A recent article published by ExchangeWire took a look at defining the opportunities and challenges around ‘programmatic premium’. The article tries to define "programmatic premium" as well as attempting to uncover how it might be executed. The article garnered a number of comments, and was also used as a discussion point at ExchangeWire’s recent sell out event, ATS Paris.

There now seems to be a general consensus that the execution of premium campaigns through platforms will come to resemble the long established and often maligned, upfront buy.

DSPs building for the future

DSPs know they need to offer a broader buying solution, beyond just RTB, in order to continue scaling and growing revenues. Private marketplaces were positioned as the means to achieve this, but it has not quite materalised (for reasons previously outlined on this site).

DSPs are now looking at building the tools to offer ways to transact with sellers, in pre-agreed buying conditions, not attached to RTB and not attached to any impression-level decisioning.

Some arguably already offer this capability, but by enabling a platform to aggregate all of your buying partners and trading deals, resource inefficiencies should be improved, thus reducing friction and helping to scale the channel. If only it were this easy.

Optimise what?

In a world of DSP upfronted buys, it is hard to identify where advertisers will be able to drive greater efficiencies from their media buying. Does it effectively reduce the ability to optimise campaigns beyond simply increasing or decreasing spend?

There is also a sense of irony that, when first launched, many heralded the DSPs as the next generation of ad servers. In an upfront scenario, these DSPs are ONLY playing the role of an ad server, and arguably, a legacy one at that.

The upfront buy, whilst making it easier to transact, reduces the conversation to one of price again. RTB might not have solved the price versus value equation, but will upfronting media buys continue to prolong the martini lunch analogy of media negotiations?

Adding Value

Beyond the rhetoric of data centralisation, and universal frequency capping, an upfronted media buy lacks any real expertise beyond the initial strategic planning stage. This is not an issue unless you operate a business with a model that is built on the notion that RTB is difficult, that it is quantitative and requires new technology and skill sets.

Simply plugging pre-approved media buys into a UI is going to be hard to justify margin against; and the question of "added value" becomes a harder sell. It is also somewhat ironic that those advocating the move towards this type of programmatic buying are the very ones who are arguably most under threat.

There has always been the question of whether advertisers will look to in-house platform-driven media buying. To date, it has been too difficult to execute for the majority of traditional brand advertisers.

In an environment where negotiations continue to happen offline, where scale and leverage enables economies of scale for global spenders, does it become much easier to cut out the buying middle man?

If campaigns are not really being optimised, why pay that incremental margin? Does this become even more of a problem for third-party buyers when these same brands look to own their technology and trading relationships? What of the DSPs being leveraged to perform these upfront buys? Will they be able to maintain the same commercial terms that they work to when running more algorithimic, heavily-optimised buys through RTB? An advertiser is unlikely to pay 10 - 15% for the ability to ad serve (on top of an existing ad server arrangement!).

Price Transparency

Most trading desks continue to claim to operate with full transparency. RTB has ensured that auditing is really a futile exercise. This all could change if prices are agreed upfront: margin relationship between advertiser, agency and trading desk would become more visible. Perhaps this is a positive and will enable trading desks to future proof their business on the back of a solid model which rewards value rather than price.

What becomes of the buyer?

If all buying starts to become platform-enabled it will begin to accelerate conversations around the future of agency buyers. The planner’s role in an agency remains obvious and secure. If, however, an agency buyer is relinquishing ALL standard buying responsibility to their trading desk (for RTB plus Upfront), the role of that buyer certainly becomes unclear and uncertain.

The flip side of this argument is that if ‘hidden margins’ are harder to achieve in a more transparent, pre-agreed pricing environment, then perhaps trading desks will begin to move back into their operating companies?

Regardless of which scenario pans out, if the agency buyer’s sole remit is being the bridge between a planner and their trading desk representative, they ought to prepare for the inevitable internal ‘reshuffle’.

Does the advertiser care?

Publishers will no doubt rejoice at learning the programmatic gatekeepers (trading desks and DSPs) are building the necessary tools to programmatically upfront media buys. But one key equation missing from this is the role of the advertiser.

The advertisers slow to adopt RTB, the larger FMCG type brands, are unlikely to share the optimism and enthusiasm of a programmatic upfront buy. Many large brands have recently reached out too ExchangeWire and there appears to be a common theme emerging: these brands like the idea of reducing waste through impression-level decisioning. Brand marketing, contrary to what many believe, isn’t simply about scale and reach to any audience, just their desired audience.

They also like the idea of not only overlaying their own proprietary data, but also being in control of optimising every ounce of marketing budget in real time against goals and metrics most valuable to them (not necessarily clicks but certainly measures of impact and engagement).

An upfront buy through programmatic channels might create less friction in the ecosystem. It might reduce the strain on agencies - and it might also help publishers lift yields. Ultimately though, what changes for the advertiser?

Unless all of the points raised in this post create improved cost efficiencies for the advertiser and their bottom line, why will a streamlined buying process lead to increased adoption of programmatic buying for big brands? There is a bigger debate to be had around this - and the feeling is brands, not trading desks, will lead the discussion.