Programmatic trading: The rise of the brand side platform?

By Brendan Coyne | 2 May 2014

Australia's programmatic advertising market is already crowded. Many commentators have long predicted consolidation, but as of yet, it hasn't transpired. Now some think it could become even more densely packed if, as is happening in the US, brands start trading directly with publishers. Is the rise of the brand side platform (BSP) to become Australia's next programmatic acronym?

Media agencies have played down the impact on the market, with IPG Mediabrands trading desk boss Marc Lomas arguing that only "the biggest of the big" brands have the resources to deliver a return from trading directly. Danny Bass, chief investment and intelligence officer at GroupM agreed, but told AdNews nobody in the market could be complacent, and that clients taking elements of marketing in house had gone on for decades.

But if a number of big players, such as banks or financial institutions with sensitive data they cannot put into exchanges, or loyalty card providers, or supermarkets were to enter the market simultaneously it could bring a number of issues to the fore.

One is speed.

In that scenario, the buy siders retaining a seat at the top table will be those with the best data, exchange connectivity and the fastest reaction times, which is why some technology providers (such as video ad platform Brightroll) are paying to put exchanges directly into data centres (in that case, Equinix’s).

At present, there are not enough players for latency to be a major issue. But if more enter the market, the increased density could slow things up.

“Investment banks and proprietary trading houses have been operating in that way for years," said Dan Sheppard, programmatic Practice Manager at specialist recruitment agency Xpand. Sheppard helped Morgan Stanley automate its trading activities before swapping London for Sydney. He says that the media industry will have to follow suit if the buyer's market continues to increase.

“Putting servers directly into high speed data centres which plug directly into ad exchange based eco-systems cuts the time from milliseconds to fractions of a millisecond and those with the fastest reaction times will be the ones that win the bids," he said. Outpaced trading desks, whether agency or brand owned, will win nothing, or only the inventory that nobody else wants. So they will have to partner with those platforms that have the fastest connections.

“The investment banks pay thousands of dollars a day in rent for that exchange space, because they can make millions in return… That is the direction its leaning towards [in programmatic ad trading]. It will be the same skeleton and pipes as in the financial world and the competition will be rife. The banks literally send people into the data centres’ server rooms, via multiple security procedures, just to go in and measure the length of the cable versus their competitor’s connection. That is how fierce it is.”

Sheppard said that the latency issue will affect trading desks of both agencies and, sooner or later, brands. He points to the partnership between (ad network turned DSP) Rocket Fuel and Brightroll following the Equinix deal.

“The relationship between Rocket Fuel and BrightRoll is what propelled them (Rocket Fuel since went public and stock and revenues are climbing). They were beating everyone to ad pools by billionths of a second. That is how it will work.”

“Buyers will need the fastest, high frequency, low-latency, direct exchange connectivity systems that can address that media and buyer quicker than [they are largely doing] now. Because some players will be winning everything in the bid process – before the others have even seen the bid call go out.

This article is part of a special report into programmatic advertising in today's print issue of AdNews. Contributors include Cadreon, GroupM, Google, PubMatic, RadiumOne, Adconion, Fairfax, News Corp, MCN and Mi9. Subscribe for your print copy, or get it now on iPad.

Programmatic advertising and its impact on the media market will be explored in depth at the AdNews Media Sales Summit, held 22 May at Royal Randwick, Sydney. Tickets remain on sale. Find out more here.

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