sandy for example in last week's piece). With regards to the gloating allegation: Republicans across the spectrum are all looking for "excuses and explanations" of what happened last Tuesday. Are they "gloating" as well? This is an advertising column, politics is a big part of advertising. The article kicked off by touching on layoffs, you can't visit any website these days and not see a company politicizing layoffs (Applebee, Papa John's etc.) But I digress, if you consider two "cutesy" references to Mr. Rove as gloating, then you have a very thin skin and everything will offend you. Respectfully, Ash
  3. Ron Stitt from Fox Television Stations
    commented on: November 13, 2012 at 11:22 a.m.
    I don't think it's an either/or proposition. Smaller, simpler ad executions may not need hands-on care and feeding. But the best programs offered to advertisers by top tier, branded publishers involve deep integration, integrated marketing components, synergizing and leveraging brand assets (shows, talent, etc.) and developing top-of-the funnel (brand equity) benefits as well as the more DR-like metrics that drive programmatic buying. It's really not possible to automate those transactions because they involve human creativity before the bespoke "product" is even defined. Same reason true social media marketing/CRM cannot be completely automated - automation is the antithesis of authenticity. I'd also argue that you can't remove all intangibles from advertising, if you are an advertiser with an eye on brand equity. But, no argument on the idea that technology is going to bring big efficiencies and reduce sales channel friction, which is a good thing.
  4. Ashkan Karbasfrooshan from watchmojo.com
    commented on: November 13, 2012 at 11:26 a.m.
    Ron, agree 100%. We won't see all direct sales forces die, or ad sales execs die. If you think about it: Google's YouTube unit (its main display/video thus branding tool) has embraced traditional media's way of selling ads a lot more than we would have expected them to... mind you, that's partly because the Algorithm failed to show the results they were hoping for.
  5. Mike Einstein from the Brothers Einstein
    commented on: November 13, 2012 at 11:45 a.m.
    Ash, The short-sightedness of programmatic buying notwithstanding, I gotta take issue with the entire notion of "premium content". Seems to me that content, like beauty, is in the eye of the beholder. Or, as Paul Simon would say: "One man's ceiling is another man's floor." Those of us who know our media history will recall this same sage advice being bestowed some fifty years ago by the Starkist folks on a certain Charlie Tuna: "Starkist doesn't want tunas with good taste. Starkist wants tunas that taste good!"
  6. Ashkan Karbasfrooshan from watchmojo.com
    commented on: November 13, 2012 at 11:48 a.m.
    Mike - agree 100%: "While the production level and costs vary enormously, the quality and appeal are *subjective*." BUT: "marketers favor more polished content even though increasingly there’s no direct correlation between audiences size and production level."
  7. Nick Dimitrakiou from Convidence
    commented on: November 13, 2012 at 11:54 a.m.
    Well written article. While I'm not a fan of PB (unless there is a "J" and some bread), it makes the reader think. In a world where the cost for someone's attention is often higher than a mortgage payment, this article is engaging. Thank you.
  8. Doug Garnett from Atomic Direct
    commented on: November 13, 2012 at 10:24 p.m.
    Excellent article. Are people really drawn in by these claims to have reinvented the world when all that's happened is an old approach has been renamed? And, by the way, the Rove comment was appropriate and understood. This is advertising - we've got to have a lawyerly ability to separate our own feelings from the topic to read the true meaning. In my book I open by discussing the Obama campaign's use of infomercials in 2008 - a highly appropriate topic for any student of advertising. Yet far too many people lack the ability to get past their personal feelings and simply read what's on the page. Sad.
  9. doug render from spotxchange
    commented on: November 16, 2012 at 4:45 p.m.
    the world is going towards placements that can be bought programmatically, and those that cannot. Figure which you have and align your organization accordingly.

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