“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 Chris O’Hara, co-founder and chief revenue officer at Bionic Advertising Systems.
Programmatic RTB has seen the lion’s share of venture capital funding and an enormous amount of innovation, yet RTB buying only accounts for 20% to 30% of all digital media dollars.
The real money still flows through the direct buying process, with agencies spending up to 400 hours and $50,000 to create the typical campaign. At the same time, publishers burn through 1,600 hours a month and 18% of their revenue responding to RFPs.
What a mess — and opportunity.
Everybody’s battling for a slice of that direct sales pie, and the game is all about helping buyers and sellers automate the manual processes that drive nearly 80% of transactional value.
As we speak, winners and losers are being selected. When you look at all of the companies providing a slice of the end-to-end workflow just in digital media execution, it’s hard to imagine that there can be one system to rule them all or a true OS for digital media. Yet, that’s the dream: an end-to-end comprehensive “stack” that handles media from research through to billing, eliminating the many manual tasks and man hours involved in connecting the dots.
But what are the realities?
The End Of The End-To-End Stack?
The notion of a single end-to-end “stack” for the digital marketer is a tough vision to execute. If you build a system with every feature needed by a huge agency, you have effectively built something no one else can use.
The flip side is building something so standardized that individual organizations find little value in it. The “operating systems” of the future that will win should allow agencies and marketers to leverage a standard operating system that can be customized with their own pricing, performance and vendor data. This delivers the efficiency of standardization while enabling data to provide the “secret sauce” needed by media shops to justify fees.
More importantly, the modern operating system for media must be extensible, allowing for a wide variety of point solutions to integrate seamlessly. The right system will certainly eliminate a few logins, but must not limit the number of tools that can be used. That necessitates a highly modern, scalable, API-driven, Web-based platform. It will be interesting to see how today’s legacy systems, which are exactly the opposite, adapt.
Hegemon Your Bets
Several years ago, I wrote that the merger between Mediabank and Donovan might actually be a good thing, provided it offered more choice, flexibility and open standards. Three years later, I am not sure they have delivered. Like any other near-monopoly, Mediaocean has a disincentive to open its ecosystem because that invites competition. Time will tell whether its nascent “Connect” effort will become a way for agencies to quickly consolidate their “stack” around a flexible operating system – or if it’s just an integration tax for vendors.
After an IPO, the company will face enormous quarterly pressure for growth. It will be hard to raise prices on already stretched agencies, so publishers will be in the crosshairs. I smell “marketplace” and some monetization strategies around programmatic direct enablement for guaranteed media.
And what about open standards? Despite years of work by the IAB, the standards and protocols for creating electronic ordering and invoicing are still very much in flux.
Connecting The Dots
The most exciting thing happening in digital media is seeing real programmatic connections between buyers and sellers for guaranteed media. After so much innovation in programmatic RTB, with hundreds of vendors and billions of dollars in venture capital, we now have some amazing pipes through which impressions can flow.
Unfortunately, this has largely been limited to lower classes of inventory and focused almost exclusively on the direct-response space. Creating the same programmatic efficiencies for premium, brand-safe inventory is now starting to happen. Whether it comes from new programmatic direct pure-play technologies, or happens through the RTB pipes, it will not transpire successfully without transparency. That means giving publishers control over their inventory, pricing and what demand partners can access from their marketplaces.
Will these connections thrive? Not if vendors charge network-like fees, arbitrage media or continue operating opaquely.
Will the endemic fraud in programmatic RTB push more transactions outside the RTB pipes? I think so, and a lot of publishers bet there are better ways for buyers to access their inventory.
Time For Real Time
There are plenty of RTB players who want a piece of the guaranteed action. Three of them – Rubicon, Appnexus and Pubmatic – will launch IPOs soon and feel tremendous pressure to increase revenue, margins and continue innovating and finding new markets. When international expansion stops providing double-digit growth increases, it’s time to look toward new streams of demand generation – namely, the 80% of deals not currently flowing through their pipes. Those pipes have been engineered for real-time bidding, but guaranteed deals are neither real time nor bidded.
Can they innovate fast enough to provide real value between buyers and sellers? Can they apply years of innovation in DSP and SSP tech to the more prosaic problem of workflow automation? Probably, but there are still business model issues to work out. Most of these companies have put a stake in the ground for either publishers or marketers, and a transactional platform must be agnostic to sit in the middle. It will be interesting to see how new offerings are received.
As the Chinese curse says, “May you live in interesting times.” The past several years of ad tech have been nothing but interesting. The real action, however, is just starting – and it’s taking place in the most uninteresting field of workflow automation.