The Top 10 Things You Should Know About Programmatic

#10. Inventory. It’s the new Audience in Programmatic

By: Brian Singleton

For nearly a decade the concept of programmatic, or specifically data driven advertising, has been the promise of the new world of digital advertising. Gone will be the days of “Run-of-Network” media buying; which came with a variety of problems including transparency to quality. Agencies equally celebrated the extinction of the antiquated practice of only being able to target demographics based on some proxy of the content they ingested, or worse, the demographics the publisher self promoted they contained. Rate cards, demo decks, and empty promises… no more. These times would be different. The new era of programmatic advertising would be the dawn of smart marketing and would bring a new and brighter day of media efficiency.

But there was a problem… we just didn’t know it yet.

For now, there was peace and prosperity in the digital landscape, and companies flourished with better media performance across the board from social, to search, and all the way to the far reaches of long tail display campaigns there was a fatness to media campaigns that set in as the new norm. The new world order was finally here; it was the age of automation, and the programmatic space (encompassing, social, display, video, and search) surged for the better part of the last 5 years. All was right with the world and agencies and brands celebrated success across the board. Then the floods came…

Programmatic… the great equalizer

We looked around and the audiences that we had been infatuated with getting access to had become a commodity overnight. EVERYONE had the data, from a small business operating $500 campaigns to traditional media agencies infiltrating the digital market. The media buying landscape which had been enjoyed was now just as good as everyone else’s. The spice, variety, and efficiency promised was boiled down to a metaphorical ice-cream shop with 31 flavors that were all vanilla, and worse, there was a line out the door. With easy access to audience and automation tools made available by several large platforms, the money started pouring into the market. Media dollars surged into the market over the last 24 months and in many large platforms the price have skyrocketed during that time.

The problem arises…

It turns out that a huge contributing factor of the success enjoyed in the glory days of digital advertising, at the dawn of data driven media buying, was due to the incredible inefficiency of the market. When the far reaches of the internet opened up via programmatic trading platforms; simultaneous with the eruption of social media adoption, digital media buyers enjoyed a completely upside down market elasticity equation where there was FAR more supply than demand. Since they could buy any audience they wanted, and the inventory was readily available, this created easy success, and in turn a complacency. When the flood of new advertising dollars swung the supply & demand pendulum back into equilibrium, the market became efficient again. Efficient markets are commodity markets, and it’s difficult to turn a dime in that ecosystem of margin compression and increased competition.

Ask any company, with a dependency in digital marketing, “How’s business?” With incredible repetition, it sounds like; “its really tough out there right now, price of media keeps going up and it’s harder to hit our performance targets, and in many cases we can’t even run media for some products any more” So, How do you gain a competitive advantage in today’s market?

The Three Pillars of Marketing

An introduction to the “Three Pillars” of marketing; which is true in any medium, but certainly pertains to digital media buying:

  • Audience – which we’ve discussed through this article, effectively the “Who” sees an advertisement.
  • Inventory – which very specifically and precisely answers “Where” an advertisement is shown.
  • Measurement – the constant pursuit of TRUTH about the combination of the other two.

You can’t compete in an efficient market without an understanding of the entire ecosystem. The reality is that it’s time for media buying companies of all shapes and sizes to wake up to the rest of the equation. While billions of dollars have been invested in audience data and automation, very little investment or attention has been paid to either the inventory or the measurement pillars of the market. If you are looking for a competitive advantage in an environment like this one, spend 90% of your time understanding how inventory works and how to measure results of your campaigns, neither of which are as simple as they sound.

While billions of dollars has been invested in Audience data and automation, very little investment or attention has been paid to either the inventory or the measurement pillars of the market.

 

Inventory is a Unique Opportunity in Programmatic

So let’s talk inventory… sounds so interesting, right?! Don’t worry inventory, and specifically path to supply, is an intricate and incredible ecosystem all it’s own. Let’s start with what used to be true, when programmatic media was born there was an exclusive relationship between a supply vendor and a website, property, or app. For example, Pubmatic had a 1:1 relationship with every publisher in it’s platform. However, publishers had so many supply vendors calling them and promising them more money, that they created a small bit of technology called “Header Bidding” which allows them to compete with each other.

