• by Tobi Elkin  @tobielkin, February 24, 2016

Global publisher Bauer Xcel Media leans heavily on header bidding and programmatic media buys to monetize the traffic it generates from social media and other channels.  In fact, 20% to 30% of its inventory is sold through header bidding -- and it's planning to increase that percentage this year, said Christian Baesler, president, Bauer Xcel Media, speaking on Wednesday at MediaPost’s Programmatic Insider Summit in Phoenix.

Bauer's a traditional media company that has put programmatic media and header bidding at the heart of its business model.

Bauer Media properties bring in $2.5 billion in annual revenue, $120 million in digital revenue, and has 11,000 employees in 20 countries. The German-based business has 1,000 brands worldwide—print, digital, radio and TV properties-- and its largest markets are the U.K., Germany, the U.S. and Australia, with publications including InTouch Weekly, Life & Style, First for Women and Woman’s World.

“What matters the most to us is the relevance and quality of the content,” Baesler said, responding to a question about how he’s realizing the CPMs to support his business model.

“The model we have wouldn’t have been possible 10 years ago. Today it’s about having the right audience and the data we make available to advertisers. Our sales proposition is that we optimize for viewability and engagement rates around relevant ads. We maintain a good ratio of relevant ads to content. We try to work with specific partners and do optimization, header bidding and private marketplace transactions.”

Baesler said a lack of ad clutter matters a lot. But it depends on what a publisher is looking for: What’s the amount of ads? What are the viewability metrics? What is the user experience? And how is a publisher measuring the user experience?  It could be revenue per reader, lifetime value of a reader over time and other metrics. Bauer tests to see if there's a dropoff in engagement with ads. In the end, it’s looking for the lifetime value of a reader. Publishers must weigh the benefit of  intrusive ads and high CPMs against how much each reader is worth over a lifetime, Baesler said.

On ad blocking, Baesler noted that Germany has the highest ad blocking rate of any country—more than 40%. The answer? “You can ask someone to pay for content, but for the kind of digital brands we have, it won’t work unless everyone else does it too. There’s always another place to see this type of content for free,” he said.

Baesler said if publishers start with the notion that programmatic is driving CPMs down, that’s the wrong perception. “If advertisers work with premium publishers that are generating traffic, they don’t have to worry about fraud, engagement rates and viewability.” He maintains that efficiency and targeting abilities have been improved. He advocates setting up private marketplace deals based on more first-party data and audience data. “The risk of fraud goes down if you carefully choose your partners,” he said.

Bauer currently works with five header bidding partners -- OpenX, Sonobi, Amazon A9, YieldBot and IndexExchange -- and will sign deals with five more in the near term, Baesler told Real-Time Daily. “Header bidding will become the new standard for how ads are served. Advertisers have full access to all inventory."

Traditionally, there was a waterfall with IO/RFP bases on top getting the best inventory. Now, through header bidding, every advertiser has access to all the inventory. A wide variety of advertisers can compete on the same level with traditional, direct sales, for example. Baesler added, "We want as many possible demand sources in the header."

From an audience standpoint, with header bidding, advertisers get a bigger pool of people to target. One criticism of header bidding is that if you buy audiences, you’re not buying context that matters.  Baesler said this issue can be resolved with the right content and context. Paying a higher CPM might be worth more to an advertiser if it gets in front of exactly the right, highly engaged audience.

While Bauer’s digital revenue is tiny--$120 million—Baesler aims to increase it to $1 billion over time. How? By entering into gaming, travel and ecommerce, and trying to own part of the transactions. “We’re also building our own ad network so we are not only looking at contextual signals, but we’ll build a data collection based on our own data and external data.” For example, a reader who is reading about Kim Kardashian's trip to Miami won't get an ad for flights to Miami. Rather, data targeting will show more relevant ads for beauty products she's recently searched for.

The English version of Bauer’s teen brand J-14 has 5.7 million fans on Facebook—these fans were achieved organically and not via paid media. “We’re writing about the right celebrities, and we’ve figured out ways to translate Facebook traffic to our websites organically," he said.

Almost all Bauer’s revenues come from third-party sources or programmatic media. There’s no digital direct sales team. “We found that by focusing on growing the content organically, we could build a profitable business from day one. We have high engagement with our posts,” Baesler said.