3 Huge Reasons Agencies Should Buy Their Direct Campaigns Programmatically
It’s an exciting time. After the progress made in the indirect ad buying space over the last few years, the focus of the market is moving on to the next step: the 50-70% of the display market that is bought and sold directly.
There has been much discussion about moving brand budgets into programmatic environments. It isn’t happening quickly because the fundamentals aren’t there – but that’s changing.
In the hype cycle of the last few years you may have heard that because impression level buying (RTB) creates so many efficiencies, particularly around audience targeting, that the best scenario would be to simply spend a marketer’s entire budget this way.
Moving a brand’s entire budget into a bidded environment seems unlikely in the short term (next 5-10 years) for several reasons, not the least of which is that the best inventory is not available in a bidded environment. This is due to the fact that even private exchanges are still being treated as a remnant monetization channel by premium publishers, rather than a premium sales channel. And even if the best inventory were biddable, would a top brand want to incur the risks of price fluctuation and availability rather than leverage their buying power to secure quality and assurances of delivery? (In my next blog post I’ll outline the steps we need to take to improve the state of private exchanges.)
In the meantime, the agency trading desks are in a unique position to be able to bring programmatic efficiencies to brand budgets simply by moving direct, guaranteed buys into a programmatic environment. Remember that direct buys represent 50-70% of a typical brand’s display media spend, whereas RTB typically represents 15-25%. Gaining access to more of the media budget would also accrue benefits to the trading desks themselves, as well as their technology partners.
Of course, for trading desks to earn access to more of the media budget, they will need to create new value above and beyond what the existing media teams can create on their own. And their technology partners (especially DSP’s) will need to evolve as well.
Here are three very simple value propositions trading desks could offer their clients when it comes to direct, guaranteed media buys:
1. Workflow efficiencies: make it easier for people to spend money, and they will.
RTB, by leveraging user data and algorithms to make impression-by-impression decisions, creates efficiencies in buying spot market inventory. But this is just part of the value created in programmatic buying. Agencies are also realizing the value of having a single dashboard, consolidated billing and reporting, and minimizing the paperwork and manual data entry that would otherwise be required to buy from hundreds of publishers at once.
Now contrast this with the manual hassles involved in direct buying. Buying digital display on a direct basis is so difficult at scale that some advertisers have just stopped doing it, even though they want to. The larger media agencies and direct advertisers who still do a lot of direct buying are burdened with ridiculously high overhead costs, lots of paperwork, humans wasting time on tasks that should be automated, etc. Very few make the effort to buy from more than a relative handful of known publishers for a given media plan, even though this still represents the majority of media spend.
This transactional friction is one reason digital isn’t growing as fast as some would hope. It’s just too difficult compared to buying TV. In other words, make it easier for people to spend money, and they will spend it (and usually more of it.)
Trading desks could alleviate these issues by simply moving direct, guaranteed buys onto their technology platform of choice.
2. Holistic Frequency Management
There are two major frequency management problems that Trading Desks could help solve—namely, over-frequency and under-frequency.
Reach and frequency management (i.e. controlling the number of people who see an ad and how many times they do) was improved with the rise of RTB because it provided a user-level view into all the different exchanges at once. The more inventory sources you bring into your field of view, the more you can control frequency across them.
But a natural constraint of this is that frequency management is limited by the “field of view” of inventory sources under one roof. Since direct buys and indirect RTB buys are handled in totally different worlds today, there is little to no frequency synergy between the two.
In other words, the field of view isn’t wide enough to manage reach and frequency across the entire media plan.
The first problem, over-frequency, is the piece the ad tech industry has mainly focused on. So you might be able to keep the same RTB user from seeing an ad too many times, but you have no idea how many times they were reached with the direct buys.
Worse yet is the problem of under-frequency. Media plans are built to reach certain audiences at scale. But because there has been no way to manage frequency across multiple publishers when you’re buying on a direct basis, most media planners will find that despite their best efforts, they end up reaching fewer unique users than planned, and reaching each one more times than needed.
Agency trading desks are uniquely positioned to help solve this problem. If you were to place direct, guaranteed buys using your DSP, your DSP would be able to recognize each user’s unique ID when the ad is served, and then use this information to optimize spot market RTB targeting. The upshot would be:
- Ensure you’re not buying users on the spot market that you’ve already reached enough times in your guaranteed buys.
- Place RTB bids to target users you haven’t already reached in your guaranteed buys.
This alone would eliminate a lot of waste.
3. Use spot market learnings to make smarter direct media buying decisions
RTB gives you the ability to sample small pieces of decent inventory from thousands of sites quickly and easily. The drawback, of course, is that once you find something that works well, it’s not easy to buy more of it.
Yes, you can increase your bids and try to buy more remnant inventory on that site by outbidding the competition, but the best inventory and placements aren’t available in RTB anyway. And even if you’re ok with buying remnant inventory, you have no assurance from one day to the next that the inventory will be available when you need it.
Buyers want to use RTB buying as a way for properties to earn their way onto the direct media plan.
Think of it this way: RTB is a low risk and low cost way to sprinkle an ad around the web. But when you find something that works, you want to point at it and say “I’ll take a whole bunch of that, and I’ll commit to it.”
But this process isn’t simple today. Most media agencies aren’t leveraging learning from RTB buys as much as they should, and those that do have to put down the technology and pick up the phone and fax machine. This is inefficient.
The IAB recently released their finding that Class 2 ads (RTB/ networks) show up in a viewable window only 20% of the time, whereas Class 1 ads (what you buy on a direct basis) show up in a viewable window 71% of the time. Think about it this way: if you’re finding that Class 2 inventory on a site works well, imagine how well it would work if you bought Class 1 inventory on that site—and received a guarantee of delivery, when and where you need it.
Believe it or not, direct response advertisers have adopted this technique already and they’re finding that direct buys can perform really well when a) you already know the site performs well, and b) you’re getting access to early user session, above-the-fold inventory, on the best pages of the site. It’s not uncommon for us at BuyAds to see click-through rates nearing 1% – when an advertiser finds a property that works at scale, it can work really well.
So even the most hard-core direct response buyers are finding that it’s often more effective to buy blocks of better inventory at higher prices than small pieces of scattered remnant inventory, even if its dirt cheap.
And when it comes to inventory quality, let’s face it– if major brands were to move a meaningful percentage of their budgets into a programmatic environment, they would care about context and quality to a much higher degree than they do today.
Will the Trade Desks rise to the opportunity?
I believe trading desks will succeed in gaining access to a larger percentage of the media budget, but not because they’ve built ad networks that perform (usually) better than legacy ad networks. They’ll succeed because the media agencies themselves are struggling with the burden of more complicated work & increased operational costs (digital is 9x more expensive in operational overhead than TV) while agency commissions are lower than ever.
There’s no question that moving a higher percentage of media spend onto intelligent technology platforms will benefit both agencies and their clients—even if we haven’t yet reached a point where everything can be bought in a biddable environment.