The buyer's role in shaping programmatic's future

Media buying has been moving to more and more automated mechanisms over the last few years. When I talk to buyers about why this is the trend, they nearly always say something like, "Publishers package inventory that they want to sell, but I want control. I want access to inventory I want to buy."

In 2006, I wrote an article called "Content Distribution: The Final Media Revolution." The point I was making is one that would be hard for people in 2014 to ignore -- that consumers are in control of their media consumption habits and that media companies should embrace this rather than battle it. Heck, back in 2003 I wrote another article on the same exact topic called "Control, the Killer App," which was more focused on advertising conceptual design.

Now let's talk about the concept of control from the perspective of the buyer. Today the vast majority of media dollars are spent on direct buys where the buyer has sent the seller an RFP and a media plan and asked the seller to put together a proposal. This process has developed over the years in digital as a way for buyers to push the grunt work (and frankly, sometimes the creative work) of media planning and buying off to the seller.

This evolved because, in digital media, the buyer has no idea what's available to buy. In television, the buyers know in advance what shows are on television and how many ad slots are available in which pods. When they execute a buy, they're just seeing if the slots they want have been sold yet. Magazines are a bit more complex, but buyers still have an immense amount of knowledge about what's available. In digital media, the world is very opaque. Buyers don't know what the seller has to offer, let alone what's "left" to purchase. This has put publishers in a position to craft packages of inventory that they push to the buyer.

Some media directors see it as their jobs to take the packages offered by publishers and break them up. The problem is that buyers tell the publisher what they want, and publishers bundle together the desirable inventory with undesirable inventory that they force upon the buyer. This effectively would be like going to the grocery store for bananas and being told that in order to buy bananas, you also had to take some plantains and avocados. You can imagine that as the buyer you would tell the seller to jump in a lake -- at which point the seller would say, "Well, maybe I can throw the avocados and plantains in for cheap." After negotiating for a few minutes, the seller effectively lowers the price on the junk you don't want to the point that it's almost free -- so you simply take it. This is how the sellers move the inventory they can't sell; they bundle it together and effectively lower the price of all the inventory in the bundle until the buyer is willing to accept it.

This has "worked' for the last 15 to 20 years mostly because buyers didn't have much choice in the matter. There was too much work on the buying side to bother trying to wrest control back from the seller. And sellers were happy to pick up the slack; it gave them great opportunities to package inventory and increase sell-through.

But things have changed, and all media buying is heading down the path toward programmatic mechanisms. Today programmatic comes effectively in two flavors: RTB and direct. They're supported by two separate software stacks and reflect the two different ways to buy media:

RTB: RTB is buyer-centric and enables buyers to take full control over what they're getting. The buyers define the inventory they want to buy, and then the tools procure that inventory over the advertising exchanges. Companies playing in this space include AppNexus, MediaMath, Turn, DataXu, [x+1], Rubicon, PubMatic, and many others.

Direct: Direct is seller-centric and enables publishers to package inventory and expose it to buyers in programmatic means -- but keep the publishers in control of defining the inventory and bundling it in ways that meet their sell-through goals. Companies playing in this space include Yieldex, iSocket, Bionic Ads, Adslot, Shiny Ads, and many others.

The problem with the programmatic direct stack and methodologies is that buyers want to be in control. The rapid (and massive) growth of the RTB stack has been driven as much by the control that buyers have gotten over their media buying as anything else. Buyers want to be in control.

Of course, publishers want to be in control too -- which is why they're adopting the programmatic direct technologies at a rapid pace. And the RTB buying tools vendors are lining up to plug into the APIs provided by the direct vendors.

At the end of the day, programmatic media buying and selling is the future. But I'm convinced that ultimately the buyer will demand control. And publishers simply don't have the means to refuse this demand. We'll see lots of mechanisms designed to plug the buyers into the sellers' systems over the next few years, with significant effort placed on giving the buyer more insight and control over what they're buying.

Eric Picard is CEO and founder of Rare Crowds

On Twitter? Follow Picard at @ericpicard. Follow iMedia Connection at @iMediaTweet.

 

Comments

Annette Tonti
Annette Tonti April 11, 2014 at 12:44 PM

Eric been wanting to understand the industry in clear, easy to understand terms. For someone who has been out of the ad media world for a number of years, alot has changed. Thanks for writing this!