Programmatic Direct: Automating The Handshake Between Advertisers And Publishers

In our series on programmatic, so far we have talked about what programmatic media buying is and the various ways in which advertisers can buy ad inventory programmatically. We have dived into Real-Time Bidding Open Auction (RTB) and Private Marketplaces (PMP), both of which make use of auctions that happen in real-time. In this installment, we will discuss Programmatic Direct, an arm of programmatic media buying that doesn’t involve a real-time auction.

The traditional concept of advertising works as a close relationship between advertisers and publishers. Many brand advertisers consider that relationship as sacrosanct. However, as intimate as they may be, traditional direct deals cannot offer the scale, speed and efficiency of programmatic, as they rely on raising RFPs, human negotiations and manually inserting the orders, which makes for a slow and inefficient process, especially when dealing with hundreds of thousands of orders at a time.

As the switch to mobile more and more advertisers started replacing traditional media buying with programmatic. Brand advertisers, particularly those with big budgets, however, shied away for long from programmatic (largely open RTB) due to its lack of guarantee of inventory and premium ad spots. Many also mistakenly believed that RTB was only used for remnant inventory and kept themselves away from trying programmatic for fears of brand safety.

With Programmatic Direct, these advertisers can test the waters of programmatic, without having to let go of their one-to-one relationships with the publishers. Here’s how Programmatic Direct can convince the most brand-conscious advertisers to embrace automation, as well as work for performance-focused advertisers to get quality installs.

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Closely mirroring the traditional concept of direct buying, Programmatic Direct is negotiated directly between buyer and seller, with fixed inventory and price. However, it is differentiated from the traditional buys as the RFPs and campaign tracking are done programmatically, i.e is automated. This route is preferred by companies who want to focus on their brand safety and wish to get a premium spot on a preferred publisher’s webpage or app. For example, a medical pharmaceutical giant would prefer to place ads on a health website because the latter already has the right audience for it. Or, a premium sports brand would target a sports web page or app during a peak game season as they know they can find highly relevant audience for their messaging there. For this, a direct buy route would offer them their preferred ad spots, which isn’t possible through an open auction.

Programmatic Direct can be accessed in two different ways, depending on how the inventory is made available.

(Source: eMarketer)

This flow chart above helps us understand the two different ways in which Programmatic Direct works. We have understood that under Programmatic Direct, inventory isn’t auctioned. However, another important question that advertisers need to ask themselves is whether the inventory is guaranteed or not, i.e, reserved or unreserved inventory.

Programmatic Guaranteed or Automated Guaranteed refers to a setup where the inventory is guaranteed or reserved. The advertiser and publisher fix the terms of the deal and commit to both the CPM price as well the inventory scale. This way, advertisers are able to book selected premium inventory to ensure they get the scale as well as the placement they want for their campaigns. However, this often entails a higher cost, which may put the advertiser’s ROI at risk.

Conversely, when the inventory price is fixed, but the inventory amount is not guaranteed, it is referred to as “Unreserved Programmatic Direct.” Relying on a bid-ask protocol to execute the deal, it functions in a similar way as a Private Marketplace, with advertisers getting a “First Look” or a “Right of First Refusal”. A Deal ID is issued to transact such bid requests at the terms and price that were pre-negotiated one-to-one between the advertiser and the publisher, and unique to each buyer.

Not Only for Brand Advertisers

As much as Programmatic Direct is suited for brand-conscious advertisers, it is also a viable option for performance-based advertisers, who are looking for quality-driven installs beyond the impression. With Programmatic Direct, they can guarantee a price and volume on a inventory that is performing for them. However, the challenge remains how publishers and advertisers can find a balance, as the former look for higher eCPMs while the latter want to keep prices down. The success of Programmatic Direct for such advertisers will depend on how both the parties can work together, keeping their goals in mind.

Looking Ahead

eMarketer predicts an exponential growth in deals made via Programmatic Direct in the coming years. From 2014, when deals made via this route only accounted for 8% of the total programmatic spent in the U.S., it is expected to reach 42% in 2016. Programmatic Direct is still at a nascent stage and brings a promise to those in the industry who have been anxious of trying out RTB. For premium advertisers, Programmatic Direct offers the benefits of programmatic without compromising on the traditional sacrosanct handshake between the advertisers and publishers. Until today however, there has been quite some confusion over a consistent definition of Programmatic Direct, and an industry standard is needed as we move into the future. It will be interesting to see how this branch of programmatic evolves as we move into an all-encompassing programmatic future.