That is one of the observations Wall Street analyst Brian Wieser draws in a new report sent to investors this morning summing up the recent spate of advertising technology deals, including some high-profile IPOs, and an even higher profile acquisition (AOL’s deal to purchase Adap.tv). At least part of all this activity, he says, is being rationalized by the notion that programmatic media buying -- and selling -- is beginning to transform the way Madison Avenue operates.
Specifically, Pivotal Research Group’s Wieser cites the emphasis recent ad tech dealmakers -- including AOL, DG, and Jumptap -- made as part of their reason for doing their deals.
But Wieser also sees it as a double-edged sword. On the one-hand, he says it will help reduce transactional costs on both the buy and the sell side of the advertising business. On the other hand, he believes it will ultimately speed up the process “by which advertisers can express their indifference to specific publishers. This means that much of the industry will continue to commoditize itself going forward.”
It’s that last part where I personally split from Wieser’s point-of-view. While it is true that programmatic trading has and will continue to have a commoditizing effect on the media markets it touches,” I don’t believe it will do so in the long run, publishers and other media suppliers are not “indifferent.” And the ones that do the best job of differentiated themselves from the rest of the commoditized pack will always generate more demand, higher prices and more premium value than those that do not. That’s true whether it’s a manual marketplace of direct buyers and sellers interacting the old fashioned way, or whether they’re doing it through machines the newfangled way.
Some of the ways they differentiate themselves may be new, like using first- and third-party data in new and imaginative ways. And some of it will be old, like good old relationship based selling, investing in their content or environment, or conducting primary research to highlight the value of their content and audiences vs. the other guys. In other words, the things that differentiate commodities from equity on Madison Avenue, will, in a way, be the same ones that differentiate them on Wall Street: research and capital investments.
On a positive note, Wieser does see some upside for the effects of programmatic buying on the media industry.“It does seem that by now the larger media owners recognize that programmatic buying and selling is real, and that it is better to capture a share of the money in the marketplace and take enhanced risks on future declines vs. ignoring programmatic advertising altogether.” That part, we’re definitely agreement on.