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How to apply real-time benefits to premium ads

Ari Buchalter
How to apply real-time benefits to premium ads Ari Buchalter

Over the past few years, buyers of online display advertising have been witness to an ever-widening gap between the way "premium" and "remnant" advertising is purchased. On the premium side, the process is characterized by high levels of interaction with publisher sales forces, PowerPoint presentations, pricing negotiations, emails, faxes, and Excel reports. But on the remnant side, a once-similar process with respect to ad networks has given way to the emergence of ad exchanges, real-time bidding (RTB), and demand-side platforms (DSPs). These technologies have put greater media and data access, more precise targeting, algorithmic optimization, turnkey automation, and better analytics and insights directly in the hands of buyers, empowering them not only with knowledge of precisely what media and audiences to buy and at what price, but also with the tools to make it happen. Consequently, we've seen the emergence of a new breed of media buyer (typified by agency "trading desks" like Cadreon, Accuen, and Varick Media Management) focused on systematically mining improvements in both efficiency and effectiveness on behalf of advertisers, with many of the largest display advertisers building out similar capabilities internally. It's nothing short of a revolution in the way online media is bought and managed, but it hasn't applied to premium media, until now.

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Of course, the premium vs. remnant distinction is an outgrowth of the primary vs. secondary market structure -- essentially replicated from the world of offline media. Publishers sell as much as they can up front for higher cost-per-impression (CPM) prices, along with benefits such as content integration, guaranteed delivery, and advance knowledge of where each ad will run. The unsold inventory goes to an aggregator (historically an ad network), which monetizes it at much lower CPMs and, typically, without these benefits to the buyer, but protects publishers from channel conflict by not disclosing specific publishers and prices.

In that sense, the publisher classification of inventory as remnant is somewhat arbitrary since it is, by definition, whatever could not be sold on a premium basis. However, an advertiser's definition of premium and remnant might be very different. For example, an advertiser might say that any impression that targeted its ideal customer would be premium, even if it wasn't on the publisher's homepage or integrated with the publisher's content. Or that any impression that was more than a five-times average likelihood to generate a conversion was premium, even if it couldn't be known in advance on exactly which page it would run. And in fact, much of the value created by the DSP revolution has come from exactly that -- buyers using data and advanced analytics to understand which impressions are truly valuable to them and why.

The notion that premium versus remnant is a relative concept is further supported by the data: CPMs for remnant impressions on ad exchanges are higher, not lower, than corresponding CPMs for the same inventory on ad networks. Why? Because DSPs offer buyers a full view of the media, and help the user to understand exactly what works and what doesn't. They can much more accurately separate the wheat from the chaff, and in many cases one advertiser's chaff is actually another advertiser's wheat.

Those DSPs employing sophisticated bid optimization algorithms to value impressions (which isn't all of them, so I encourage buyers to ask their DSPs to see the actual output of those algorithms) are not looking to find cheap impressions that are worth very little (that would actually be a losing strategy); they are looking to find effective impressions that are worth a lot. That's why in many cases the CPMs bid for remnant RTB impressions actually exceed what publishers get from their premium pricing.

As a simple example, consider two otherwise identical ad impressions on the same publisher, but with one key difference: The first impression is for a user that the advertiser knows has visited its site and checked out the product but not yet purchased, while the second impression is for a random user with no such history. That information alone could warrant, say, a $20 CPM bid for the first impression versus a 50-cent CPM bid for the second. Now imagine every advertiser looking at the world through that lens, and imagine they are looking not at one, but hundreds or thousands of data points on every ad impression. That's a very different lens for understanding value than the one publishers look through when they see the same impressions.

If the premium vs. remnant distinction is in the eye of the beholder, there's no reason that benefits like automation, optimization, and enhanced insights should be confined to the new world of remnant RTB buying. With that vision in mind, some DSPs are now offering the ability for buyers to funnel their existing premium, guaranteed buys through the DSP platform via a simple implementation of their tags, thereby transferring many of the benefits of RTB to the premium buy. In effect, this creates a "private marketplace" for premium inventory within the DSP platform wherein that inventory is sold to the buyer at the already-paid premium price, rather than in an open auction. Why would a buyer want to do this? At least five good reasons come to mind:

Centralized management and streamlined workflow
Most large advertisers typically run multiple premium buys at once, requiring logins to multiple partner interfaces and aggregation of individual partner reports to manage the entire effort. The workflows are typically redundant, disconnected, and inefficient, with some premium buyers joking that their user interface (UI) is Outlook email plus a fax machine. The private marketplace solution for premium buying centralizes all premium buys within one (bona fide) UI, providing a single point of control for campaign management and reporting. Moreover, since that same platform houses RTB buying, it unifies management of all display buying -- premium and remnant -- and all types of digital media that can be managed through DSPs, including video, social, and mobile.

