Continued Growth of Programmatic Requires Changes on the Supply-Side

All of us in the programmatic market have seen unbelievable growth over the past couple of years. That said, as this market begins to mature, savvy buyers are asking for more than demand-side platform (DSP) 1.0 (e.g. cheap media and cookie targeting). The good news is that DSP 1.0 has scaled and supply-side platforms (SSPs) and exchanges alike have had remarkable growth. The bad news is that the supply-side has become complacent, and the same formula that drove that growth over the past few years will not drive growth in the future.    

Marketers are looking for more – beyond the click, and the view through CPA, to upper funnel campaigns on named media. This is where the real dollars are, and the SSPs that have achieved scale on the old model will not continue to deliver shareholder value in the long term if they do not change their fundamental business practices. The old world was about using cheap media to game attribution models, while the new world is about advertising effectiveness. 



What changes are required to transition into the new world? Below is a starting list that will benefit buyers and sellers alike:

  • Provide Transparency & Consistent Classification: Most basic level – if buyers do not know what they are buying, they won’t buy it. Or at the very least, they won’t pay much for it. On average, anonymous inventory costs 25-50% less than transparent inventory.  Many publishers continue to keep their inventory anonymous (for many reasons, some valid and some not). Brands will simply never value buying this type of inventory to drive upper funnel metrics.     
  • Take the Auction Mechanism Out of its ‘Black Box’: Economics 101 will tell you that second price auction is the way to go to achieve maximum efficiency.  And all the SSP’s and exchanges are running second price auctions.  Right?  Take a closer look.  How about dynamic price floors? One floor? More? In my experience, many suppliers are unwilling to document and warrant their auction process contractually. And frankly, given what we have seen in the market, it is time the Media Rating Council (MRC) got involved with a certification or auditing process. Buyers will reward transparency with increased spend.  
  • Improve Impression Quality: The supply-side has the incentive to onboard and distribute as much inventory as possible, leading to a market swollen with less than desirable inventory. I applaud the efforts of suppliers in market who are investing and publicly focusing on removing things like tool bar inventory and file sharing sites. At the end of the day, we will not move our industry forward (and bring more TV dollars into the space) unless we do this, and more. One might argue that it is unrealistic to expect supply-side to remove this inventory because there is, and will continue to be, plenty of demand for this type of filler. That being said, advertisers should be given a clear and transparent choice.  
  • Shutdown Fraudulent Traffic: Recent articles have documented the extent of this problem, and it’s great to see the IAB finally picking it up as an issue they need to address. As a start, supply-side platforms should document and publish their inventory onboarding and monitoring processes.  Publishers should do the same, and be especially mindful of how they supplement their organic traffic with purchased traffic. Today, there are supply-side platforms that do not even have the most rudimentary click fraud detection tool in place, leaving the door wide open to non-human traffic.  Fortunately for brands, buy side platforms have picked up the slack here and are running multiple processes and technology to limit their exposure to this type of traffic.  
  • Fix Private Market Place Mechanisms: The tech in place does not provide for guarantees on either side – as such, the value prop is thin for both the buyer and seller. Without the contractual mechanism and capability to guarantee volume and fill, this market will continue to struggle to move beyond basic right-of-first-refusal (ROFR) cookie-based buys.  

The programmatic market has reached an important tipping point in its growth. The efforts of many suppliers who have proactively improved the quality and transparency of their supply are to be lauded; however, these limited efforts are not sufficient to continue to guide the market towards programmatic nirvana. I fully expect and support increased participation and scrutiny from governing and standards authorities in digital media. That said, dollars will continue to be the highest regulatory authority, and my short list of five proposed changes is necessary to not only improve buyer confidence and increase spend, but also to maximize publisher yield.

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