“Automation” is a tricky word — one that carries with it both excitement and trepidation. The very nature of automation brings forth the exciting prospect of superhuman speed and efficiency, the ability to move at a faster pace and and reaching beyond the limitations of the “manual” world. But at the same time, it frightens us, because we are, of course, human, and don’t want to be replaced.
In the 1980’s, for instance, when “automation” hit Wall Street and program trading became widely used in trading between the S&P 500 equity and futures markets, the volume and speed of activity exploded and became incomprehensible to the mere human brain. It was thrilling — and petrifying at the same time.
This algorithmic revolution came to the online advertising space, and now it is hitting the mobile advertising industry in the same way, notes the Economist in its special report (pdf) on programmatic buying. In fact, some agencies and media companies are instructing their executive teams to read “Flash Boys” by Michael Lewis, a book about Wall Street’s high-speed traders, to understand what the media-buying space is like today.
Just as the computerization of order flow in the financial markets only developed further, making trading even faster and more efficient, programmatic over the past decade has moved past its rudimentary beginnings in the search advertising market and become more sophisticated, gaining traction in the online display market — and now taking major inroads within the mobile medium.
By now, to say programmatic buying is a trend would like saying those Wall Street traders might soon go back to pen and paper and little green screens, writing trades down on a stub and having them written in a log and run to the accounting office. Programmatic buying is not a sales strategy per se; it is mostly about operational efficiencies.
But not all programmatic is created equal. Real-time bidding on an open exchange, which most people are familiar with by now, is a public auction, with non-guaranteed inventory – and has been grappling with the problem of low-quality for years (i.e. transparency, viewability, low session depth, etc.). This is where the industry thankfully developed the technology to create private marketplaces (PMPs), open only to select bidders, with both fixed and variable pricing. In parallel, publishers started to sell their direct guaranteed inventory programmatically, with fixed pricing and guaranteed impressions and placement on premium, high-value environments.
What the private exchanges allow for is letting brands and publishers set up direct relationships – just like the old days, while leveraging the technology that delivers the speed (milliseconds vs. I/O trading), targeting, scale and efficiency of an all-digital, algorithmic platform, writes Adweek. And at the same time, maintaining the highest level of brand safety and transparency.
While private exchanges might be a relatively new concept, they are gaining traction with electrifying speed. Buying via private exchanges (18%) has just eclipsed programmatic via RTB on open exchanges (17%), according to a 2015 IAB survey of mobile marketers.
And the private programmatic industry is projected to approach $8.6 billion as early as next year, as brands as well as performance advertisers openly embrace the model and move their budgets into it. Ultimately, we believe that PMPs will overtake the open exchange auction model, as buyers realize how much more transparency and viewability they can have into the reach they are buying, and as publishers become more frustrated with how diluted their CPMs become with the open-exchange model and want to get the value they deserve from their inventory.
Still, like any dramatic movement into automation, there are some areas that have yet to catch up to the demands of both buyers and sellers. As Eric Cohen from Demand Media proclaims in a Digiday op-ed: “We expected a flood and got barely a trickle […] but it could mean not abandoning a direct sale or open auction strategy. Ensure that you’re consistently eating small meals rather than expending all your energy on catching that elusive mobile programmatic feast.”
But the day of the mobile programmatic feast is very close, and it will arrive sooner than you think – because publishers and advertisers are hungry for it. And that is what sets apart the greatest athletes, entrepreneurs, and, yes, financial traders in the world: Hunger. We’ve come a long way since the early days of desktop-only, open RTB, and in doing so, have made great achievements in mobile monetization, but we are – and should be – hungry for more.