Inventory Discovery Is The Key To 'Programmatic Waste' Management

by , Dec 18, 2013, 9:47 AM
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Trading efficiency and precision in audience targeting has fueled the explosion of interest in new ways for publishers and advertisers to work together more effectively. The latest trend -- programmatic direct -- promises to bring the efficiencies of real-time bidding (RTB) to guaranteed, insertion-order contracts, but comes with a hidden pitfall: programmatic waste.

This digital detritus refers to the volume of inventory that buyers acquire via programmatic direct that they would have rejected if it had been available through “traditional” RTB. With any guaranteed inventory, buyers bear 100% of the risk over whether the publisher will send them the “right” impressions. To mitigate this risk, advertisers discount the price they negotiate with publishers to account for their prediction of waste. RTB's ability to find and engage audiences can minimize this risk, yet these efficiencies are still absent from programmatic direct buying.

The “new” programmatic direct transaction model follows the same pricing mechanism as the traditional guaranteed inventory model. Thus, buyers find themselves in an automated landscape in name only, where they are locked into the same guaranteed contracts with publishers, without help from a sales team to identify which products best map to their target audience.

Fortunately, there is a solution, which we call “inventory discovery.” To see how this helps both buyers and sellers, it is important to understand how poor waste management impacts inventory pricing. Advertisers pay more when they know they will receive qualified target audiences. To truly automate programmatic buying, we need to automate the role that sales performed in helping buyers identify and select the publisher inventory most likely to achieve their goals. The better this is done, the greater the reduction in risk to the buyer, even with fixed-rate contracts. Buyers are willing to pay more if they feel that their finite ad dollars are being well spent.

The tools to reduce this waste through inventory discovery are here today and getting even better. Data management platforms (DMPs) already help marketers create custom audience segments based on their own first-party data and that of third-party data providers. Once buyers determine a target audience, they then identify the reach of their audience on specific inventory sources.

However, buyers face the challenge of media planning tools that usually provide insight only at the inventory exchange level. To get a deeper look at their targeted audience at the domain or site level, they often must resort to the use of high-level static audience characteristics (such as where people live) or a narrow set of demographics. This lack of precise data means that marketers are forced to target with 1990s technology and sellers earn far less per impression than they otherwise could.

In the past, buyers used publisher content as the proxy for their target audience.  This too led to high levels of waste. More recently, some publishers have suggested the impractical solution of buyers sending them user lists containing what the buyer defines as their “right” audience. Since buyers cannot synchronize the ever-changing segment membership rules with the thousands of publishers with whom they transact, this approach simply does not scale.

Meanwhile, in the RTB transaction model, demand-side platforms (DSPs) enable advertisers to reach their precise target audiences based on unique audience definitions. Advertisers tell us they desire similar audience-targeting capabilities with their programmatic direct contracts. When this same buy-side technology is used to plan and forecast on guaranteed inventory, this solves part of the discovery challenge that publishers previously solved via their costly sales teams.

To further automate the discovery of highly valuable inventory, publishers can provide a sample of traffic to buyers' DMPs, enabling forecasting of audiences against these packages. Buyers can identify both which publishers to buy from and which bundles of publisher products to buy. Because this is just a sample of traffic, publishers still remain in complete control of who they sell to, as well as their floor prices. In essence, the DMPs become a lead-generation tool for publishers.

Through inventory discovery, the full potential of programmatic direct buying is unleashed. Advertisers will pay more for inventory when their risk is reduced, and they will still achieve a high ROI. The technology is already there, it will just take a bit of education to help the market discover this simple solution to programmatic waste management that has immediate benefits to both buyers and sellers.

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