Programmatic Buying Rises, But Display Ads Decline

The rise in programmatic buying continues to drive the decline in premium display ad sales, according to an analyst report published Tuesday. The findings cite Yahoo's weak operating results and commentary by CEO Marissa Mayer during the company's Q2 2013 earnings report.

"Our display business has felt some negative impact, particularly due to the shifts around programmatic buying," Mayer said during the call with analysts and investors, citing issues around premium sell-through rate as opposed to non-guaranteed and with pricing in the exchange. "We need to do a much better job here in order to reverse these trends."

Yahoo's plan to "fix it" might not work, given the problem digs deeper into a morphing display ad industry. Pivotal Analyst Brian Wieser believes online display advertising remains a "structurally weak business for most media owners." In the lengthy research report, he explains how media owners AOL, WebMD, and other traditional publishers with large digital advertising businesses like the New York Times Co. are exposed to negative secular trends hurting premium display advertising that limits the prospects for organic revenue growth and more susceptible to declines.

Most publishers are experiencing "negative underlying trends" as a result of programmatic buying, which Wieser asserts amplifies the buyer's advantage. In the coming year, he estimates that media owners with arbitrage-based businesses like Millennial Media, and Tremor Media, operating outside of traditional PC-based display inventory could experience the same impacted.

While Wieser notes exceptions to the conclusion, he explains how industry data highlights tepid growth for nearly every company other than Google, Facebook and a handful of others. He also cites risks for all Web publishers as a high degree of rivalry, given an absence of barriers that will prevent new competition, overly high and increasing capital needs, and government regulations and consumer pushback related to management of consumer data and respect for privacy.

Can relationships save the premium display advertising biz? While programmatic buying continues to "suck the demand" out of the market, as MediaPost Editor in Chief Joe Mandese describes it at the OMMA Premium Display conference in Los Angeles, Wieser notes that proving relationships remains one strong area for publishers -- either personal or professional.

Technology will become commoditized, so relationships help the company stand out -- especially from the sales side, said John Tuchtenhagen, vice president, group director of media, Digitas. The relationships need to bring together publishers, brands and media agency.

Next story loading loading..