What We Talk About When We Talk About Programmatic

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Today’s column is written by Jed Nahum, Senior Director of Programmatic Sales at Microsoft Advertising.

A friend of mine once lamented, “As an industry, we ruin words.”

It’s true.

A few years ago, we all conspired to ruin the word “exchange” with ad network models that diluted its meaning. Now we’re in the process of destroying the meaning of “programmatic.”

Let’s face it. We’re talking about different things when we say the word programmatic. I’ve attended several good forums on this topic and was alarmed to realize that people who think they’re talking about the same thing when discussing programmatic are actually worlds apart.

A Proposed Taxonomy Of Programmatic Offerings

Under the overall umbrella of “programmatic,” I consider there to be four main offerings: RTB, Deal ID/private marketplaces, programmatic direct and another offering that some are discussing which, for lack of a better name, I’ll call programmatic forward. Here are some quick definitions:

Programmatic offerings
RTB Subscribe AdExchanger Daily Get our editors’ roundup delivered to your inbox every weekday. Daily Roundup Daily News Roundup Not For Sale!; Johnny On The Spotify	Deal ID and private marketplaces	Programmatic direct sold	Programmatic forward market
RTB has come to refer to the spot market for ad impressions that is enabled by the real-time bidding protocol.	Features on top of RTB which enable sellers to designate privileged or specific buyers	Refers to the efforts to address automation of existing forward buys (guaranteed or reserved) sold around the industry.	Refers to the as yet undefined forward and futures markets for impressions.

Notice that I am not using the phrase “programmatic premium.” This phrase is simply too ambiguous and translates roughly to “automated good offering.” I can’t really define it and therefore recommend avoiding it. Since I won’t be addressing them, I’m omitting all reference to the manual lines of business that can be either direct or indirect, as well as reserved and remnant.

RTB

Technically, the RTB protocol is distinct from the marketplace it has spawned. But since this market remains unnamed, we have unwittingly conspired to call it simply “RTB.” We should probably call it “programmatic spot market.” I won’t go into much detail here, since presumably if you’re reading AdExchanger, you know something about RTB. However, I will point out the following:

• This may be obvious from the last paragraph, but what we call RTB is not just a protocol but also a marketplace.
• RTB has improved liquidity for publishers and advertisers alike in the spot market.
• From the perspective of the buyer, there is fungibility of impressions and audiences across marketplaces. In other words, the stuff you buy from one RTB marketplace can more or less be replaced by the stuff you buy from other RTB marketplaces. Significantly, the price of impressions will vary against quality similarly across marketplaces.
• RTB, while capable as a protocol of delivering content adjacent advertising, has been used mostly to enable buyer defined audiences across a broad range of content.

I think much of the time when people talk about “programmatic,” they’re really just thinking about RTB. I don’t think that’s specific enough.

Deal ID And Private Marketplaces

Deal ID, and to some extent, private marketplaces are efforts to automate existing direct buys. They allow a fair approximation of hand sold direct using RTB plumbing. One advantage of these solutions is that they enable buyers to utilize the same buying systems for both RTB and direct deals, and therefore concentrate data in one buying system and DMP. Another big advantage is that these offerings are available now and everything else below is more or less on the horizon. The disadvantages are that they aren’t yet effective for guaranteeing placement and it can be difficult to replicate ad server placement granularity in the RTB environment. Further, as currently defined, these buy types create significant overhead for publishers that limit their scalability. I suspect these are gap-bridging offerings that are neither fish nor fowl and won’t be actively sold in the long-term. The technology that enables them, however, may be repurposed for other goals.

Programmatic Direct

Direct or hand sold advertising exists in both remnant (spot) and reserved (forward) forms. Programmatic direct, on the other hand, refers to the automated versions of these advertising offerings.

The emerging solution set consists of API access into ad servers with automation against RFPs, I/Os and creative management. This product is coming together as you read this with publishers, SSPs and third-party vendors, such as ShinyAds and iSocket, adding the requisite feature set. Another good example is the recent feature additions touted by Rubicon for its Revv platform. There will almost certainly be multiple acceptable solutions that will sit in this space. Programmatic direct will offer efficiencies of process, such as removing Non Value Added steps and redundant activities in the order process (repeated input of the same data for I/Os). It will shorten cycle lengths and “appify” the selling process, if you will. It doesn’t offer increases in liquidity and price discovery. On the other hand, I’m pretty sure this offering will, over time, entirely supplant our current way of selling brand on display since it should wind up being a more efficient substitute. Most excitingly, it will be the means by which we sell native and very customized advertising.

Programmatic Forward Market

Programmatic forward will be the forward market that attaches to our current spot market. Its acolytes tend to advocate for liquidity and price discovery, indicating that pricing information must flow smoothly between the spot and forward markets. Such a market would be real-time from the perspective of order placement but would deliver impressions in the future on agreed-upon dates. This marketplace/offering would supplement the direct and programmatic direct offerings. In fact, while programmatic direct looks like a feature set to me, programmatic forward looks like a marketplace. As it requires integration with the existing spot market, it would mostly involve contracts getting written that are then delivered through systems built on top of the RTB protocol. This would allow the spot and forward marketplaces to trade pricing information and balance demand.

Envisioning this marketplace is fun, but defining it is a hairball. In order to sell forward contracts, the writers of those contracts must be able to forecast availability. Contract writers would forecast the availability of the item being sold, including audience or content placements, and later find the audience or placements necessary to fulfill the order in the programmatic spot market. This is analogous to the way contracts for commodities are written.

Since programmatic forward will support and require automation, it should see many of the process efficiency benefits I mentioned above for programmatic direct. However, it will additionally bring greater price discovery and liquidity, and should eventually make us better buyers and sellers. It will be very well suited to deliver standardized forms of advertising, but will have difficulty supporting customized and native executions. The pricing information that it and the associated spot market delivers will be invaluable for direct offerings.

Let’s Be Specific

My goal here has been to offer terminology and definitions that allow us to be specific enough to avoid confusion when we’re talking about “programmatic.” Below, I’ve distinguished between major types of offerings and added fairly standard names.

I’m not inclined to argue about the relative value of each of these ad offerings. The future is big and will incorporate all of them. Each offering will each provide unique value for sellers and marketers.

Follow Jed Nahum (@jednahum), Microsoft Advertising (@MSAdvertising) and AdExchanger (@adexchanger) on Twitter.