Amerian Express plans to buy all its digital advertising programmatically in the next 18 months.
A takeover of the $US600 billion ($813 billion) global media advertising sector by machines through “programmatic” trading exchanges has won over The Boston Consulting Group in a new report.
BCG says that Australia leads the world in programmatic advertising and there are significant revenue, profit and margin improvements for publishers if they automate their inventory management and trading strategies properly.
But the problem, according to the consulting firm, is that most publishers here and around the world are going in half-cocked.
In an echo of the end of human traders on stock exchange floors in the past decade, the media industry is following suit with the rise of virtual trading exchanges of advertising inventory. The use of audience and data management platforms are also taking over traditional day-to-day interactions between media company sales teams and media buying agencies and their advertiser clients.
The Australian ad market is approaching $US13 billion annually and companies like Google are keen to see more of that trade automated rather than stay with the still dominant approach today where people sell to people.
About $US10 billion of the global $US50 billion online ad market at present is currently traded via “real time bidding” platforms where the entire advertising process from purchase orders to bidding on rates to ads being served to users is a fully automated process, started and completed in real time in milliseconds. There are unquestionable efficiency gains to be made by media companies swinging to programmatic tech but many publishers have been stung and remain concerned about the dramatic impact on inventory yields and the further pressure it puts on the economics of investing in original content creation.
Publishers have typically seen these automated advertising exchanges as a way to offload remnant, or unsold inventory, to extract some revenue from otherwise dead ad space. But advertisers and their media agencies have gamed the system in recent years by shifting more money into these exchanges where they figure they can acquire quality inventory from publishers in open, automated exchanges at a fraction of the price of buying direct from publishers. The one drawback in these deals is they are typically “blind buys” so advertisers don’t know the specific sites their messages are landing on before they do. But rates are usually so cheap they will take the risk.
These sorts of bad experiences and false margin promises from the tech sector have made many publishers wary of deploying fully-programmatic initiatives but the Google-commissioned and funded BCG report, The Programmatic Path to Profit for Publishers, tackles these concerns head-on.
BCG points to examples where American Express intends to buy all its digital advertising programmatically in the next 18 months and a US TV broadcaster it won’t name which will move to a fully programmatic trading platform within two years.
BCG said the biggest areas of challenge for digital media companies and publishers was that they were focused on low-value activities in the programmatic supply chain.
A string of new alliances and consortiums around the world between competing premium publishers are finding margin improvements in programmatic technologies. This week Mi9 and Fairfax Media officially launch the APEX exchange in which the two publishers have joined up to match the scale and tech capabilities of Google and Facebook.