Programmatic Media and the Future of Media Buying - Robert Brill & Steven Kaufman-KSL Media

Just as it has impacted other industries, technology is dramatically changing the media landscape. Programmatic media has risen in recent years, driven by the need for publishers to sell unsold remnant inventory and for advertisers to scale their niche data and behavioral targeting campaigns.

In its first iteration, programmatic media became synonymous with terms including "real time bidding (RTB)," "biddable media," "ad exchanges," "demand side platforms (DSPs)" and "trading desks." This happened because there was little differentiation between the various parts of this ecosystem.

Ad exchanges offer impression-buying opportunities and the place where auctions occur in real time. These supply sources extend to ad networks, single sites such as Facebook, and publishing groups such as the NBC Audience Platform. I n the future, supply sources will be connected TV inventory, TV impressions, and aggregators of digital OOH inventory.

DSP technologies typically connect the advertiser and the inventory source by providing a single platform interface to facilitate the media buy. By doing so, they connect advertisers to billions of impressions, thousands of data segments, hundreds of ancillary ad tech partners, and a majority of supply partners. DSPs can also supply data into a sister technology in the form of the data management platform (DMP).

Because of data's importance to programmatic media, the DMP serves as a repository for all first and third party data, along with the insights and modeling capabilities that this information facilitates.

Finally, the trading desk is the organization that leverages the programmatic landscape for the advertiser, harnessing it to steward campaigns into maximum performance. Often the trading desk is housed within an agency holding group. For instance, KSL Media launched Fulcrum5 as a standalone trading desk in 2011 to leverage the exchange environment with the goal of driving value for KSL Media clients. In 2013, Fulcrum5 evolved into KSL Media's digital buying arm, activating media across multiple inventory procurement channels.

With all of these terms becoming more defined we see four factors that have led to the burgeoning expansion of programmatic media:

1. Biddable remnant inventory

Advertisers look to programmatic buying to round out their media plan. Impressions are low cost and remnant across many sites. Ads are bought via auction, and data is used to infuse value into the ad impression. A great use for low cost inventory is to drive additional delivery for clients. In late 2012, KSL Media allocated a substantial end of year buy to reach 21+ males to the exchange environment. Its Fulcrum5 arm over-delivered $2MM in media value at no additional cost due to two factors: the pricing differential available in the marketplace and aggressive optimization tactics.

2. Biddable premium inventory

With the help of ancillary ad products and greater publisher participation, advertisers can buy more top comScore properties and premium placements. These come in the form of homepages, above the fold inventory, content rich environments, and viewable inventory. Expanded data offerings and richer pricing model insight both help drive value across impressions. Rich media across display, video and mobile is introduced. Increased participation by supply partners equates to a huge opportunity for advertisers to find users across premium environment, at scale and at the optimal price point.

3. Non-biddable premium inventory

When publishers forge deals with advertisers using the existing programmatic infrastructure through private marketplaces, the advertisers pay either a fixed price for a fixed set of impressions, or a price floor minimum bid in order to access any impression available by publishers. Fixed price inventory targeting is usually sold through a sales rep.

Meanwhile, with the minimum price floor auction, the advertiser that pays the highest price for the inventory gets the impression, regardless if it's sold publisher direct, through the open exchange, or through a private marketplace. The trader in both cases can control data overlay.

The need for minimum campaign spend agreements and out clauses is reduced, or taken away completely. The operational costs of negotiating IOs and handling paperwork is reduced. Inventory is targeted to the most likely intended purchaser within a website, rather than targeting users simply because they happen to visit a specific page or domain. Advertisers leverage this ecosystem to route campaigns through a single unified source of reporting. Information about audience intention, past behaviors, TV viewership and purchase habits are used to derive insights and take action on them.

4. Digitalization of offline media

TV, radio, OOH, and even print are now guided by digital-buying principles. Rules-based buying, real time bidding, device targeting, venue targeting, geographic targeting, frequency capping, infusion of first and third party data and rapid optimization will evolve into offline media buying. TV spots will be bought not just to TRP levels, but also to levels of delivery against Experian audience data points. Eventually, connected TVs will become a new scalable impression supply source, and inventory will be delivered digitally. Early stages of connected TV buying will be sold by vendors with direct deals to the inventory suppliers. However, a scalable source of supply will soon develop in connected TVs, and that inventory will be sold programmatically. As with any marketplace, availability of inventory will separate high cost and low cost ad impressions.

Today, we can buy digital OOH across the country using the programmatic auction in taxi cabs, malls, airports and other digitally connected settings. Devices will become more unified through universal tracking.

The programmatic ecosystem is the factor that will facilitate turnkey media buying across devices and media. Each unique aspect of this landscape will evolve into well-defined and differentiated procurement opportunities: biddable vs. fixed price, remnant vs. premium, standard ads vs. native, and ad exchange vs. publisher direct.

Publishers, advertisers and their agencies will continue to have an incentive to use this efficient marketplace to lower operating costs. Publishers will see higher CPMs, and they'll realize data sales as an added revenue stream. Technological innovation is helping to solve specific media challenges because that the programmatic landscape provides an efficient marketplace and delivery mechanism to connect buyers and sellers.

The result is that agencies will buy digital media with lower overhead. Offline media will take on digital buying principals. Indeed the line between digital advertising and advertising may soon be erased.