Today’s column is written by Eric Picard, CEO at Rare Crowds.
There has been a quiet shift in the digital ad ecosystem over the past few years, although it isn’t clear to many people working in the space. When we think about the ecosystem these days, we typically look at the Lumascape, which overlays companies onto various “ecosystem buckets.”
But while this is a helpful view of the world, it’s more than overwhelming. So let’s dive into the ecosystem as it’s evolved over the last few years, and use a diagram I put together as the foil for the conversation.
Note that I’ve used very simple color coding here: red for publishers, blue for advertisers and buyers and purple for companies that sit between them – maybe we can call them "aggregators."
The ecosystem is quite complex, and no diagram I’ve seen can accurately map this complexity. In the case of my diagram, I’ve had to smoosh some things together, such as demand-side and data-management platforms; “adjacency” in this diagram shouldn’t imply too much. For instance, publisher ad servers can plug directly into DSPs and buy-side programmatic direct vendors. And media-buying teams can buy directly from supply-side platforms. What adjacency here does imply is that there is a clear relationship between ad networks, exchanges, SSPs, media-buying teams and publisher ad servers.
This diagram ignores many different kinds of vendors, including the various yield-management companies and other vendors who plug into the entities that are represented. Data vendors are good examples – they plug into DSPs, SSPs, exchanges and publisher ad servers.
Let’s look at a few of these blocks in particular for a moment and talk about how these interact and how they’ve evolved over the past few years:
The Rise Of Programmatic Direct
The rise of programmatic direct is a big deal – and the recent announcement of Microsoft, AOL and Yahoo all releasing their premium inventory via programmatic direct is a seismic shift in the ecosystem. Programmatic direct is really born out of the massive inefficiency in the market for directly sold inventory. Not only do sales teams have to manage the customer relationship, they need to respond quickly to RFPs, come up with creative ideas to offer to buyers, put together all the details of the contracts, figure out what inventory is available and ensure that the final campaign is configured properly to deliver.
In the world of programmatic direct, the RFP process, including the contracts, insertion orders and all related work items, becomes fully automated. Buyers can find inventory that they want without waiting for sales teams to respond, and sales teams get unshackled from the RFP treadmill. This is so clearly a win across the board that I predict that nearly all sales will be fully automated in the next decade. I won’t commit to saying that the current approach to programmatic direct is the final one – but we’re on a path, and it’s exciting.
What I find particularly interesting is that the trading desks are beginning to build programmatic-direct buying practices – giving them access to guaranteed premium inventory that previously was held apart from their bailiwick – that are reserved only for media-buying teams. And while I’ve drawn the trading desks on this diagram as seemingly “owning” the relationships with DSPs, DMPs and programmatic-direct vendors on both the buy and sell side, this isn’t really the case. Many media agencies are engaging in programmatic direct – directly, meaning that buyers are accessing these tools and the budgets remain outside of the trading desks.
The buy-side programmatic vendors are a great way for them to do this – and there’s been some exciting early adoption of these tools by standard media buyers across the industry. Of course, the future gets much more difficult to predict, especially when it will arrive. The likelihood is that trading desks get blown up in the next few years and absorbed back into the individual holdings within the big holding companies. This is inevitable since budgets in programmatic RTB and direct are growing very fast, and the individual holdings will want to pull that revenue back inside their own P&Ls.
The race that I find exciting will be the race to make all the complexity of media buying disappear – to create enough automation among the RTB and programmatic-direct stacks that a standard media buyer, rather than a DSP-using specialist, can use these tools to execute their work. We’re getting very close to this as an industry, and all sorts of creamy goodness will come oozing out when that happens.
Blurring Of The Lines
Another area to discuss is the blurring of the lines between the vendors and business models for the ad networks, trading desks, DSPs, DMPs, exchanges and SSPs. Several years ago, there were dozens of DSPs, and then there were DSPs calling themselves DMPs and DMPs adding DSP functionality. There were trading desks that were just business operations teams, and trading desks trying to build their own technology (that’s mostly stopped now), making them sort of like DSPs.
Then there’s the whole controversy about the trading desks operating on arbitrage, much like ad networks. The SSPs began offering direct sales of inventory to media buyers, basically becoming ad networks. Then the ad networks began offering API access to their inventory, and some of them began operating a lot like DSPs or trading desks. Some of the SSPs then began offering buying tools, becoming sort of like DSPs. And the exchanges began offering everything to everyone.
Suddenly all the lines between all these entities are quite blurry, especially at the company level.
New Trends And More Blurring To Come
Other trends that aren’t represented in this diagram yet include the new focus being of marketers and publishers to build out their own stack of technologies and bind them together in custom workflows that represent their own needs. Many marketers realize that their agency partners have become oddly financially incented due to the arbitrage inherent in the RTB models, and are beginning to form their own direct relationships with vendors. This will likely explode in the next few years since the percentage of spending going to RTB is growing significantly – and the procurement oversight that most marketers fall under won’t allow the arbitrage to continue. For big spenders, it makes perfect sense to bind together their own vendor relationships with a DSP, DMP, ad server and CMS system, then grant access to these systems to their media agency partners.
Similarly we’re seeing the biggest traditional media publishers adopt much more sophisticated approaches – basically learning from the native digital publishers, including Yahoo, AOL and Microsoft, which invested heavily in technology for yield optimization and private exchanges, and now in programmatic direct for guaranteed inventory sales automation. These traditional media publishers are investing more than ever in technology vendor relationships to drive their sales and yield upwards, often with incredible results.
With changes coming to the way that cookies are handled, the push of the technologies to first parties – advertisers and publishers – is inevitable. We’ll see the vendor space really heat up with consolidation and new investments to support this. The biggest vendors will invest heavily in the entire stack of technologies, either building or buying their way across the whole stack.
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