Procter's Programmatic Gamble

Advertising Age reported yesterday afternoon that Procter & Gamble wants to buy 70% to 75% of its U.S. digital media programmatically by the end of this year, citing “people briefed on the company’s plans.”

Doing so would be significant on multiple fronts. For one, P&G is a brand advertiser, not a direct-response advertiser. Programmatic has been commonly associated with direct-response advertising, sometimes with a negative connotation. Such a significant investment on P&G’s part could transform that perception.

The other significant angle here is that this move could have a significant impact on how P&G uses its media agency -- Publicis’ Starcom MediaVest Group -- because P&G does its programmatic buying in-house. The P&G news, coupled with word from Bloomberg that Apple is taking more of its advertising in-house, marked a bad day for agencies.

But Brian Wieser, senior analyst at Pivotal Research Group, doesn’t think the new items are "omens" for the industry at large.

“First, we recognize that growing numbers of brand-based marketers either operate or are establishing in-house trading desks for the digital media they buy programmatically,” Wieser notes in a research report. “While there is some logic to this approach for many marketers, there are real reasons to doubt its durability for most.”

Wieser mentions the difficulty of getting specialists to relocate, securing the ongoing investments needed to operate a trading desk and keeping pace with larger agency trading desks as a few reasons to be worried about the long-term sustainability of brands bringing ad tech in-house.

In the short-term, however, it’s something that has actually been a trend for months now. Casale Media recently noted that marketers doing their own programmatic buying accounted for 11% of all spend on U.S. marketplaces in Q1 2014, up 267% over Q4 2013. No other programmatic buying method -- such as through an agency, via a trading desk, or using a manage service/network -- grew as fast quarter-over-quarter as marketers using in-house tech. However, Casale's report included both brand-based marketers and direct-response marketers, and the importance of the P&G news is that it’s on the branding side.

“Over time, we only expect a minority of brand-based marketers to eventually bring programmatic trading in-house,” Wieser remarked.

The other side of the equation here is figuring out how P&G is going to spend 70% to 75% of its U.S. budget on programmatic.

I’m assuming the majority of this spend will come through “programmatic direct” channels rather than real-time bidding (RTB), though perhaps the more important question is where the supply will come from.

“[P&G] is basically saying, ‘If you want to work with us, you’re going to supply to us,’” Wieser said to RTM Daily on the phone. Essentially, P&G appears to be forcing the hand of publishers, but Wieser reckons those publishers are prepared for it.

“I’m going to guess there’s probably not very many suppliers who [P&G] really care about that they couldn’t get,” Wieser said. He added that while they might not like it, he would be surprised to learn of a major publisher that hasn’t seen the inevitability of programmatic. He believes P&G could help "move a lot of people along" in terms of how programmatic is utilized by brands.

2 comments about "Procter's Programmatic Gamble".
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  1. Seth Ulinski from Independent Analyst and Consultant, June 5, 2014 at 1:45 p.m.

    Coincidentally Kellogg (another CPG heavyweight) has made significant moves to bring programmatic in-house. As stated, agencies and ATDs should have an edge on the in-house approach as long as they A) have access to superior talent B) weave additional value-add into deliverables through SME's, add'l tech layers, etc.

  2. Ed Papazian from Media Dynamics Inc, June 7, 2014 at 10:04 a.m.

    One of the main questions to be asked is whether "branding" advertisers like P&G are buying true online branding campaigns progammatically or are these mainly direct response and/or promotional ads which are not handled by their branding agencies but are normally dealt with in-house or via specialized shops.

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