The Programmatic Open Market Isn’t Serving Publishers. Automated Direct Can.
By Doug Huntington
An estimated 84% of global digital advertising spend goes toward programmatic transactions, but direct sales continue to dominate revenue. To look into this further, we took a deep dive analysis within AdBook of nine mainstream premium publishers spanning broadcast, newspaper, magazine, and wholly digital and this is what we found.
Across the publishers, on average, 95% of revenue came in through direct sales. What’s more, open market programmatic sales account for only 13% of impressions sold and just 1% of total ad revenue. These numbers suggest that the programmatic open market cannot be the future of digital advertising.
Let’s further explore the perils of the open market for publishers, the benefits of programmatic direct relative to the programmatic open market, and the ultimate need for the industry to move toward automated direct deals.
HOW THE OPEN MARKET HINDERS PUBLISHERS
Why do these publishers do so few open market sales? With in-demand inventory and household name recognition, the organizations can monetize their media however they please. And as it turns out, that preference is not the open market.
Digging into their revenue, yield starts to reveal why that might be the case. The open market’s transaction fees and inventory commoditization managed to degrade 13% of the publishers’ main resource (impressions) down to a measly 1% of their revenue. With those numbers, it’s no wonder these publishers don’t do much business on the open market.
The publishers we looked at are not the only premium media brands to say no to the open market. Bloomberg and The Financial Times have both removed their inventory from the open market, turning instead to more direct deals.
The move has many motivations, from privacy concerns to revenue optimization. With direct deals, publishers can charge more for their products because buyers know exactly what they’re getting and are willing to pay for that confidence.
Plus, the tech fees that programmatic exchanges charge — up to 98% of every transaction — are limiting publishers’ ability to finance quality content for their sites and scale their businesses.
In the coming years, as new technologies come to light that enable more direct deal types, more publishers will follow the nine from the study as they discover the revenue opportunities that are possible outside of the open market.
WHAT PROGRAMMATIC GUARANTEED CAN OFFER
If the programmatic open market isn’t serving publishers, what are the alternatives?
Programmatic guaranteed deals takes the transparency and confidence of direct deals and marries it with the convenience of programmatic pipes.
But the publishers surveyed sold just 5% of their impressions through programmatic guaranteed deals, accounting for only 4% of ad revenue.
Why are they doing so few programmatic guaranteed deals, which seem to offer the best of both worlds? And while the yield is an improvement on the programmatic open market’s, why are programmatic guaranteed deals still not pulling in proportional dollars to the number of impressions sold?
Working directly with advertisers and agencies increases confidence in deals and drives higher inventory prices, but the deal still has to go through programmatic intermediaries — each of which takes their fee before the publisher sees a dollar.
The operational costs of doing business with programmatic intermediaries mean bleeding dollars with every transaction. How can publishers overcome this hurdle?
WHY AUTOMATED DIRECT IS DIGITAL ADVERTISING’S FUTURE
Publishers need to eliminate cost centers in their transaction processes while granting buyers more transparency and confidence. Programmatic guaranteed deals get part of the way there in helping publishers do their inventory justice with transparency, but the programmatic pipes still cut into revenue.
The most obvious solution is avoiding the programmatic infrastructure altogether, as the nine publishers surveyed do with their direct sales — which account for 81% of impressions sold and a stunning 95% of revenue. But manual direct deals are often onerous and inefficient.
But now, direct deals are getting a makeover with automation — in a way that gives control back to the buyers and sellers rather than padding the pockets of programmatic intermediaries. This deal type is called automated direct. By connecting directly to the publisher OMS, advertisers and agencies can view products, inventory, and pricing at the point of sale, also bringing a new level of efficiency to media planning.
It’s worth noting that the nine publishers in the study all have direct sales teams, which enable them to pursue such successful direct sales operations. But with the help of automation tools, even publishers without direct sales teams will be able to sell inventory directly, and more premium publishers will automate their direct sales for efficiency’s sake.
Ultimately, the shift toward automated direct deals will help publishers maximize product pricing and retain more revenue from each transaction, which will ensure the vitality of premium online content. That’s a mission worth striving for.