Publishers should know the costly truth about programmatic ad sales

Bit of a buzz word isn’t it ‘programmatic’…? But what does it mean and what are the true market affects? Online ad sales manager Monty Jamieson spells it all out.

If you’re not familiar with programmatic trading of ad inventory on websites then you’re not alone – recent research from the Association of National Advertisers (ANA) and Forrester of client-side marketers released last month revealed that only 28% of brand advertisers (such as P&G) understood programmatic ad sales well enough to use it.

This is especially interesting as P&G allegedly want to purchase 70-75% of its digital media programmatically by the end of 2014, and recent research shows that programmatic is forecast to account for nearly half (47%) of digital display ads in 2014.

How programmatic ad buying works

Essentially the process is this: an online publisher signs up to a programmatic ad sales provider, and assigns their backfill inventory (any ads slots on their web pages that have not been sold directly) and the programmatic provider fills the ad space – simple enough, right?

Well not quite…

The traditional way of selling ad space online is that publishers, or sales houses on behalf of the publishers, brokered deals with media agencies on behalf of advertisers. These deals may also be done directly with the advertisers, taking out the middlemen of the agencies.

Regularly with programmatic buying the agencies use special media buying houses, which means the advertisers spend stays the same but there is another middleman to take a slice of the media spend.

This added intermediary cost, combined with the common 15% commission from the programmatic platform means there are many more mouths to feed with the same budgets.

Publishers generally take the hit…in more than one way…

The long and short of it is that publishers take the hit – the ANA estimates that publishers get as little as 25-50% of the advertisers media spend.

Publishers also have to balance the revenue generated programmatically with the potential revenue lost from premium deals (when advertisers are diverting premium to programmatic spending). Depending on the nature of your site this could range from negligible to catastrophic.

On the other end of the programmatic spectrum there are also questionable advertisers displaying ads from Russian Brides to Belly Fat, so bear in mind there are a possible 20,000 possible advertisers ready and waiting to snap up a premium spot at a snippet of the value.

Programmatics can work – but it needs great user data and careful management

Programmatic buying can generate significant revenues but for the right publishers in the right markets.

A way of combatting the low CPMs and increasing the relevancy of ads bought through networks programmatically is to have an effective data set against your users.

The more data you have on them the more targeted the ad for the user, the higher the click-through rate and the higher the CPM as a result.

That data can be stored and managed by the publisher, or fed in from a third party that has a tag on your site, these companies are called Data Management Platform or ‘DMP’s’. This data collected will include, demographic, interest, surfing habits etc.

For many premium clients, it can devalue the sought-after inventory so be wary – careful management of the platform including base rates and block lists are essential.

To find out more or to help develop your online business, please contact The Internet Works.

Written by

Montague Jamieson is ​Head of Publisher Development at The Internet Works. His role centres around defining and delivering bespoke online services to a number of clients, both existing and potential, using his ​​ expertise in online advertising ​from data and mobile, to native and programmatic. If your site can make money – he'll make it happen.

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