Home Data-Driven Thinking Low Visibility Keeps Programmatic Reserve From Reaching Its Potential

Low Visibility Keeps Programmatic Reserve From Reaching Its Potential


marzouk-ddt“Data Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Nancy Marzouk, CEO and founder of MediaWallah.

With all of the buzz about programmatic reserve — also called programmatic direct or programmatic premium — it would be easy to miss the fact that market adoption has remained slow. In fact, some trading desks claim that it accounts for less than 1% of their revenue. Many advertisers still don’t know about programmatic reserve. And for those who do, it’s still unclear whether the cost of securing premium guaranteed inventory is worth it.

While there’s some debate about the definition of “premium” inventory (see “What Makes Premium…Premium?” and “Note To Publishers: Not All Of Your Inventory Is ‘Premium’”), the term typically refers to nonstandard, above-the-fold ads placed on sites — with high-quality content — that reach a valuable demographic at a prime time and place. All of these attributes make premium more valuable than remnant.

For publishers, that higher value is key: Premium inventory accounts for 80% of ad revenue, even though it only makes up 20% of total inventory. Obviously, growing sales of premium inventory could significantly boost publishers’ revenue and bottom line. But several factors are preventing this from happening today.

First of all, there’s the sheer number of layers involved in executing programmatic reserve. Just think how many middlemen sit between the publisher and the advertiser today — you’ve got an agency, an SSP or ad exchange, a DSP and a trading desk. Even if each of these players adds only a 10% markup, it quickly adds up. These markups boost prices beyond what some advertisers are willing to pay — reducing the addressable market — while shrinking margins for publishers.

All the markups can be hard to pin down, making it very difficult to maintain a rate card for premium inventory. Advertisers are paying $8-$15 CPM for private ad exchanges in display, and somewhere in the $25 CPM range for private ad exchanges in video. These rates include agency fees, technology and data costs totaling as much as 40%.

In spite of the increasing prices, it’s likely that advertisers would still be willing to buy guaranteed inventory across multiple publishers if they could lock in large bulk buys at sub-rate-card prices. Unfortunately, that isn’t happening. Leading trading desks, such as Vivaki and Xaxis, claim that their volume of private ad-exchange buys is lower than that of other ad buys.

This low volume is largely due to the fact that SSPs and ad exchanges haven’t been able to guarantee premium inventory at scale. (This issue is compounded if any type of user targeting, such as frequency capping or cookie matching, is attached to the task of securing inventory.) While publishers are understandably wary of diluting the market and causing prices to shrink, I’d argue that the low supply of premium inventory limits the market far more than it preserves price integrity. SSPs and ad exchanges need to negotiate deals outside of their current publisher arrangements to grow the availability of premium inventory.

Even with additional inventory, though, two other main challenges would prevent SSPs and ad exchanges from being able to guarantee more than a small percentage of premium inventory. First of all, cookie deletion and visitor attrition pose major challenges for publishers to be able to forecast their inventory. Secondly, the only way to guarantee a specific share of voice or audience-inventory pool is to pay for first right of refusal for premium inventory and to look at each impression.

In other words, SSPs and ad exchanges would need to serve publishers’ entire inventory — and take on the risk of impression passbacks.  It remains to be seen whether SSPs and ad exchanges will evolve to compete with ad-serving giants such as Google (DFP), WPP (Open AdStream) and OpenX, which have dominated the publisher ad-serving market in order to chase programmatic reserve.


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Programmatic reserve is still in its early stages, and there are plenty of unanswered questions about how it will ultimately play out for all RTB players. But it’s clear that there’s plenty of work to be done; the market has yet to fully embrace programmatic reserve. I believe that better visibility into inventory is critical to enable SSPs and ad exchanges to capitalize on the concept they created.

Follow Nancy Marzouk (@nmarzouk) and AdExchanger (@adexchanger) on Twitter.

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