Programmatic Premium: The Industry’s Main Challenge For 2013

Stephan Noller is CEO & Founder of AG

At this year’s I-COM conference in Rome I had an interesting discussion with the media manager of a large FMCG company known for booking premium inventory via DSPs for a number of years. We talked about his specific goals, and he said that they had nothing to do with clicks and CTR, as his products are sold exclusively in supermarkets and not online.

Responding to my question about how he managed his DSP campaigns – as, to my knowledge, DSPs up to now have only used clicks as statistical variables – he replied, “we check to see whether we actually reach our marketing targets using market research… after the campaigns in most cases”. I then asked him whether he might not prefer working with a solution that could make his targets visible directly in the booking, modulation and optimisation of the campaign instead of waiting several weeks for market research results. His reply: “Yes, of course, but as far as I know such a DSP is not available on the market, right?” Right!

In 2012 the internet replaced television as the medium with the highest spend on advertising in Germany, as well as in the UK. This trend seems to be continually accelerating. The print crisis, which in Germany has had far-reaching consequences, like the recent loss of the Financial Times, is contributing to this, as is the unbeatable success of the internet among the younger target groups.

In difficult times like these, the internet is now being burdened with a task that may be more challenging. Most of the budget currently being shifted around is classic television spend – revolving around products and campaigns that do not focus on sales because a) the product cannot be sold on the internet and b) the marketing goal of the campaign is not sales-focused but is more brand development.

In these cases two problems need to be resolved, and this is not easy despite the massive oversupply of inventory in 2012.

First, target groups must be addressable and matched to the marketing goals – in the simplest case “women between the ages of 20-29”, but frequently more difficult target groups as well, maybe something like “urban, sustainable, fetishists”.

Second, parameters and metrics must be found that depict the campaign goal as efficiently and precisely as possible. This sort of efficiency cannot be achieved by a market research study that supplies a PDF report two weeks after the end of the campaign. It should only be defined as efficient, what makes it possible to collect and optimise data in real time across all participating publishers – and should not not be in the form of just a click rate.

There is another challenge as well. It may seem fairly banal, but industry leaders know that “the contact rate” remains a serious issue. Campaigns designed to have a brand recall effect must generally be shown to the consumers at least 3-5 times over a relatively brief period of two weeks. However, the typical online campaign can be considered successful only when an average contact rate above two is reached; and that, of course, must preferably be with a significant share of the audience. The audience should be as large a portion as possible of the theoretically reachable target group, which in most markets requires the solid teamwork of multiple marketers.

As I said previously, no expert would currently contradict the statement that this still constituted a truly immense, sometimes almost insolvable, problem in 2012.

The medium is mature enough to overcome these challenges!

The medium is also mature enough to overcome these problems. There is plenty of bandwidth for eye-catching ad formats and enough range for relevant target groups. You’ll also find the latter increasingly frequent in lean-back mode on the sofa, often in the form of a second screen. There are also numerous ambitious attempts to develop branding KPIs and to make them available faster than usual. A superb example of this is the founding of an IAB Brand Advertising Committee at the initiative of my colleague Karim H. Attia.

Now to the biggest risk, and simultaneously the biggest opportunity, in mastering this task in 2013: programmatic buying. Programmatic buying could be a decisive breakthrough in making the internet as bookable as television from the standpoint of advertisers – with blanket coverage of the ranges and high contact rates in the right target groups.

Up to now, this has remained only a possibility. The way in which DSPs, SSPs, RTB and exchanges are currently used makes it seem like we want to repeat all the errors of the initial phase of online advertising. While it has been possible over the past two to three years to show that the internet can actually be more than just a flea market for products and a big click machine, programmatic buying in its current state continues to damage the progress made in the industry.

Why? Because currently not a single DSP has any optimisation strategy apart from click rates. There are no reasonable standards accepted throughout the industry for branding campaigns. There are no standards for the definition and validation of digital audiences. In Germany, there are several very interesting initiatives at present, such as the collaboration between the publisher Interactive Media and AppNexus.

Elsewhere, many publishers appear to be under so much pressure to trade in the current automated model that they carelessly sell premium inventory in ad exchanges for short-term sales, while their clients rub their hands in glee having obtained impressions at a tenth of the regular price. Programmatic premium must do justice to all advertiser demands, even if this requires new ways of thinking.

The decision on what direction programmatic premium takes, and how we can make it work for the whole industry, is the big challenge for 2013. The cloCk is now ticking…