The ad tech industry may be in danger of growing up. This morning I attended the AppNexus Europe Summit and I actually was able to understand most of what the presenters were talking about. It seemed as if the speakers were actually knowledgable, rather than just salespeople throwing around a bunch of scripted buzz words. Of course that may just be a reflection on me — too much time with the ad tech fast talkers might be making me one of them.
Most of today’s conference was about that biggest of buzz words, programmatic. It means different things to different people, but by 2017 programmatic will be an umbrella term for several different marketplaces within digital advertising. Each marketplace involves a way of buying advertising for a media planner with potentially multiple goals.
The first of these marketplaces is what’s commonly called RTB (real time bidding), which is often mistaken for the entirety of programmatic. RTB is simply an auction where machines representing publishers put their excess inventory (used to be called advertising space or TV time) online, and machines representing advertisers bid on it. RTB is where inventory goes to die, after the publisher has determined that it isn’t “premium,” aka really valuable and is therefore “remnant” (left over). As in any auction, the buyer takes all the risk. It’s like buying at a bargain basement; it’s cheap, but it may be soiled.We’re buying blind. We’re buying impressions, but we don’t know if they are viewable, if they are desirable, if they will work for our campaign. All we know is they’re cheap.
But there are other marketplaces that are somewhat more predictable than RTB. For instance, there’s the performance marketplace, in which the advertiser only pays for click throughs, installs, or other performance metrics (known as conversions). Here, the risk is all to the seller, but if the reader/viewer “converts” to a sale or lead, the seller/publisher gets the big bucks. It behooves the seller to maintain his own platform with all the performance metrics combined to get him the most dollars. At present, 80% of mobile advertising is performance-driven. That’s actually how all digital advertising was until recently. Now that advertisers are finally beginning to understand they can get brand lift from digital, the field shifts again and they have to grok mobile. Back to square one: pay for performance.
The third type of marketplace really isn’t a marketplace at all, because it’s more like how it used to be. The advertiser pays up front, and the publisher guarantees delivery. You want the banner at the top of the New York Times home page, pay enough and it’s yours. Publisher context, audience and brand association drive value in this marketplace, where the buyer has full transparency but not much control. The buyer/advertiser pays what the seller demands. Most of this is still direct, although it’s moving quickly to programmatic.
AppNexus has just started a fourth kind of marketplace that it calls the “deals” marketplace, using a startup called Twixt that spun out of itself. Twixt is a way to automate the deal an advertiser used to be able to make with a publisher for special prices or placement. Twixt standardizes the RFP process and helps media planners streamline their workflow. AppNexus thinks this marketplace will produce a virtuous cycle in which there is shared risk, moderate transparency on both sides, and a more collaborative, less mechanical approach.
From your lips to God’s ears.
