How to get your inventory back
Over the past year programmatic advertising has really taken off. Even if you doubt the numbers that say 75% of marketers are already using programmatic advertising [Chango 2014], it is clear that every player in that ecosystem has to have a strategy in place for programmatic. That strategy needs to be a business strategy that is directly tied to a technology strategy: What do you want to achieve and how do you want to do it technically?
By definition programmatic advertising means using technology to improve marketing performance: Reaching relevant consumers better and cheaper by buying the right inventory at lower cost, automating campaign management, and improving audience targeting. The tools that help a buyer, a publisher and everybody in between achieve these goals live in the acronym- and logo-soup of Lumascapes and Hypecycles or they get bundled up in big suites from Google, Adobe, Salesforce, AppNexus and the like.
They are: Buyers’ self-service tools – agency ad server – Demand Side Platforms – Data Management Platform – Ad Exchanges – Sell Side Platforms – publisher ad server and a couple that span across multiple domains. And yes: Excel.
But before we go deeper into the tools, let’s take a step back and look at the business objectives first. And let’s look at the challenge from the perspective of publishers concerned about their inventory becoming cheaper through programmatic.
Business strategy for publishers going programmatic
The top level business goal for a publisher holding valuable inventory, i.e. especially the premium publishers, is to capture as much revenue from ads on their sites today while at the same time preserve (or better even increase) the inventory value of the future by protecting the brand. Therefore, they have to strike a balance between monetizing every aspect of their sites and avoiding ads that are not ‘compatible’ with the site’s appearance. Traditionally, publishers have handled that by employing a direct sales force that sold the inventory to their clients with a placement guarantee. Then the sellers could conduct their own quality control on the ads being placed, making sure they live up to the expectations. Unsold inventory got a place on the spot market with less stringent rules, but still governed by quality principles.
With the advent of programmatic advertising, especially Real-Time Bidding (RTB), that unsold inventory was pulled onto public ad exchanges. Prices were already low on most ad networks and increased efficiencies helped offset the margin contraction. However, the publisher also lost most control over their own inventory, except for some floor-pricing rules and by maintaining blacklists. Even though the extra
money to be made from that is low, the inertia in the industry dragged a lot of companies with it, creating today’s business reality
At the end, the business goals of achieving high yields on current inventory as well as preserving future value were not achieved and a new approach to programmatic has to be put in place.
Technology strategy for publishers trying to regain control
Taking control of the inventory back to achieve these goals sounds like an interesting approach. However, it requires better systems than used before to execute it. Else the result will not only be not better, but probably worse overall. One critical element in the ‘tool value-chain’ described above is the one closest to the publisher: The ad server. Were it not for the top-dollar acquisitions that happened in the past months from Freewheel (to Comcast) to Open AdStream (to AppNexus) as well as the re-launch of Atlas at Facebook on the buy side (for now), any discussion of them would have quickly been yawned away. However, now that it got the attention it might deserve, how can it help that publisher who is searching for technology-support in their dilemma with getting the most out of their inventory vs being overwhelmed by the task?
Pure play publisher ad servers such as Smart AdServer or those integrated into SSPs like now Open AdStream connect directly to ad exchanges, making the demand accessible to the algorithms implemented in their system. Then an optimizer can take the guarantees as constraints within the parameters of the total inventory on the site. The result should then be an optimized sell of the RTB inventory alongside an optimal placement of the guarantees. Overall improvements in CPMs are observed to be anywhere between 20% and 200%. But most importantly from the strategic perspective, they are optimal under given constraints. Therefore, the business objectives of short-term revenue generation and long-term value preservation can be met.
The other important aspect is the ability to operate a system that manages such as complex undertaking. While only few publishers would (should) contemplate operating their own proprietary ad server, for the vast majority there is now a broad spectrum of options available on the market, competing with the ‘default’ option of Google’s Doubleclick for Publishers. Which one to chose depends on further strategic decisions on the business and technology side: Are intermediaries seen as providing or capturing value? Is it important to understand all transactions or is goal achievement good enough? Is acquiring a media service vs software-as-a-service an important choice?
It does not seem to be such an outrageous idea anymore to manage all your inventory yourself, even in times of programmatic advertising. While many organizations benefit more from fully integrated services or do not mind putting their inventory directly on exchanges, it is totally feasible to make good use of that thing people thought to be of the past.
Disclosure: Smart AdServer is a consulting client of Freestyle Consulting LLC. Else I would not know enough about ad servers to talk about them.