Integration of advanced display capabilities
The display ecosystem has exploded with numerous value-added point solutions, such as various kinds of third-party data targeting, dynamic creative, ad verification, brand measurement studies, and more. The implementation of these solutions at scale has been another driver behind the value creation associated with RTB. Extending these solutions to multiple premium buys, however, requires individual integration and execution of the desired solution with each premium publisher, which becomes exponentially complex if you're talking about doing multiple things across multiple publishers (e.g., third-party audience data plus a brand measurement study across four premium buys). The private marketplace approach enables simple and automated integration of any of these solutions through a single stroke, across all premium buys as well as RTB.

Efficiency gains from de-duplication
Premium buys executed independently across multiple publishers often wind up hitting the same users repeatedly across different media. The problem is there's often no way to know that those are the same users. Each premium buy is a closed system, unaware of what's happening in the others. Two publishers may each report 30 million uniques reached, but because of overlap, the true sum of the two may only be 40 million actual unique users, as opposed to 60 million. That also means buyers looking to frequency cap their campaigns at, say, three impressions per user per day across five different premium buys could actually be hitting some users as much as 15 times a day. That's not only inefficient from a cost standpoint, but can potentially dilute the brand impact as well.

By bringing all premium buys within one system, the private marketplace solution enables true global reach and frequency management, ensuring that the brand message reaches the broadest possible set of target users at the desired frequency and eliminating the waste of unwanted duplication.

Optimized real-time decisioning
For existing premium buys, the decision as to what ad to serve for a given impression is made in advance, often by a human looking at high-level Excel reporting based on a few variables. For buyers representing many advertisers, that not only becomes a complex analytic effort, but also a very costly one if the pre-determined allocations of creatives to premium impressions are not the optimal ones.

Within a DSP private marketplace for premium inventory, the same algorithmic real-time decisioning of which creative to serve on each RTB impression can be applied to the decision of which creative to serve against each pre-bought premium impression. Just as with RTB, an algorithm can assess both the media characteristics of an impression (such as publisher, channel, as size, etc.), as well as the known information about the user on that particular impression to make a real-time determination of the value of that impression with respect to each of the potential advertisers and creatives that might be eligible for it. Those values are then ranked to determine which individual ad should win. In other words, the buyer no longer needs to worry about whether they are serving the right ad on every impression: If there is money being left on the table, the algorithm picks it up.

Superior insights
When it comes to reporting and insights around premium buys, there is tremendous variation from publisher to publisher. Often, the reporting consists of the standard impression, clicks, and "cost-per" metrics at the placement-level, with perhaps some additional publisher-specific metrics added on. One of the major benefits of buying RTB inventory through a DSP platform is the enhanced transparency and insights delivered. With a premium private marketplace implementation, buyers can still obtain the same reporting directly from publishers, but overlay on top of that granular reporting on the media and audience characteristics driving the campaign. This includes not only breakdowns by things like publisher, channel, geography, and daypart, but also user attributes like demographics, category interest, and in-market purchase behavior, as well as breakdowns by any relevant first-party advertiser data.

It also includes the ability to do more sophisticated analytics, such as user reach and frequency reporting across all premium buys, economic value analysis by comparing the above-mentioned algorithmic determination of impression value with the actual price paid, detailed analysis of the interactions between premium and remnant media in driving campaign performance, and attribution modeling resulting from these interactions. In short, the ability to understand in unprecedented fashion what is making premium buys work, and why.

The net result? In our experience, both brand and direct-response buyers implementing their premium buys through a DSP private marketplace were able to improve the performance of premium media (as defined by the metrics the advertiser cared about -- unduplicated reach, CTR, CPA, etc.) by more than double. As importantly, the streamlined workflow, analytic rigor, and better insights meant that premium buying for those buyers went from an exercise in fax and spreadsheet management to a true strategic competency.

The nicest thing about the application of private marketplaces to premium inventory is that it doesn't require much effort to implement. The buyer can continue to purchase the same premium inventory from the same publishers at the same prices. The benefits above accrue merely from flowing those buys through a DSP that offers these capabilities -- the real trick becomes selecting the right partner.

Where does this go from here? Buyers will quickly and clearly see the benefits and begin routing more and more premium buys through DSP private marketplaces. But it won't stop at just premium and remnant display. Precisely the same approach is being applied to integrate all forms of digital media -- video, social, mobile, search, and more. A single point of control, integrated with all media and data, offering de-duplicated delivery, algorithmically optimized decisioning, and deep insights on the drivers of performance, attribution, and value, within and across all digital channels.

What about the publishers? Publishers will become increasingly comfortable as they see revenues grow from the enhancement of their premium inventory with newly applied data and analytics. They will also become a lot smarter as the controlled environment of private marketplaces allows for greater two-way information flow, back to the publishers, to help them better understand what's working for their customers and what isn't -- and sell more of the former. Publisher concern over price erosion and commoditization will give way to a focus on innovation around how they can bring more data and insights to drive differentiation.

In short, the buy side and the sell side will become much more aligned on what drives value and what doesn't. The processes for buying and managing premium and remnant media will converge to the benefit of both buyers and sellers, starting in display and extending to all forms of digital media.

Ari Buchalter is the COO of MediaMath.

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