Recently, Ryan Green, the Trading Manager for Coegi, and I attended a dinner with Jeff Green and folks at The Trade Desk along with a number of other leading digital agency professionals. The topic was how to advance the market toward the adoption of programmatic forward buying of digital media.
Unlike programmatic RTB, forward buying is not executed through open exchange inventory, but involves direct contracts with publishers. While private exchange and programmatic direct deals are also contracted with publishers, forward buying allows for more flexibility, precise target-ability and price discovery in regard to the impressions purchased.
For instance, suppose an agency can reliably forecast that one of their client’s digital campaigns should include a large amount of inventory from the New York Times. Rather than make a direct buy at a specific CPM, however, the agency would choose to guarantee a certain level of spend, and in return the New York Times would open up reserved inventory to the agency, allowing them to bid on only the most valuable impressions for the target audience. The effective CPM for these impressions may vary over the course of the campaign, depending on the demand for this inventory.
The overall thrust of the conversations from the group were:
- The technology is not yet in place to be able to rely on programmatic forward
- There is a resistance to programmatic direct in the marketplace from various stakeholders due to a perception that this method of buying will negatively impact revenues
- And finally, that there is a clear incentive for both publishers and agencies to push forward to establish a programmatic direct marketplace in order to attain greater efficiency and targeting for digital media campaigns
Programmatic Forward Technology
The plumbing, or ‘pipes,’ necessary to make the programmatic forward market grow are still being developed. Advertisers can execute effective and targeted premium digital media buys, though, if they can get all of the stakeholders on the same page. This generally requires coordination among the publisher, the agency, the DSP and the SSP.
The complexity of these type of media buys is one of the core reasons why Coegi was started – to ‘bring together’ (the definition of the Latin word Coegi) programmatic technologies and simplify media buying for agencies and their clients in this space.
The Effect of Programmatic Forward on Revenues
The appeal of RTB technology for advertisers has often been the ability to purchase targeted impressions in an auction based upon the value of the impression to their campaigns. The business model of publishers is to maximize the returns on the impressions they have available. The programmatic forward market has the potential to address each of these factors.
Applying RTB technology to direct sales relationships would help ensure that advertisers are executing targeted media buys and securing the most valuable impressions. On the other hand, with this assurance, advertisers will typically be willing to pay a much higher CPM, knowing that they are reaching the exact audience that they need to communicate with in a premium environment.
One example discussed at the dinner was targeting swing voters in Ohio three days before the election. Some political advertisers may be willing to pay a $5000 CPM for these impressions across some sites! For publishers who get programmatic forward right there should not be any negative impact on revenues.
At Coegi, we have negotiated a number of private exchange or direct programmatic deals for our clients. Typically, these buys have higher average CPMs than open exchange RTB media, however the value of the impressions almost always outweighs the increased unit cost. The same would be true of programmatic forward buys.
Why Programmatic Forward Makes Sense for Agencies and Publishers
At Coegi, we believe that programmatic is the future of media buying, and the forward market is going to be an increasingly important area of this approach. Agencies and media companies that integrate programmatic forward buying benefit by being able to deliver the most targeted, efficient and impactful media for their clients. Publishers should see greater returns on their inventory that is not sold by their direct sales forces while strengthening their relationships with progressive agencies and media buyers.
Author: Sean Cotton, President @ Coegi