Media Buying Auctions: Going, Going, Gone

By Thought Leaders Archives
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This piece is the first in a series that considers how auctions have changed the media market and how they work on each of the major biddable media platforms. Among the many institutions disrupted by the pandemic was the Upfront television marketplace. The interruption raised important questions: Would the market transition from a broadcast to a calendar year? Was this the end of the annual mating dance between supply and demand?

Uncertainty remains on both counts. What was less discussed was how the underlying nature of media markets had already changed, not pre-pandemic to present but as a function of the digital age. The Upfront market was, in reality, a futures market. The goal of buyer and seller was to forecast supply and demand for television inventory and predict, as best they could, a forward price versus a spot price. If you had the right forecast, significant market advantage could be had, an advantage that could represent tens of millions of dollars.

Supply and demand remain at the heart of media trading but the futures market, and with it, reserve pricing, is no longer the only or even the dominant means of transacting the commodities of exposure and attention.

In 1998 Google was incorporated. In the same year (later Overture, later still acquired by Yahoo!) launched an auction-based pay-per-click business model that was to become Yahoo Search and the basis of a business model that was to transform the media industry. By value, half of the media market is now transacted at auction; by impression it's more. Google, Bing, Facebook, Instagram, Amazon, TikTok, Snapchat, Pinterest, LinkedIn and the entire programmatic video and display are all auction dominated, some in real time, some in private marketplaces, others in open exchanges.

Auctions allow media plans to be assembled automatically. Reach is built impression by impression, performance, action by action. This process could not be more different from reserve markets but underlying principles remain. There is no reduction of emphasis on the principles of media planning that require combining the weight and distribution of messaging to build the foundations of communications and precise flexible delivery to capture available demand. Critically, auctions allow the buyer to be highly selective in acquiring reserve positions restricting those moves only to areas where supply is strictly limited.

Success in auction markets demands the cross-channel and intra-channel orchestration, sourcing and application of data and, above all, a deep understanding of auction dynamics. Those dynamics have changed a lot since the days of Then, in simpler times, the highest bid won. Now, the range of auction methodologies is dizzying -- first price, second price, bids for impressions, bids for conversion. On it goes; each platform upon which the auction takes place operates differently, requires a different approach and has its own peculiarities, some of which are significantly influenced by creative assets. And then, overlaid on top of all of that are bids direct from buyer to sellers, bids from aggregators on both sides and execution in milliseconds.

How do agencies and brands keep up? How do planning tools and processes evolve? How does budgeting and flighting work in a real-time market? How do you set KPIs? How do buyers and intermediaries organize for success? What does good look like?

Over the coming months we will aim to answer some of these questions and hopefully receive input and provocation from the MediaVillage community.

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