Why 2023 Will Be the Year of Automated Direct Deals

By Steve Pelletier, EVP, strategic partnerships and corporate development, FatTail

This year, the open market will become an increasingly difficult place for brand advertisers. The deprecation of third-party cookies will make open-market targeting less effective, and fraud will continue to be pervasive. Advertisers will increasingly see the value in buying media directly from publishers to benefit from brand safety guarantees, lower intermediary fees, and first-party data-driven targeting. 

The allure of direct will grow for media buying partners and publishers, too. The DSPs and omnichannel buying platforms that serve advertisers will need to optimize their own supply paths to provide brands access to premium inventory such as CTV and retail media, which will be purchased upfront. Automated direct deals will allow publishers to keep more of each ad dollar, maximize the value of their first-party data, and take back control of their relationships with brands.

Here’s why 2023 will be the year of automated direct deals.

Privacy changes incentivize direct media transactions

The deprecation of third-party cookies and the accumulation of pro-privacy regulations are causing massive signal loss, making third-party open-market targeting both harder to execute and less effective. This alone will incentivize advertisers to go direct, capitalizing on publishers’ first-party data.

To this, some might object that first-party data-driven targeting is still possible via the open market. But the privacy movement isn’t just about first-party targeting. It’s about building an advertising supply chain that makes sense to the end user so that advertisers don’t risk creeping out the consumers they are trying to convert into customers. This means advertisers need to partner with publishers to reach audiences in quality content environments where the ads they see make intuitive sense. 

Given the creepiness problem, advertisers and publishers will lean back into contextual targeting — like placing an ad for a router next to an article about which router is right for your needs or placing an ad for running shoes on a publisher site that focuses on fitness. Publishers will then overlay first-party data to enrich contextual ad placement so that advertisers can target audiences based not only on the content they’re reading but also on identity-related factors. 

The open market is anathema to this approach. It incentivizes choosing media without regard for the natural fit between a publisher’s audience and the advertiser’s. Advertisers will go direct to reprioritize that connection, transcending the creepiness problem by working with publishers whose readers will automatically understand why they’re seeing an advertisement from a given brand. 

Supply path optimization offers both sides greater value

In addition to privacy changes, media buyers’ pursuit of supply path optimization (SPO) will drive both sides of the industry toward automated direct deals. As marketers pay more attention to the effects of the open market’s convoluted execution paths, they’ll realize their ad dollars could be better put to use with direct deals. Plus, communicating directly with publishers lets marketers know exactly what types of media are on the table and helps them understand the full context of those line items. 

Working directly with publishers also allows media buyers to secure better conditions like guarantees on impressions or high-visibility ad placements. And with technological advancements, automated direct deals are becoming easier than ever to execute, no longer requiring the manual labor typically associated with direct. 

As media buyers, brands, and agencies pursue simplified media transactions through SPO, publishers will need to be ready to respond with beefed up automated direct deal infrastructure to capitalize on the industry shift. For their adjustments, they’ll be rewarded with more revenue from each ad dollar as intermediaries drop out of advertising transactions. 

The contest for premium inventory renders the open market irrelevant 

Premium inventory availability will also drive the industry toward direct deals. Particularly for hot channels like CTV/OTT, audio, and retail media, the best inventory will rarely make it to the open market. Buying platforms will discover they can’t rely on the open market to meet the demands of their clients, forcing them to prioritize direct deals.

The contest for premium inventory will put the publishers who own that inventory in the driver’s seat. They’ll be able to lock down firm commitments with trusted advertising partners months in advance. Publishers can also use these more direct relationships with clients to charge more for preferred conditions and collect the valuable data that comes with direct buyer-seller relationships. 

Direct deals have historically struggled to gain widespread adoption due to the perception that they involve too much manual labor compared to the efficiency of the programmatic open market — the term “programmanual” comes to mind. As automation makes direct deals easier to access, publishers and advertisers will see the benefits of combining the efficiency of programmatic with the brand- and privacy-safe premium inventory offered by direct. And as moves by premium publishers such as Bloomberg have foreshadowed, the open market will become a vestige of the past.