From remnant to premium: The evolution of the open marketplace

Daniel Rowlands
By Daniel Rowlands | 9 June 2015

The cornerstone of programmatic ad buying – the open marketplace – has long been tarred by a reputation for driving CPMs down. ‘Race to the bottom’ anxiety has been an inherent fear among publishers since auction-based marketplaces entered the video market in 2007.

Back then, the use of programmatic was basic. Publishers predominantly used ad exchanges as a way to sell off remnant inventory, populating marketplaces with long-tail, lower-value placements.

Eight years down the track, the use of programmatic and open marketplaces in the video market has evolved. Open marketplaces have become a source of a large variety of inventory, of which premium is becoming an increasingly common, and hotly contested, type.

In April, premium inventory in SpotXchange’s marketplace raked in CPMs of at least double the average of other video inventory in the marketplace – ‘select’, ‘mid-tail’ or ‘reach’.

What we saw last year was the beginning of the evolution of the marketplace.

With a small population in Australia to support publisher scale, video has historically been in short supply. However, with many publishers now adopting a video-first strategy to capitalise on significantly higher CPMs, and SVOD players and broadcasters starting to enter the fray, the premium end of online video is set to explode.

A changing of the guard

For several years, publishers have been grappling to adapt from legacy systems that don’t support modern ad buying styles. As their popularity grew, programmatic and other new infrastructure was bolted on to traditional ad serving systems, giving sales teams numerous trading platforms to manage.

As a result, sales processes became cumbersome, operating in multiple, often siloed, systems, across different types of inventory (display versus video) and different channels (desktop, mobile, and soon even linear TV).

Traditionally, publishers prioritised tried-and-tested, direct-sales models, and pushed what was left into programmatic marketplaces. But there are signs emerging that suggest this order will be reversed.

Among the publishers we work with in the US, we’re increasingly hearing the strategy of putting programmatic first. Driving this shift is simple economics. Buyers are willing to pay a premium in order to access the targeting and efficiencies that programmatic affords.

There will always be traditional up-front buys, but preference is expected to shift to advanced, real-time ad decisioning incorporating first- and third-party data.

In Australia, and increasingly across Asia, a wide range of publishers have entered the programmatic sphere, and as more overcome the growing pains of upskilling and realigning, we can expect similar trends to emerge.

As the well-publicised redundancies among journalists can attest, these are businesses looking to operate more efficiently. Incorporating programmatic sales approaches will be a crucial step towards maximising video yield and streamlining processes for these margin-hungry businesses.

The customer is always right

The pressures to adopt programmatic are not limited to achieving sales efficiencies. Buyer preference is quickly moving towards programmatic as they seek to take advantage of the added optionality, addressability and efficiencies it brings.

Trading desks are putting a growing portion of budgets through programmatic pipes, in response to client demand for greater transparency. Many multinational brands have introduced global remits for programmatic, and some big players are setting up in-house trading desks, taking advantage of the ability to use the technology themselves.

The idea that programmatic marketplaces are a race to the bottom is a conditioned response – a legacy of the era of display commoditisation from years gone by. In the premium video market, where demand outstrips supply, it’s totally inaccurate.

Australian CPMs are the highest of any country in our global marketplace, the dynamics of which enable publishers to take advantage of variances in inventory levels and respond to demand in real time. If news or an event causes a sudden spike in audience, publishers can capitalise on this spike using the real-time insights and flexibility a programmatic inventory management platform provides.

Tarring the reputation of open marketplaces with the stroke of a single brush is short sighted. It’s a crucial part of a holistic inventory monetisation strategy, and has benefits that should not be ignored.

Most Australian publishers are on their way to getting the technology and resources in place for the time when budgets move across to programmatic by the truckloads. When this time comes, the open marketplace will become an important premium inventory sales channel, as the market’s growing pains continue to subside.

By Daniel Rowlands

Director of supply, APAC at SpotXchange

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