Commentary

Confessions Of Agency CTO: Ready or Not, Programmatic Future Already Here

Dr. Hagen Wenzek, a leading technology consultant who spent more than a decade with IBM and was the CTO at IPG Mediabrands, has seen the future of how online ads will be bought and sold, and the crystal ball revealed a programmatic world to him. “The tsunami is already in sight,” said Wenzek, founder of Freestyle Consulting. “You don’t need to telescope any more to see it coming, so I don’t think anybody has any time left.”

Skeptics can deceive themselves by looking at the percentage of revenues being generated by programmatic, but this is the wrong vantage point. If your gauge is the actual number of transactions facilitated through programmatic, you’ll get a much better picture of how things are truly changing.

Programmatic’s dramatic shift is especially evident in video. Six months ago Hulu and others said that it would never offer any of their inventory on an exchange, network or through any kind of programmatic situation. Now Hulu sells inventory via GroupM’s Xaxis. “That’s just an example where those folks who believed the transition would be slow are now turning around and wondering, what the heck?” said Wenzek. “Why can’t I buy that inventory anymore on Hulu? Because I don’t have the capability to buy programmatically?”

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Wenzek asserts that publishers and advertisers that have held back on RTB based on the “race to the bottom” perception will be surprised to learn that they can actually improve the quality of their impressions by using programmatic.. Quality concerns don’t stem from real-time bidding or programmatic, he explains. The real problem begins with how digital advertisements have always been bought.

“Through a more algorithmic approach to buying and placing ads, it’s much easier to find patterns in the data that give you an indication whether the ad that you paid for is actually a valid impression,” he said. “So it is a pressure point.  Maybe RTB would even accelerate that.  Yes, you’re racing to the bottom, but that race is also the result of people starting to understand how impression-gathering is really working.”

When I asked Wenzek why he thought so many advertisers and publishers were resistant to adopting programmatic trading practices, he responded, “It’s not a concern for quality. It’s culture.” Both the buy and sell side have built their businesses in an analog manner, on direct sales forces, media buyers and planners.  These businesses are accustomed to doing things manually. Today, we’re beginning to rely on computers and algorithms to facilitate all these transactions. Data is available to help make better decisions about those transactions and different skill sets are required to facilitate trades. There’s also less need for businesses lunches or golf outings – business events that executives are reluctant to leave behind.

“However, if you can actually make that transition or you started from scratch without that baggage, then you can be so much more efficient because you’re doing things with computers and not with people,” noted Wenzek.

Although programmatic will continue to grow as predicted, it will still appear to be a small part of the industry economy simply because cost-per unit is so much lower than it is on other channels. “It might not be total revenue of the industry, because a Super Bowl ad is just so crazy-expensive that if you negotiate it manually, it still looks as if a lot of activity in the industry continues to be non-programmatic,” concluded Wenzek.  “However, if you look at the total number of transactions that happen in the industry, that’s for me the measurement of the pyramid.”

2 comments about "Confessions Of Agency CTO: Ready or Not, Programmatic Future Already Here".
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  1. Kevin Lee from Didit, November 19, 2013 at 11:18 a.m.

    Interested in the future of Programmatic? Check out this eMA breakfast event, CyberMonday http://emarketing-chat.com/

  2. Henry Blaufox from Dragon360, November 19, 2013 at 11:46 a.m.

    The distinction between dollar volume and transaction count when measuring the penetration of "programmatic" is crucial, for the reasons mentioned by Mr. Wenzek in the Skip Brand's post. When IPG announced they wanted to achieve fifty percent programmatic penetration, they used dollar volume as the measure. That will likely be a high bar, since high cost TV broadcast accounts for nearly sixty percent of spend. Big ticket broadcast may not be conducive to programmatic buying for the reasons mentioned by Wenzek. So perhaps focusing on transactions, and the ways in which automated processes can eliminate labor intensive, often redundant operations and costs, is the better goal.

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