The Programmatic Path to Profit for Publishers

The Programmatic Path to Profit for Publishers

          
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The Programmatic Path to Profit for Publishers

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  • The Programmatic Opportunity

    A big opportunity is getting bigger—fast. Advertisers value the ability of digital marketplaces to deliver their ads to relevant consumers, at opportune times and alongside pertinent content, much more precisely than was possible in the offline world.

    Programmatic buying is no longer just for desktop display; it is fast gaining traction in mobile and video. Some sell-side platforms (SSPs) report that about a quarter of all programmatic transactions now involve ads served on mobile devices.

    Large advertisers are already allocating significant portions of their overall budgets to programmatic. American Express, for example, has indicated an aspiration to be 100 percent programmatic within 18 months. Brand-marketing campaigns are also shifting to programmatic buying as more premium inventory becomes available and marketers gain confidence in the benefits of programmatic trading. As Procter & Gamble’s chief marketing officer put it, programmatic “creates value for the consumers, and therefore creates value for the publisher and for the advertisers/brands.” Participating in programmatic marketplaces also enables publishers to tap into new demand pools, often including advertisers that do not buy through direct sales. In its first year of programmatic sales, Condé Nast UK discovered that 60 percent of its top 50 advertisers that buy programmatically were entirely new customers.

    The most successful digital publishers already embrace both traditional direct and programmatic models. As an advertising sales executive of a major North American publisher said, “We’re here to maximize revenue, not to protect any specific channel: both direct and programmatic are important revenue streams. Our strategy is based on how we can best add value for our buyers via each channel, while making sure that we offer consistent propositions and pricing across our channels.”

    A comprehensive strategy that encompasses both direct and programmatic channels will become an imperative as sales models evolve, as programmatic continues to rise in importance, and as traditional direct sales are increasingly limited to high-end, high-touch relationships where publishers can add significant value, such as those involving creative, publisher-written “native content” or the use of complex proprietary data to optimize performance.

    “We see programmatic as an opportunity,” said a senior executive at eBay Advertising Deutschland. “We can sell targeted audiences either directly or through a programmatic private deal at a higher yield, and free up inventory which can be sold to thousands of new buyers on the open market.”

    Moreover, many in the industry are predicting the rapid growth of programmatic guaranteed, which means that the line between direct and programmatic sales will blur. “It won’t be direct versus programmatic soon,” said one publishing executive. “We’ll need our sales team to understand when bespoke [as opposed to] standard is right and guaranteed versus nonguaranteed.” Said another, “Programmatic guaranteed is the next big thing—the technology is in early days, but it promises the efficiency of programmatic with the volume guarantees many brand campaigns seek.”

    Programmatic models also extend beyond digital publishing to offline properties. Time Inc. uses programmatic sales for its print publications. Programmatic sales occur for on-demand TV services, and the advent of targeted ads via cable, satellite, and Internet TV will open traditional TV ads to programmatic sales as well.

    Growing pains persist…That said, our research shows that many publishers are far from unlocking programmatic’s full potential. They continue to approach it in a reactive manner, often delegating programmatic decisions to operational teams that previously managed leftover or “remnant” inventory. Programmatic teams spend too little time on activities that actually drive revenue and too much time on low- or no-value pursuits. Inverted priorities are all too common, with administrative chores taking precedence over revenue-generating endeavors such as building demand, analyzing pricing, and improving the offering. Ineffective processes are fraught with pain points. (See Exhibit 1.)

    exhibit

    In our study, publishers in a typical month spent an average 11 hours (19 percent of the total staff hours spent on regular programmatic tasks) on value-creating activities, such as generating leads by analyzing bidding data, and 48 hours a month (81 percent of the total) on such purely administrative tasks as monitoring, billing, and reporting. And this does not include the time it takes to make the sale and set up the deal, only about 20 percent of which is spent creating value. (See Exhibit 2.)

    exhibit

    …but solutions are available. Publishers leave money on the table by not focusing more on value creation and by not using the full range of optimization techniques available. By analyzing the performance of different segments of inventory—specifically, which ones are attracting the most active bidding and by whom—publishers can optimize their auction parameters (such as floor prices) and test the impact of various offerings, configurations, and bidding criteria. This data can then be used to feed leads and new propositions to the sales teams. It can also be used to advise advertisers on their bidding strategies. All of which leads to higher yield and additional revenue. One publisher in our study makes an average of one extra sale per week, either as a direct sale or a programmatic deal, from analyzing bidding data and up-selling based on the results. Another increased CPMs by 30 percent on one ad exchange by consistently monitoring bids and adapting floor prices.

    Despite the actionable benefits, fewer than 25 percent of the publishers we studied regularly translate data analysis into sales initiatives. One reason may be that this level of analysis requires developing (or hiring staff who can provide) sophisticated quantitative analytical capabilities, which most publishers do not currently have in-house. (See the section on building go-to-market and analytical capabilities, below.) Only a quarter of the publishers we interviewed regularly test the impact of amending auction criteria, such as changing the amount of inventory available for bidding or setting different bidding restrictions. None design new products, such as packages based on audience segments, using bidding data. “We’re not really equipped to advise buyers on what level to bid at, or even to understand what is working for them,” one publishing executive said. Said another, “We don’t do as much optimization as we should. We do this ad hoc when we have time or if we spot something in our regular reporting.”

    Making sales, initiating deals, and other value-creating activities take time. Publishers can also realize value by removing inefficiencies and freeing up staff to focus on maximizing revenue. Best-in-class companies spend 60 percent less time on basic programmatic activities than the average. They set up programmatic deals faster and spend many fewer hours on ongoing tasks, such as monitoring, reporting, billing, and creative review. The steps they take include the following:

    • Limiting the Number of Demand Partners. Generating demand from multiple sources—by using several SSPs, for example—can make publishers more susceptible to inefficiency and wasted time, as the volume of nonvalue-creating activities increases with the number of demand sources. We found that publishers using a single SSP spend an average of about 30 percent less time on ongoing processes than those that use two or more.
    • Putting in Place Quality Assurance Measures. Publishers can implement procedures to preempt problems that require troubleshooting later, such as prescreening of key information from a buyer and its demand-side platform (DSP). Some major SSPs include functionality that enables a publisher to review the ads on its site that are purchased programmatically; an hour or two a week spent checking for, and blocking, unwanted ads can save many more hours of “fire fighting” problematic ads as they appear.
    • Automating and Standardizing Reporting and Billing Processes Wherever Possible. Smart publishers use readily available technology to reduce the amount of staff time—and the associated costs—spent on low-value, everyday activities.

    The time these steps save can be used to create compelling sales offers and to optimize performance through research and data analysis, ultimately driving more revenue.