Fixing Programmatic: Start At The Top
Publishers worry about the loss of revenue associated with the shift toward programmatic ad buying, but columnist Rob Rasko believes there are ways to solve this problem.
“The only way out is through…”
One of the greatest fears publishers face is an impending loss of revenue, based on the spread between what they earn selling their premium inventory and what they earn from programmatic.
In some instances, the delta between publisher premium and programmatic can be as great as ten to one; in other words, some publishers’ programmatic ads are earning only ten percent of what their premium counterparts earn.
Since programmatic is here to stay, this delta in earnings has to be closed if publishers are to remain profitable.
As discussed in our previous article, Don’t Be Spooked By The Fear Of Programmatic Ad Buying, changes around programmatic are creating opportunities in digital media for all stakeholders.
But, the way these changes pay off has yet to be seen by the publishers who are scrambling to determine how they can remain profitable in a paradigm where their earnings are being cut by ninety percent.
The best way to overcome this problem is to embrace the changes ahead and find a solution to increasing profitability, while at the same time moving towards an automated way of buying and selling ads.
Thankfully, There Are A Few Options
There are two obvious solutions to making programmatic more profitable for publishers: the top-down and the bottom-up approach.
The latter involves increasing efficiencies, including creating better yield management practices and incorporating better technology.
The former focuses more on selling programmatic deals, educating your team on how to sell programmatic, forming new relationships with agencies, and getting buyers to ask for your brand via technology automation.
Both sound like reasonable approaches with promising results. Ultimately, however, one approach is the best solution long-term.
Start From The Top
The key to profitability lies in a solution with limitless opportunities to continuously generate revenue — as opposed to one where revenue growth is restricted by the number of efficiencies that can be optimized.
In our client work, the top-down path has consistently proven to be the approach that gets the job done. It is the only viable, long-term solution to shrinking the delta between publisher premium and programmatic ad buying.
While the bottom-up approach requires every last efficiency to be optimized, it doesn’t take into account the scarcity of ways in which these optimizations can occur.
The result is a limit in the potential ability to reclaim the revenue lost when buying programmatically.
Conversely, the top-down approach can be hugely expanded and creates the ability to become, over time, even more profitable than before.
The top down approach focuses on publishers creating greater demand for their brand, which results in an increase in bid density and queries per second (QPS). Higher bid density paired with an upsurge in QPS naturally generates opportunities for publishers to increase profitability.
A Competitive Advantage
In essence, the top-down approach can offer not only an increase in profitability for those who excel at its implementation, but it can also create a competitive advantage for early adopters who see the upside of investing in their sales team’s training and creating demand for their brands.
The wisest publishers should spend time and money developing these core areas of their business in an effort to gain market share with regard to the demand for their brand.
From Problem To Possibility
Change is always the driver of innovation. As an industry, digital media is evolving rapidly, and those changes are producing great strides in innovation.
Malcolm McLean was a historic figure who fundamentally transformed the shipping industry by containerizing cargo via ship as opposed to ground.
This radically reduced the cost of shipping by a factor of 36 times and energized global commerce markets – not to mention setting the stage for companies such as Amazon, eBay and Walmart.
Similarly, digital media will be fundamentally changed as programmatic is more heavily embraced and the ability to increase profitability from use of programmatic increases.
McLean knew the challenges he faced actually presented the industry with new opportunities. Likewise, the best digital media pros understand that the biggest upside in programmatic has yet to be realized. Great profits and successes await those who take a top-down approach to programmatic selling.
Opinions expressed in this article are those of the guest author and not necessarily MarTech. Staff authors are listed here.