Total Automation May Put Publishers Back On The Map

chrisoharasellsiderThe Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Chris O’Hara, vice president of strategic accounts at Krux.

It’s been a long time since publishers have truly been in control of their inventory. But that’s changing, with new trends that are steadily giving premium publishers the upper hand.

Technology and new procurement methodologies have the potential to put publishers back on the map – but only if they possess quality audiences and first-party data.

The Era Of Eras

First, a brief history. When display inventory procurement began with the publisher direct era, publishers controlled their banners, keeping them safely hidden behind sales forces and rate cards. Then the network era crept in, marked by smart companies like Tacoda that categorized all unwanted banners. Advertisers liked to buy based on behavior, and publishers enjoyed the extra check at the end of the month for hard-to-sell inventory.

That was, however, no fun for those on the demand side. They started the programmatic era by building trading desks and leveraging demand-side platforms (DSPs) to scrape a few percentage points from media deals. The poor publishers were left to fight back with supply-side platforms (SSPs) and more technology to battle the technology that was disintermediating them, the advertising equivalent of a robot fight.

Publishers realized it was silly to let others determine the value of their inventory. They launched the DMP era, where they used first-party data from registration and page activity to create wonderful segments they could sell to marketers. Smart publishers now knew more about their inventory than third parties and could find readers across the wider web via exchanges. A win-win.

Then marketers began to understand how much money programmatic companies took from investments earmarked for media. They decided to use their own technology and data to power audience targeting. If it were a baseball game, this would be in the first or second inning, but the pitcher is throwing at a fast pace.

Up next: the programmatic direct era. It lasted about 10 minutes and effectively jumped the shark when Rubicon bought ShinyAds and iSocket, two of the more prominent companies involved. Programmatic direct marketplaces promised a flip of the yield curve for publishers to expose the “fat middle” of undervalued impressions. They placed blocks of inventory in a marketplace, enabled publishers to set rates, impression levels and provide API access directly into their ad servers.

Alas, a tweak to Google’s API did not an industry make. Marketers loved the idea, but since they use audience as the primary mechanism to value inventory, programmatic direct marketplaces failed as standalone entities. Under the steady hand of RTB-based technologies, they slowly evolved based on buy-side methodologies. Again, the demand side foiled a perfectly reasonable, publisher-derived procurement scheme.

Total Automation

The programmatic direct era still lives, albeit within private marketplaces and direct deals. The IAB’s Open Direct protocol remains stuck at 1.0, but there is hope for a change that is positive for both marketers and publishers. It’s the latest era in inventory procurement that I call total automation.

A big auto manufacturer, for example, can use its data-management platform to identify, via purchase information, the exact profile of everyone who buys its minivan. Call then “Van Moms.” Then suppose the publisher, who licenses an instance of the same DMP, is a women-friendly publication chock full of those Van Moms – and women who just happen to look like Van Moms. It’s pretty easy to pipe those moms from the marketer right to the publisher.

You could call the process programmatic direct 2.0. It requires no exchanges, third-party data, DSPs, private marketplaces, SSPs or, potentially, agencies. It only requires technology to map users and port them directly into an ad server.

This is happening today, quickly. Marketers are discovering that the change from demo-based buying to purchase-based buying through first-party data is winning more customers. Publishers are seeking and commanding high CPMs, and those CPMs are backing out for marketers. Thanks to all the junk in open exchanges, paying more for quality premium, “well-lit” inventory actually works better than slogging through exchanges trying to find the audience needle in a haystack full of robots and “natural-born clickers.”

The new era of total automation will put publishers back on the map, but not all. The big distinction between the winners and losers will not only be the quality of their audience but, more importantly, the first-party data used to derive that audience.

It was once easy to use third-party data to call someone an “auto intender” if they brushed past an article on the latest BMW. Compare that to the quality of an “auto intender” on a car site who has looked at five sedans over the last two weeks and used a loan calculator. There’s no comparison.

The latter “intender,” collected from page- and user-level attributes directly by the publisher, is 10 times more valuable, worth a $30 CPM vs. $3 CPM. That user volunteered real, deterministic personal information that the publisher can validate. I bet an auto manufacturer would pay a high CPM for access to an identified basket of those intenders on an ongoing, “always-on” basis.

This is fantastic news for publishers with great quality inventory and a first-party data strategy. It’s even better news for marketers that have embraced data management, and can extract and find their perfect audience on those sites. The era of total automation will end when every marketer has a DMP. By then, we will no longer a glut of display inventory since all of the quality Van Moms and business travelers will be completely spoken for. What will be left is a large pile of unreliable, long-tail inventory available for the brave direct-response marketer and his DSP.

Marketers and publishers should welcome this new era of data-driven one-to-one marketing. Once we get it right, it will look just like an anonymized version of direct mail, which is perhaps the oldest, greatest and most effective and measureable marketing tactic ever invented.

Follow Chris O’Hara (@chrisohara) and AdExchanger (@adexchanger) on Twitter.

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