The future of online advertising: part 4 – DSPs and publishers
In this instalment of Marketing’s serial feature exploring the world of automated trading, we look at how publishers can benefit from data-driven ad trading, what it means for their sales staff and why they’re hesitant to get involved.
Before delving into this instalment, we highly recommend reading Part One (or at least the glossary of terms at the end). Also recommended: Part Two, on DSPs and marketers, and Part Three, focusing on media agencies.
As automated trading through real-time bidding technologies emerges as an efficient method of buying online advertising space for marketers and media agencies the world over, on the other side of the equation sits another party for which this growing trend will have significant implications: publishers. One of the apparent contradictions of real-time bidding is that as advertisers sit on one side of the equation employing algorithms in order to increase buying efficiency, on the other side sit publishers, who (obviously) want to maximise the value of their inventory.
But this contradiction doesn’t take into account factors such as campaign performance and wastage. Depending on the targeting, response rates and conversions, when marketers do this well, large improvements in campaign performance can be achieved. A smaller buy can achieve the same result as one five times its size, says Stuart Spiteri, chief operating officer of News Digital Media.
“This is where publishers start to get a little cautious,” he says, “because there is a decline in the volume that may be purchased, but there should be an increase in yield, if it’s done properly.”
Part of doing it properly means using data. Instead of selling an audience on its size and generalised profile, yield can be maintained and increased in an automated environment by wrapping each impression in information, such as intent to purchase (a car, a skirt or a home loan).
Marc Barnett, general manager of the Microsoft Media Network and Microsoft Ad Exchange for Mi9, agrees that a lot of the fear is ungrounded, but he can understand the apprehension. “The last thing you would want to do if you weren’t 100% sure and you didn’t own the technology is give a whole bunch of your inventory to a third party supplier who then goes and sells it at 10% of the price, exposes URLs and brings your premium business crashing down.”
The issue is one of control. Publishers may feel that allowing their inventory to be traded automatically means giving up control over which ad space is sold to whom and for how much. Another issue that must be addressed is data leakage, where sensitive information such as pricing policies can become exposed during auctions. To keep the risk low, publishers have the option to experiment before diving in.
“You can put just certain sections of your inventory in; you can have a certain level of transparency or no transparency. You can set up private exchanges, so that only certain agencies or advertisers can access that inventory with different price floors and buying rules,” says Barnett.
In the world of real-time bidding, the opportunity for large, horizontally integrated publishers lies in selling their audience with the knowledge of its behaviour across multiple online properties. A publisher with an automotive site, a careers site and a real estate site can, for example, know a great deal of information about
a visitor, tracked via a cookie: what type of car they’re interested in, their income level, how many children they have. Every page visited adds another piece to that user’s profile. The more complete the profile, the more valuable that user becomes to advertisers. “Volvo will always want to find somebody who is interested in a car who is a parent, because that is a brand attribute of Volvo owners who are concerned about child safety, for example,” says Spiteri. “So you can start to see that you can then turn that around to Volvo and say, ‘All day long, we’ll find those people for you across a stable of digital properties.’”
Imagine that across a portfolio comprising dozens of websites.
For independent specialist sites, it’s a bit harder. Their audience’s interests are apparent – a finance site can get a fairly high yield already by working directly with advertisers who want that audience. The site’s sales director must manage a balancing act, deciding which inventory it sells directly to advertisers and which it allows to be traded through an automated trading hub.
As one of a small number of major publishers in Australia, News Digital Media is cautiously exploring ways to participate. On the other hand, Mi9′s position is clear. “We are making all of our inventory available through the exchange. Anything that is not sold on a premium basis by our advertising team is made available in the exchange for everyone to bid on,” Barnett says. Of course, Mi9 owns and has developed the Microsoft Ad Exchange, so it knows what goes on behind the scenes, and as a matter of confidence must back itself.
Mi9′s invitation to other ‘premium’ publishers to join its exchange puts it in competition with Google, which owns the DoubleClick Ad Exchange. There are no restrictions around reputability, size or traffic, so blogs and other very small publishers can make their ad space available.
Is the choice for Australian publishers, therefore, really as simple as ‘Mi9 or Google’? It is true they are the only two exchanges in the country, and in this market the chance of someone else taking the time, effort and money to build a competing exchange seems low. But publishers don’t have to deal directly with exchanges.
