Unlocking the Potential of Programmatic Direct Part 1: The History of Programmatic Channels
by Clayton Tarics
To appreciate where we’re going and the opportunities that lie ahead as an industry, we need to look back at where we started. The advent of programmatic technologies infiltrating the digital advertising industry changed everything. Open market programmatic trading revolutionized the industry by inverting everything we previously understood about how to transact impressions and unlocked incredible value along the way. We’ve seen the previous decade bring about greater efficiency, transparency, real-time actionable insights, and the spawning of massive innovation leading to new stalwart companies such as The Trade Desk, Magnite and AdX.
As revolutionary as it was, open market programmatic isn’t without its shortcomings and limitations. Brand safety and fraud continue to be top concerns when trading in the open market. There’s also a systematic disregard for content context and the publisher brand. As a publisher-side tech company, this has never sat well with us. Finally, there are high technology costs on both sides that ultimately come at a cost against the media being traded. Despite continued efforts to combat these issues, the open programmatic market channel is far from an ideal “alternative to direct”.
Until recently, the common understanding about transaction channels was binary: it’s either direct or it’s programmatic. A deeper look reveals that these transaction channels represent a collection of attributes that together define the method of transaction. “Programmatic” decisioning itself (to bid or pass) is itself an attribute. Other defining attributes include:
Specificity vs. scale
Self-service
Inventory commitment and priority level
Fixed vs. variable pricing
Flighted, curated media plan
Custom “premium” or commoditized placements
Creative execution
Billing and payments process
In recent years, we’ve seen an emergence of transaction channels that blend the various attributes above in different combinations. These channels include automated guaranteed (non-programmatic self-serve) and three programmatic direct channels: programmatic guaranteed, preferred access deals, and private auctions. Each has relative strengths compared to the other channels. What was once a binary decision to transact directly or programmatically has evolved into a question of choosing the right mix of channels to buy through (or monetize with) based on specific advertising goals and objectives.
While there is an opportunity to realize much greater potential in these emerging programmatic direct channels, there remain challenges to overcome. Traditional programmatic platforms on both sides lack the necessary infrastructure to manage deals, products, pricing, and electronic negotiations. Furthermore, there is a lack of technical standardization between supply and demand platforms to support these functions. Programmatic direct needs what the RTB protocol was for the open market.
By tackling these hurdles, the whole ecosystem benefits and opens the door for a new wave of innovation that unlocks incredible value. We’ll address that topic in our next post, so stay tuned!