As everyone knows… All is not fair in love, war, and media buying.

Almost immediately the publishers also added layers of political influence to their header bidding stack giving certain vendors priority or throttled access to inventory. They now have separate “tiers” of their header that supply vendors compete for giving priority to the ones they like best (usually because they spend more money) and other get lower priority (regardless of prices bid for inventory). Remember the early days of the internet when “remnant inventory” was the 30th impression on a site? Remnant inventory is now 500ms after the bid started and has been passed on by almost every supply platform imaginable. Want to see it in action?

So looks like DFP won the impression (and they did) but notice how several supply vendors passed on this inventory before they were even asked to participate? That’s artificial inefficiency caused by publisher politics, not by equalized competition. Now we have found an opportunity for a competitive advantage. Header Bidding represents a return to an inefficient marketplace through the dimension of Inventory.

 

 

 

 

 

Remember, inefficient markets are where great gains can be made, so from the perspective of media buying this is a GOOD thing. Starting to understand the dimension of path to supply is simply about embracing that there is unequal access to a varying quality of inventory created by things like header bidding. It is now very common for a certain site or app to look as though it has one set of performance metrics, even though the same inventory accessed through a different header tier or supply vendor will have widely varying pricing and performance.

For this reason the use of private markets has dominated the media buying landscape over the last 18 months. Private Market Places (PMP) are direct deals set with major publishers or groups which help secure specific tiers of inventory and at more stable pricing. Seems like a regression back to the days of the old IO right? well… it is. And that’s the way a lot of agencies are approaching this, swinging their large pocket books at a problem they don’t clearly understand. The good news is that these publisher groups are willing to work with just about anyone and they are open for business. Any good media buying operation now has a business development component specifically tasked with developing a suite of private markets with strategic supply vendors and publisher groups.

Where do you start to leverage Inventory?

The magic question becomes how do you get a sustainable competitive advantage leveraging inventory and Private Market Places? Let’s try to simplify; it’s always easier to end a wall of text article like this with some bite sized pieces to use as a take away. A short and digestible list of techniques can go a long way. So here are a few “Do and Don’t” type tips for constructing your programmatic inventory in a meaningful way:

DO = Reach out and introduce yourself  to publishers and publisher group business development teams, _even if you aren’t ready to commit spends_. This will help get you on their radar and you can take advantage of seasonal opportunities as they occur also.
DON’T = Add new PMPs to critical delivery campaigns as a stand alone delivery channel. There is a good chance that your PMP won’t work the first time, so save yourself some heartache and make sure it’s not the only place you are delivering.
DO = Negotiate!!! There are levers to pull on here, and we aren’t talking about just price. You have to “right price” these markets anyway, you can bid $25 into a deal with a $1 floor, but you probably are NOT going to get the tier of inventory you want. Don’t think you are getting some deal for a lower CPM, there are games to be played with the tier of your media as we showed earlier. NOTE: Many times it makes sense to cut multiple deals with the same publisher group to get high priority access as well as a back fill set of inventory.
DON’T = Shake a stick at publisher groups, they may be just a small part of your media buy, but these people can be an unbelievable asset to your media strategy, any positive vibes you send their way will come back 10 fold in opportunity down the road.
DO = Ask about new product offerings. Remember publishers are investing a lot in their service offerings also, if you have some budget flexibility, you may the get the chance to test some GREAT stuff at a reduced cost or before everyone else.
DON’T = Guess!, this is a data driven industry, you want to be specific in your ask. If you aren’t you might get a list of properties you didn’t want to be on included in your market and deliver very little against what you actually wanted. Show up with your white lists and black lists already laid out so there are no surprises.

Hope this helps some folks impress some clients with some new opportunity or look like a hero to their boss. Happy media buying, until next time.


About the Author

Brian Singleton is the co-founder and Managing Partner of Evolution Media Group, a leading Independent Trading Desk. He has over 20 years of experience in digital marketing and private equity, having had a pivotal role in the formation, growth, and exits of three digital companies.

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