Cameran Harman, OpenX, managing director, EMEA, speaks with ExchangeWire over publishers' approaches to programmatic trading.

Within just three years (2017), over half (59%) of UK online display ads will be traded programmatically, when the sector will be valued at $32.5bn, according to research firm Magna Global, although not all publishers appear to so accepting of this trend.

ExchangeWire spoke with Cameran Harman, OpenX, managing director, EMEA, to gauge his insights into how publishers can best prepare to transition to this eventuality, as well as the benefits of adopting the technology sooner rather than later.

Do you think publishers see programmatic as something separate (and somewhat secondary) to direct sales or as an integral part of it?

Most publishers see the two [direct and programmatic] as separate revenue streams. But increasingly, there’s more and more cohesion between [the formerly distinct] direct sales and the programmatic strategies of publishers.

This has been brought on by media buyers looking to purchase inventory in a different way; and publishers increasingly want to align their strategies [with those of their customers]. So now we’re seeing more hiring of programmatic sales teams among publishers, these teams oversee how media is traded programmatically, making sure that their [trading] models align with media agencies.

How would a publisher go about getting started with programmatic trading?

What I’d say to most publishers is that if you’re not selling direct to agencies [in all of your deals], then you’re probably already doing an element of programmatic trading.

But what a lot of publishers should be asking themselves is: ‘What do I want to achieve from my media strategy, [incremental] extra revenue [in the short term], or future-proofing my business?’ For the more premium publisher, the higher priority will be future proofing, rather than temporarily increasing revenue.

Ultimately, it’s a trade-off between extra revenue now [by not opening up to programmatic] and building a more sustainable revenue model in the long term.

What benefits will a publisher start to see with programmatic?

Publishers that open up to programmatic will benefit by gaining an enhanced insight into their own audiences, and the preferences of [progressive] media buyers who want to trade in this way.

Essentially, what publishers have to ask themselves is: ‘How can I use this technology to grow demand for my inventory in the long term in categories where I haven’t previously seen demand?’

For instance, you can have a publisher that has traditionally done business with fashion advertisers, but can then use the data to show how their audience is also relevant to automotive brands. This can then increase demand for their inventory [and increase their CPM rates].

4. What are of some concerns with programmatic trading, such as issues with quality, brand safety, pricing, having the expertise to know how to trade programmatically?

One of the first concerns you hear from publishers is: ‘What kind of an impact am I going to see on yield and revenue?’ or ‘How will this affect relationships with direct buyers?’

Another consideration is: ‘Will I get the right inventory to improve/maintain the user experience?’

For instance, last year OpenX and Digiday conducted a joint study called ‘Programmatic + Premium - Current Practices and Future Trends’. The results to this survey showed that Publishers were sceptical towards the programmatic trading of inventory. Among the reasons one was a question over the quality of the advertising that would be served to their websites. Since this survey was carried out OpenX, has invested heavily in taking action to improve its marketplace, introducing the manual review of all new publishers coming onto its exchange and automated the filtering of suspect placements in real time.

Another consideration is: ‘Do I have the right technology and skill set to successfully implement such a strategy?’

Are you seeing a rise in the adoption of programmatic?

In our experience we are seeing a huge, huge increase. Some buyers are seeing such an increased level of efficiency on their KPI’s they are not buying as much inventory [but this doesn’t necessarily affect the amount they are spending with publishers].

The question for these advertisers is how do they spend at scale? I.e. how do they spend more and further increase efficiencies in spend. Some advertisers are spending more and some are spending less. If you look at a lot of the early investors in programmatic – such as telecoms operators – some of them are spending less because advertising via programmatic channels highlighted inefficiencies in their old buying model.

However, publishers are able to improve their yield through the strategic use of price floors on our OpenX Marketplace. For instance, one of our clients Lycos was able to quadruple its CPMs by setting its price floors on the marketplace to justify higher CPM’s with direct advertisers to create a more competitive market that resulted in its average CPMs jumping from an average of $0.25, to well over a dollar.

Now we are also starting to see some of the issues with mobile programmatic start to be resolved, we expect there to be further levels of increased spend coming from this sector.

For instance, our recent partnership with Airpush combines our real-time bidding technology with their mobile ad network inventory to launch the AirX private mobile exchange, this gives approved advertisers first look at quality inventory from over 120,000 Android apps.

[This partnership builds on an earlier similar partnership with the world’s biggest Android device manufacturer by shipment volume Samsung dating back to 2013].

How do you see the programmatic trading evolving?

We believe that the programmatic space is only just finishing its first phase, which lasted five years, and its second phase should be be another multi-year growth cycle, full of what we at OpenX are calling ‘programmatic sophistication.’

The industry is at an incredible inflection point where programmatic is becoming more sophisticated because publishers and buyers want to apply its power to a much broader, more heterogeneous set of opportunities, For example, we’re now seeing the range of ad formats really begin to evolve, like Rising Star IAB ad formats, trading of units traditionally only sold via insertion orders (like big home page units) and cutting-edge work on programmatic native. And screens are quickly becoming more diverse as programmatic buying is used for ads on mobile devices. Business models now include “private marketplaces, programmatic direct, programmatic guaranteed and many flavors within these new deal structures.

The bottom-line is that programmatic is moving from a scaled yet homogenous phase to a more sophisticated, heterogeneous phase. Needless to say, that transformation brings with it plenty of room for terrific innovation and of course major potential revenue growth for the participants.