Thursday, July 3, 2014

The Impact of Going Direct

There has been a noticeable shift toward programmatic direct initiatives, creating value for both brands and publishers. How does this change benefit marketers?
There has been so much noise lately about agencies and trade desks shifting from open exchange buying to private marketplace buying. We've seen multiple announcements from existing and new ad-tech companies specializing in supporting programmatic direct initiatives that enable private deals between buyer and seller, but what is fascinating is that nobody is talking about the benefits. The buzz is largely focused around fraud, but the reasons are much broader and more impactful.
Let's explore why this shift to programmatic direct is occurring now, who benefits from the migration of dollars, and what impact it will have on the market.


Going direct has some distinct advantages and is partly occurring out of necessity. Brands remain skeptical of exchange inventory because in the early days they were tarnished with low-quality, long-tail inventory that posed significant risk to the brand identity. Over time the complexion of inventory within exchanges has improved, now with most major publishers participating in some form or fashion allowing buyers to access their inventory programmatically. Buying on the open exchange is also hard to police. The average buy runs on tens of thousands of sites and is operationally difficult to maintain quality control. There are concerns over transparency, content adjacency, clutter, and viewability that come hand-in-hand. By creating direct to publisher relationships and focusing on fewer partners, the number of variables reduces significantly and is therefore much easier to control where brands appear.


Large publishers are the clear winners as the buying shifts from open to private deals. Today, major publishers are not seeing a significant amount of spend coming from programmatic. I often refer to this as the "peanut butter effect," where the exchanges level the playing field and campaign dollars are evenly spread across thousands of websites, making each of them a few dollars a day, even the largest of publishers. Given that most of the spend is coming from audience-based buys or remarketing activities, the "where" has been less emphasized, but as dollars get applied to more brand-building initiatives or consideration type programs, the "where" in addition to the "who" becomes much more critical.


The shifting landscape will have lots of impact on how business is conducted and what is needed to efficiently manage programmatic buys. As noted earlier, many companies are modifying their technology to support automation of private buys between a single seller and a single buyer. This is good for converting legacy IO business to a more efficient scenario and allows for consolidation of spend within a single system. One of the largest impacts is going to be with measurement. Today, buyers evaluate their return on investment (ROI) largely on antiquated attribution models tying the ad exposure to conversions. These systems have been susceptible to gaming, where technologies use the open exchange to purchase ubiquitous, cheap, fraud-infested inventory to capture the last view or click winning the attribution race. With the shift to higher-quality inventory, advertisers and publishers alike will need to rethink how to measure success and potentially leverage measurement schemes that align more closely with traditional models.
Many great brands have been built on trust and direct relationships between publishers and advertisers from as far back as the radio soap operas of the 1930s. It seems fitting that programmatic should go direct, creating value for the brand and the publishers - there are clear advantages with programmatic direct; quality, control, lower fees, and, importantly, more spend. Ultimately this shift to private marketplaces is just another step in the evolution of programmatic buying.


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