• by Tyler Loechner , Staff Writer @mp_tyler, June 13, 2014

Programmatic buying promised to bring efficiency to the digital ad marketplace, but it didn’t come without issues, one of the most pressing of which is transparency. Where did your money go? Did the ad work? How can you know?

I spoke with Bill Lederer, chairman and CEO of MediaCrossing, about efficiency and transparency to find out where the programmatic market stands and where it’s going.

RTBlog: “Transparency" and "efficiency" are two of digital advertising's favorite words. What do these two buzzwords mean, and why do they matter?

Bill Lederer: Transparency is the relative depth of awareness a digital media buyer or seller is permitted to have: the publisher, placement, distribution, audience, effectiveness, price, agency, marketer and outcome. Transparency is a spectrum — rarely an absolute state. 

Efficiency is the sum of total costs relative to total media investment or proceeds necessary to achieve one’s objective as either a buyer or a seller. Without relative transparency and efficiency, any given media option stands little chance of survival in the long-term. Today, most programmatic forms of digital media – as currently delivered to buyers and sellers – are an improvement over non-programmatic methods, but are still dramatically inefficient. This stems from three root causes: 

1. Most digital media advertising doesn’t work most of the time.
2. There is an apparent lack of fairness in the price one pays or receives for what they contribute to the individual media trade.
3. Too much of programmatic trading is not yet fully automated and optimized.

Without greater clarity and consistency in the delivery of these two facets of our industry, few long-term industry growth forecasts are likely to be met and sustained. It is MediaCrossing’s expectation that market competition, if not industry imposed self-regulation, will likely improve current standards of transparency and efficiency. 

RTBlog: Have the definitions of those two words evolved?

Lederer: Due to the availability of cloud-based computing, real-time engineering and greater competition, the definition of and standards for acceptable “transparency” have never been higher. The definition of “efficiency” has not changed in media; however, the accuracy and precision of the measurement of efficiency has become more of a science and less of an art. The same is true for its partner by necessity - “effectiveness.” Similar to how in nature if you’re not growing you’re dying, the need for greater transparency and efficiency is undoubtedly a good thing. 

RTBlog: Does programmatic ad technology in and of itself help in the "transparency" and "efficiency" departments? How much do the people using the technology matter?

Programmatic ad technology certainly helps in transparency and efficiency to the extent that organizations, their cultures and the individuals specifically involved embrace the need for and desirability of these things. People make all the difference. Those of us working with technology each day too frequently forget about the instrumental role held by individuals, particularly those at the top of the organization who are responsible for setting the imperative.

RTBlog: Who has the most to gain by remaining non-transparent? Who has the most to gain by a 100% transparent marketplace? Is that a utopian, unrealistic goal?

Lederer: Most to gain: the current players who wield power – and to some extent, control – in the ecosystem as it currently stands. The movement toward greater transparency and greater efficiency is a challenge to ad networks and certain agencies in addition to a variety of non-risk bearing data and technology vendors.

Those who have the most to gain are likely to be the highest quality publishers and the smartest marketers. The net result will be margin pressure and diminished growth for those who cannot meet the increasing standards and/or deliver appropriate value. This is not an unrealistic expectation; in fact, we should all expect a clear distinction along these lines during the next advertising recession. 

RTBlog: So what's the next step? Where do more efficiency and more transparency come from?

Lederer: It comes from those innovating at the edge. Disruptive innovation rarely comes from those who have the most to lose. The most important catalysts for change are likely to be knowledgeable marketers, publishers and those that represent them, who are demanding and delivering increasing accountability (e.g., independent media traders). 

RTBlog: One of the promises of programmatic was that it would bring more efficiency to the trading of digital media. Has that promise been met? Is there a new promise of programmatic?

Lederer: Yes, programmatic has brought more efficiency to the trading of digital media, and this is seen in the measurement of the spread between what advertisers are getting for their money and what publishers are receiving for their inventory. Neither may be happy, but on balance they are better off.

The stage is now set for the new promise of programmatic. If you’re a marketer and were getting a bargain before, you’re more likely to see competition for the best available inventory. If you’re a publisher and don’t like what you’ve been receiving, there may be a good reason for it, suggesting that you need to adapt in order to accomplish your economic objectives.

This next stage of programmatic digital media trading will be Darwinian in nature. That is, there will be survival of the fittest within the ecosystem and its stakeholders. As programmatic trading scales, we should expect margin compression due to the wide diffusion of ideas and capabilities. Early innovation is leading to commodification and commoditization, which if managed properly by buyers and sellers, may benefit them in ways far beyond what they might imagine.

RTMD: Any other comments?

Lederer: Digital media – in being driven to become more transparent than most other media channels and as efficient (if not more efficient) than most – has the opportunity to become the world’s largest media channel in the next decade, even surpassing television. Digital has tremendous potential, especially because of its high degree of targetability and measurability as well as its site/sound/motion characteristics. The future for our industry is very positive.