Great Marriage Or Messy Menage A Trois? Premium Inventory, RTB, Upfronts
To state the obvious, programmatic buying/real-time buying has been growing like a weed. It is the fastest growing part of digital advertising – in fact, it is causing all other types of digital advertising to decline. IPG just announced that 50% of all of its media buying will move to RTB over the next three years, and that includes TV, radio, and digital.
Most recently, premium inventory has started to become available on exchanges. Often this occurs on private exchanges for select buyers, as well as sometimes through networks that buy out the entire unsold inventory. Either way, it is available. And even when people are still emailing insertion orders for specific inventory, this will become automated. Over time, the difference between "automation" and "programmatic buying" will become smaller and smaller. Our industry simply cannot afford to do a $25K buy manually. It costs more than that just to execute the buy, so it is terribly inefficient.
So how did TV manage to invent upfronts, and will AOL be successful in getting advertisers to commit to digital upfronts in advance? In my humble opinion, it’s a resounding NO. Don't get me wrong, I'm a seller of digital media, so I would LOVE for this to happen. But I'm not an ostrich; I'm a realist. The only reason upfronts exist, and indeed the only reason that TV advertising still commands such premiums, is because there are very few outlets – the major broadcast networks, plus a handful of cable and similar companies – with significant media reach and 30-second spots to sell.
It’s because of the scarcity of buying options that there is an imbalance between buyers and sellers, with sellers having the upper hand.
Contrast this with media sold online. There’s a myriad of sellers, yet none ot them are sold out. The balance of power in digital is in the hands of the buyers, not the sellers. "You won't sell me that rich-media campaign at my price? No problem, I've got a line out my door of people who will."
Video is the one digital option for which it is possible you could have an upfront, again because there are so few genuinely premium video options online that have significant reach. However, once you move outside of these few opportunities and into the long-tail/user-generated video space, video begins to look just like the rest of digital: much more of it is available than advertisers require.
So what does this mean for digital? To start, it’s definitely not going to be a picture-perfect marriage for programmatic, premium inventory and upfronts just yet. Because advertisers have the luxury of almost unlimited inventory, they will continue to focus on audience buying, and because advertisers don’t know which sites their audience will visit in advance, they will continue to buy in RTB programmatically, bidding for impressions on whatever sites their best prospect visits. This means that upfronts for digital advertisers is a pipe dream, and any advertising agency that commits to this is doing their client a massive disservice.