Commentary
The Ruse Of Programmatic 'Direct'
- by Tyler Loechner , Staff Writer @mp_tyler, June 14, 2013
When it comes to the advertising
industry, and especially in the programmatic space, there's a whole lot of BS tossed around about who can do what, when, and where. Personally, I have a hard time remembering off the top of my head
what company does what, mostly because everyone seems to say they can do everything. One week a company is a "cloud-based ad solutions provider," the next they are a mobile exchange.
Sifting through the pile of BS, though, one term sticks out - "direct."
In the automated space, we often hear the term "programmatic direct." We hear about how real-time bidding (RTB) has a low ceiling because it's associated with remnant inventory, and that programmatic direct is how the cool kids trade. I was at Tech For Direct last week where speakers happily displayed charts showing that programmatic direct would bring in piles of cash to the moon and back, sucking the money from RTB's measly spend predictions.
One problem though…it seems to me that everyone trying to sell the idea of programmatic direct is actually a middle man.
I'm not saying the idea behind an easier way for brands and publishers to collaborate is bad. Not at all. It just feels as though "programmatic direct" options are nothing more than rebranded demand-side platforms or sell-side platforms. The term "direct" is inviting because it carries with it the old school way of doing things while avoiding the stigma of "remnant." But then what do we call sales that are actually direct?
I spoke
yesterday with Mark Trefgarne, CEO of LiveRail, about his company's recent Video Publisher Forum. The term popped up a few times during the event, and he said the he objects to it being called direct
because, well, it's not direct.
So what does Trefgarne think really qualifies as programmatic direct? "A direct deal that is executed programmatically," he said.
Oh. It can be that simple?
Tyler Loechner is a MediaPost Reporter covering real-time, programmatic, RTB and more. You can reach Tyler at tyler@mediapost.com.
Thank you. My take is that this is the latest way in which scale media agencies are trying to remain relevant in a world of biddable media.
First of all, thanks for coming to our event.
But I think you've really missed the point about all this / some of this post is wrong.
Simply having the presence of technology doesn't conflict with the traditional notion of direct sales. Direct sales uses ad servers, yield optimizers, Outlook, Excel, etc - yet ad servers aren't considered middle men?
Direct simply means: a specific buyer and specific seller chose to work explicitly with each other.
Programmatic Direct means that when specific buyer and specific seller want to do business with each other, they are conducting it digitally as opposed to the old school manual method. PD companies are the "better fax machine" that enable it.
Trefgarne's description of programmatic direct being "A direct deal that is executed programmatically" is exactly right.
Can you please explain how the programmatic direct companies aren't direct?
(Yes, some of the remnant companies like Rubicon are trying to rebrand into this space, but the leaders were purpose built and founded only for direct sales.)
@Stuart - this is explicitly not biddable media. No auction or bidding process at all.
Tyler,
To add to John Ramey's spot on response, a few more points:
Programmatic Direct (PD) solutions are designed to take legacy tools and processes and allow publishers to scale their direct sales through efficiencies in workflow, optimization, inventory forecasting and pricing, to name just a few areas.
Unlike RTB platforms, we don't take a position in a transaction, i.e. we don't take a percentage of spend as our fee. We charge transparent tech fees either in the form of volume pricing or seat licenses. There's no arbitrage or other hidden margin. It's as transparent as it gets.
Our goal is to support the direct buying process through the introduction of efficiencies, not to become a middle man in the process. We support the transaction through our platforms. None of us are involved in the transaction, i.e. we don't make markets. That is the role of a middle man.
Happy to discuss more at your convenience.
Anthony, yes. There are a few tech companies that take that approach with their model (assuming Maxifier is one of them).
Seems like now the term "Direct" is under scrutiny after the term "Programmatic" had its turn. =)
Both comments point to whether the tech that makes it happen is really direct or a middle man. And that could be up for debate for every vendor.
How would one determine if they are a middle man or not? Seems like it would be the way the tech charges for the transaction. (% of spend like a traditional network or is it a tech license like an ad server?)
Can someone explain in laymen's terms what the differences are between RTB and Programmatic Buying/Selling? I am struggling to determine the real differences and/or pros and cons of both. Thnx
You can think of "programmatic" as "workflow automation." RTB (Programmatic 1.0) is not possible without being fully automated. Because of deal sizes and turnaround times, direct sales can be done without automation. However, as Neal Mohan of Google pointed out two weeks ago at the Think DoubleClick event: the industry is wasting $3.6 million *per hour* in manual labor. He estimates that automation like programmatic direct will save 33% of time. That's no "pile of BS" - it's serious money and a huge chunk of time! Programmatic Direct (Programmatic 2.0) is all about automating direct sales.
@Michael - RTB is a subset of the programmatic spectrum.
Programmatic simply means machines talking to each other. RTB is a specific method of that - one design for the real time auctioning of a cookie driven impression.
But Programmatic has expanded to include guaranteed and direct sales, since you can accomplish those types of sales using machine-to-machine pipes now too. But it isn't an auction, is controlled by humans, etc.
@James I wouldn't judge a PD vendor by their billing model. I understand there's so much nuance in the space, that it's easy to classify a solution as a middle man if they're claiming a revenue share. Some can take a revenue share, others may not. For example, we charge on a CPM basis exactly like an adserver, while others take a transparent % of revenue. The key word here is transparent. If the publisher has generated more revenue at higher margins due to increased efficiencies throughout the transaction - easier to buy, easier to sell, easier to operate and easier to optimize, then there should be happy parties on all sides. The goal of Programmatic Direct is to facilitate exactly that - make it easier for buyers and sellers to directly transact media as efficiently as possible while maintaining 100% transparency with humans at the drivers seat. Our collective goal is to create the "Easy Button" for premium, direct sold inventory.
@Anthony - I agree with that. If it's a rev share, transparency certainly changes it. The "middleman" has gotten a bad rap over the years and for better or worse, the rev share model players are usually tied to being a middleman. Maybe because it was the networks that started it, or maybe because the rev share model allows the third party to share in the upside of the deal rather than a static charge. Whatever the case, or model, there is an inherent cost to running a piece of ad tech and giving the publisher/advertiser an "Easy Button". The buy / sell side needs to understand this when pointing the middleman finger. Making the easy button, is NOT easy. It will be interesting to see if all the PD players are able to show that their cost of the "easy button" IS in fact lower than hiring 4 more people to run excel docs and use paper IOs. I think everyone is rooting for PD, but is also scared out of their mind at the idea of having a one person ad ops team. (I love the easy button analogy btw)