Commentary

PubMatic President Says Facebook/Google Duopoly Will Reach Tipping Point In 2017

RTBlog asked Kirk McDonald, president of PubMatic, to take the pulse of what’s to come in the mad, mad ad-tech world. McDonald noted the exceptional pace of change and offered some projections for 2017. Overall, he expects more rapid change and shape-shifting in the year ahead.

RTBlog: What are the top trends you see taking shape in 2017?

McDonald:The stage is set for even more rapid changes in 2017, specifically: 1) the Facebook/Google duopoly will reach critical mass, forcing action; 2) publishers will evolve their programmatic strategies and realign internal organization in response to market changes; and 3) advertisers will continue to demand better measurement and attribution as more brand dollars migrate to digital and they bring programmatic spending in-house.

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If the share of dollars to Facebook and Google shifts further, advertisers and publishers will be forced to take actions to find alternatives and will work more aggressively to reduce their dependency on these two giants. The environments could become ad- saturated and ultimately less effective. Publishers will not be able to support their business models on even more compressed margins as they're forced to bring down CPMs to compete for dollars. Facebook and Google will also see that the same trend doesn't work for them in the long-term. They might be willing to adjust their commercial agreements with partners to improve the terms in order to ensure that they don’t cause publishers and agencies to compress margins so much that they can’t remain viable.

RTBlog: What specifically do you see happening in the duopoly?

McDonald: The Facebook/Google duopoly will reach a tipping point in 2017 as publishers and advertisers recognize the threat imposed by the imbalance of digital advertising dollars going to these players. With more brand dollars migrating online and increasingly programmatic, competition among companies like Verizon/AOL/Yahoo, Amazon, and even Snapchat (parent Snap, Inc.) will heat up as they vie for the next largest share of digital advertising pie.  

RTBlog: How will tactics shake out?

McDonald:Header tags, private marketplace deals (PMPs), and programmatic direct will be widely adopted tactics as publishers realize the ongoing benefits of regaining control over ad decisioning. In addition, more publishers will initiate internal reorganizations like those implemented by Hearst, Time Inc., etc.  Publisher-titled roles will collapse into central selling organizations, while sales teams are downsized in favor of a greater emphasis on programmatic. This process is already underway, but it will accelerate. The re-organizations will likely have fewer sellers focused on non-standard sales opportunities and managing with a vertical/category basis. The new organizations will follow a central monetization strategy that balances the tension between people-sold and technology-sold media opportunities. There will be a heavy dependency on near real-time reporting, and analysts will inform pricing and packaging strategies to respond to the dynamic nature of the marketing. Ultimately, this is about shaping the organization to operate in a world where dynamic order management is normal.

RTBlog: How will marketers evolve to cope with all the changes?

McDonald:Brand marketers will follow in the footsteps of Disney, Procter & Gamble, etc., by building internal programmatic buying competencies and pulling programmatic spending in-house. Marketers will work on material improvements in multitouch attribution across screens, channels, and formats. The vendors able to increase confidence that direct-bought campaigns can deliver against specifically desired metrics will become game-changers, especially if the solution manages to close the loop between online and offline attribution, cross-screen, and cross-platform consumer touchpoints.

Last click attribution modeling is flawed and everyone knows it. However, we've done little to move past this in the past five years. As brand dollars migrate from TV to digital, the standard of measurement must be improved. We should be able to solve this with technology, and that will be a demand made by the marketers.

 

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