Commentary

Programmatic's Race To The Bottom Is A Non-Starter

Programmatic is the new norm. That is the big takeaway from IAB Europe's latest research into advertisers, publishers and media agencies' opinions on automated, data-driven selling and buying of media. In fact, its latest research shows just 13% of advertisers, 8% of publishers and 7% of media agencies are not currently working in programmatic. Conversely, 90% of 'stakeholders in the industry are already firmly involved and optimistic that investment in the channel will increase during the next 12 months. 

Interestingly, the report outlines a road to programmatic maturity that many advertisers take as they begin to dip their toes in the water with a specialist platform before using a DSP and then, finally, adapting a hybrid model. Publishers, on the other hand, start out with a hybrid model through a specialist platform before leaning toward building an in-house teams that lean toward a SSP.

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The most interesting part of the research for me has to be the reasons why the three principle stakeholders get involved and then invested more in programmatic. No matter what gurus say about data and competitive advantage through smart media buying, advertisers and agencies are primarily immersed in programmatic for efficiency gains and cheaper media. Thus, it will come as little surprise that publishers are involved because of client demand. It's worth noting that a year ago, publishers reported client demand as a factor -- but it was not high enough to make it in to their top three reasons. This year, however, it's way out ahead as the number one prompt to offer their media on a programmatic basis.

Put simply, advertisers and agencies clearly see the benefit of programmatic, automated media buying as being focussed on cost and efficiency with, of course, considerable data benefits. Against this backdrop, publishers are reacting to demand.

It would make you immediately wonder if this is a final step forward in the so-called "race to the bottom," where CPMs fall through the floor in automated media auctions. However, when it comes to business impacts, publishers lists the main impact as more efficient trading. Better CPMs and more control over inventory are listed as the joint second-most important business impacts. 

It's a conundrum, but IAB Europe hints at the solution. Publisher models, the research concludes, have matured to a point where they now have the expertise in-house to run hybrid operations that are supply side led and, so presumably, open up a lot more inventory for sale than the days of direct sales with a side order of programmatic experimentation.

With the process embraced, then, could it be that publisher fears were unsubstantiated, that they gained better control and sold more inventory at improved overall CPMs? Well, that's what the data from IAB Europe is telling us. According to the latest figures, publishers have firmly embraced programmatic and the results have been positive. It's not going to be the last word on the subject but most definitely provides a counter argument for any publishers concerned that programmatic can only see CPMs go the wrong way.

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