“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 Richard Jalichandra, CEO at iSocket.
Though still an emerging industry segment, programmatic direct is fast becoming one of the most talked-about trends in ad tech. In spite of all this buzz – or perhaps because of it – there remains significant confusion about what is and isn't programmatic direct.
We have seen pieces explaining the difference between direct and indirect buying – specifically the distinctions between programmatic direct vs. open RTB – but that's not the only distinction at play.
The common misconception is that programmatic direct is one very specific type of media buying, but there are two very distinct categories: reserved and unreserved, both of which have advantages and disadvantages. The characteristic both share is a fixed price, but there are significant differences between "fixed price unreserved" and "fixed price reserved."
RTB introduced incredible efficiencies to ad buying, giving buyers easy access to inventory often at a significant discount. One reason for those lower prices is that inventory is available on an unreserved basis at the impression level. In any biddable environment, a purchasing decision is made in real time, milliseconds before the ad is served, which means there is no opportunity to reserve inventory in advance. In contrast, under the traditional advertising model, inventory is reserved days, weeks or even months in advance.
Unreserved Programmatic Direct
The unreserved buying process applies to the open-market RTB, but also to programmatic-direct mechanisms that rely on a bid-ask protocol to execute a buy. I'm talking about private exchanges and deal ID.
Deal ID is a unique identifier that lets publishers sell directly to buyers at a fixed price that is prenegotiated offline, and is unique for each buyer. In that sense, it is by definition, programmatic direct.
However, while deal ID enables direct deals, it differs from traditional direct buying in one crucial way: Deal ID buys are unreserved. Deal ID buys are actually executed through private exchanges, which are still auctions. This means that, technically, buys are executed at the impression level in real time, and inventory isn't actually reserved.
Reserved Programmatic Direct
There is a second category of programmatic direct: reserved. The IAB defines this segment as automated guaranteed.
This category is more like the traditional direct sales process, in which inventory can be reserved well in advance, both parties agree upon terms upfront and the actual buying mechanism is automated. Deals are negotiated directly between a single buyer and seller via technology, and programmatic pipes connect the buyer directly to the publisher's ad server. Hence, programmatic direct.
"This type of transaction most closely mirrors a traditional digital direct sale," according to the IAB. "The deal is negotiated directly between buyer and seller, the inventory and pricing are guaranteed, and the campaign runs at the same priority as other direct deals in the ad server. The programmatic element of the transaction that differentiates it from a traditional direct sale is the automation of the RFP and campaign trafficking process. Negotiation through to fulfillment can be, should the publisher desire, completed within the technology platform providing the automated reserve functionality."
Looking Ahead: The Programmatic Direct Ecosystem
Both approaches – reserved and unreserved programmatic direct – employ distinct technology to solve the same general problem: Direct ad sales are hard and automation is essential. That said, it isn't necessarily the case that one of these categories will win out. In a growing $18 billion market, there's room for more than one solution. Many publishers already employ both categories of programmatic direct to suit the varying needs of different buyers.