The supply-side platform
A supply-side platform (SSP, sometimes ‘sell-side platform’) adds a layer in front of the publisher, allowing it to connect to multiple sources of demand, and optimises yields in order to maximise revenue for that publisher’s digital media. It executes the rules a publisher has about what it wants to sell, to whom and for how much, across all sources of demand, whether that be the real-time bidding in an exchange, or the more ‘traditional’ automated trading through an ad network.
Google’s SSP, Admeld, was purchased for an estimated US$400 million last year, adding to its growing array of offerings in every part of the automated trading set-up. From the sell side through the exchange to the buy side, Google wants to own a piece of every part of the chain.
Conflicts of interest are something publishers should be concerned about, says Jay Stevens, vice president and general manager, international for the Rubicon Project, a leading supply-side platform that executes more than four billion ad trades every day, primarily for comScore 500 publishers (the biggest of the big online). Stevens questions Google’s transparency and independence in light of the fact it acts as both the seller and buyer, but doesn’t buy Britt’s suggestion that Mi9 is the saviour.
“Publishers don’t have to choose the lesser of two evils; there are independent solutions in the marketplace that can provide that level of security and safety for their data and information and pricing intelligence,” he says.
As always, the question of whether a publisher engages an SSP middleman is one of value. “The question for publishers is: by passing my inventory through a sell-side platform with them taking a small clip of the ticket, do they add enough value where I make more money by dealing through them than dealing direct?,” Barnett says.
Death of the salesman?
The immediate answer to whether or not online media salespeople should be worried that algorithms are taking over their jobs is ‘no’. Automated trading is only concerned with remnant, or non-guaranteed, inventory: that which isn’t sold by a publisher’s sales team. Therefore, one of the immediate benefits automation brings to a publisher’s direct sales force is a reduction in time spent on less valuable areas.
To Kunze, Google’s director of publisher monetisation for the JAPAC region, automated trading takes away some of the pain that goes with a publisher’s unsold inventory. “The great thing about automated selling and buying is that this actually frees up resources for the publishers to focus on higher yield campaigns like sponsorships and homepage sales,” he says.
Stevens believes this has significant implications for revenue. “Publishers’ direct sales have grown substantially [with automation], as they have essentially allowed their sales people to be more creative and go out there and think about big creative sponsorships, rather than chasing down a minor insertion order on a website campaign,” he notes. “That’s important.”
Just as roles for those in marketing departments and media agencies are changing to remain up to speed with data-driven advertising, publisher sales forces need to evolve, too.
“It was purely a relationship game a few years ago,” says Barnett. “The best salespeople were the ones that can build the best relationships, but you need to have more than that now. You need to have relationship skills, as well as data and intelligence skills and understanding of systems that allow you to talk a different lingo when you’re in market.”
Spiteri expands: “The sales teams of the past were able to talk about ad servers, ad formats and so forth, but they were not comfortable talking about technology as a platform, whereas what you’re seeing now is that a commercial director of a large publisher would have to be coherent and competent in a whole bunch of technologies.”
Changes in competencies and business processes will occur because yield management is not a spreadsheet issue, Spiteri explains, but rather an application management issue, and business rules, and salespeople, must evolve to work with yield management platforms that respond to what they’re learning in the market.
The future is data
Mi9′s sales pitch to advertisers includes its access to data on users’ lifestyles and interests through its network’s dozens of sites, their purchase intent data from ecommerce and product comparison sites and the demographic information of eight million Windows Live IDs. (As the saying goes, there’s no such thing as a free lunch, or a free Hotmail, Gmail or Facebook account.)
For Australia’s real-time bidding scene, developing a third party data market is the next big step towards growth. “If you think about the fact that we pass very little information back through the exchange, for advertisers to view that inventory as valuable and useful and pay more for it, they will need to have considerable third party data assets on their side to be able to make informed decisions about that inventory,” says Barnett.
While a publisher can choose not to pass any identifying information about a website to potential buyers, as Mi9 is doing, information about the user/IP address/cookie is where the power lies, as that drives up price for the publisher and effectiveness for the advertiser. It’s therefore in both the seller and buyer’s best interests to gather as much data as possible.
Spiteri looks at the bigger picture. “I think if I had to choose a career that wasn’t in that media, I’d be going into data myself,” he says. “It’s the future, not just for digital marketing… data is being realised as a core asset of enterprise.”
He cites Coles’ recent relaunch of its FlyBuys program. Beneath all the discounts and loyalty prizes, the unpromoted underbelly of rewards programs is all about capturing customer data. Knowing who your customers are, what they like, what they don’t like and where they live is invaluable in terms of generating foot fall and purchases by presenting the right offer to the right consumer in the right place at the right time.
“Data is a real world phenomenon, and I think it’s mainstream now,” Spiteri says. “It doesn’t always have to be personal, it can be anonymous, but data is the future. There is no doubt about it.”
The battle of the ad exchanges – Google vs. Mi9
“Google is the Death Star. They’re commoditising context. They do not believe in the value of brand… Publishers will soon have to pick a side: the Death Star or the Rebel Alliance.”
So said Mark Britt, CEO of Mi9, the trade brand of the ninemsn partnership between Nine Entertainment Co and Microsoft. He was speaking at the Ad Trading Summit in Sydney, funnily enough in the building that is Google’s Australian headquarters.
Mi9′s invitation to Australia’s other publishers to make their inventory available through its Microsoft Ad Exchange was a positioning statement from an organisation that is the first of this country’s major publishers to dive headlong into the real-time bidding environment.
By making its exchange private – by controlling which websites can feed inventory into the exchange and which buyers can access it – Mi9 is trying to position itself as the premium Australian exchange. To be involved, a publisher must meet requirements around size, reputability and brand safety – hopefully enough to allay advertisers’ concerns about buying ad space on an anonymous website, as the site’s identity is hidden in the auction.
In ad exchanges, as in other technologies, Google’s mantra is ‘openness’. Matthias Kunze, Google’s director of publisher monetisation for Japan and Asia Pacific describes Google’s approach, where the difference between large and small publishers is service level, as allowing publishers even more control: not only over which inventory is accessible for its DoubleClick exchange and for how much, but whether it is branded or anonymous.
Google does not share the ‘us versus them’ attitude Britt promotes, instead saying it is prepared to work with anyone, even competitors. “In the end, we give publishers control,” says Kunze. “They can decide how they want to use it.” And he isn’t worried about Mi9: “We’re clearly the market leader in this space globally, and we have probably the largest inventory pool and the largest demand pool, so I think that speaks for itself.”
Case study: The Guardian
Source: Rubicon Project
The Guardian reaches a global audience of more than 60 million unique browsers per month. An open, digital-first strategy has put it on a journey from UK newspaper to leadership in global digital news.The Guardian has recently seen an exponential growth of the number of Americans reading the website, with similar proportions of users now visiting from the UK, the US and the rest of the world.
The Guardian‘s goal is to maximise its overall digital display revenue while maintaining high ad quality standards. It has increased its focus on developing an end-to-end monetisation strategy and, over the past 18 months, has increasingly expanded into real-time bidding, complementing its premium sales and growing its share of trading desk budgets.
The Guardian is taking a four-prong approach to maximising display revenue:
- expanding non-guaranteed monetisation,
- creating additional inventory for the RTB market,
- establishing private marketplaces with premium clients, and
- actively ensuring ad quality.
Expanding non-guaranteed monetisation
When The Guardian partnered with the Rubicon Project, it was working with only two ad networks, which expanded to an additional 183 ad networks using the Rubicon Project’s REVV core technology that uses data-driven algorithms to match each impression to the highest yielding demand source. These ad network additions and increased yield from its original two ad networks have increased The Guardian‘s non-guaranteed revenue by 411% since it began.
The Guardian recognises that spends are being increasingly pushed through real-time bidding (RTB) agency trading desks and is taking advantage of the technology and pricing controls REVV offers. It maximises its RTB effectiveness with price floors, premium direct sales advertisers can buy through RTB with price floors at direct guaranteed prices, allowing The Guardian to capture additional spend without undermining its direct sales efforts, resulting in a CPM (cost per thousand) increase of 146% over non-guaranteed sales, and 33% of The Guardian‘s nonguaranteed impressions are now being monetised by RTB, which generates 50% of the site’s revenue. It continues to increase the percentage of its impressions going to RTB.
The Guardian is interested in revenue, but not at the expense of ad quality. Maintaining the integrity of its site is top priority and it works closely with its client services team to block undesirable ads from its site. The Guardian‘s block list includes competitors, undesirable advertisers and undesirable ad types. Rubicon’s blocking system allows blocking to be done by individual site, entire industries and ad types. Ad quality technologies ensure no banned or unidentified ads are served.