How to Turn The Economics of Programmatic on Its Head

November 25, 2015

Spending on programmatic will continue its meteoric rise to over $20 billion annually by 2016[1]. But the open question remains: is this trend a good thing for a publisher’s bottom line?

Programmatic, at its core, is workflow automation software. And as such it has offered publishers and advertisers significant value by squeezing out inefficiency and reducing the costs associated with traditional media sales. But in this process, publishers have actually been driven to sell inventory at lower CPMs. Plus, publishers have given up a greater percentage of the value of each impression to platforms and vendors that make programmatic targeting possible.

So what’s a publisher to do in order to regain some of the CPM ground that’s been lost over the years?

In order to claw back some of this value, publishers need to think about the disconnect between what successful mega-publishers like Google, Facebook and Twitter are doing, and what they are doing. These companies have grown their share of digital ad spend by finding ways to offer unique opportunities for advertisers to take advantage of their large subscriber sets and proprietary social data. By giving advertisers the ability to plug their data into a vast subscriber network and blend first-party data with proprietary social data, these companies found powerful, new ways to create more relevant, people-based marketing opportunities than were available elsewhere in the marketplace

Publishers need to take a page from this playbook and offer creative new ways to leverage data and real-time data platforms to create even better offerings for advertisers.

Here are three strategies publishers can use to leverage their data, in conjunction with their advertiser partners, to generate more relevant advertising experiences in real-time – resulting in more engaging ads, better ROI for advertisers, and a higher CPM for themselves:

 

Help advertisers remarket accurately and efficiently.

One of the biggest drivers of performance, and subsequently biggest line items on many programmatic budgets, is retargeting. However, retargeting budgets can also be one of the biggest sources of waste and poor user experience across a media program.

For example, as a consumer you have probably at least once noticed a retailer ‘following you around the web’, promoting the same product you bought a week ago. This is a loss for both parties—the retailer is spending unnecessary dollars serving an ad with zero chance of driving a conversion, while at the same time consumers are getting a poor impression of the retailer’s brand. Worse yet, 90% of a retailer’s conversions likely occur in store, where purchase data is captured by a POS or CRM database that’s not connected to the brand’s digital marketing activities. So they’re unable to suppress retargeting of these buyers.

Here’s where a publisher can help: by leveraging their subscriber data (for example, e-mail addresses tied to log-ins), they can empower brands to onboard this offline purchase data in real time. This has the potential for saving the advertiser a significant portion of their retargeting budget. Better still, now that this data has been captured, it can be used for deepening the brand’s relationship with that customer, by upselling complimentary products and or additional relevant services. That’s a lot of incremental value to add back to a publisher’s CPM.

 

Empower advertisers to align messaging across channels.

Most advertisers are probably already using CRM data to send highly targeted email messages to customers. That said, they are likely lacking the ability to leverage those offline audiences in the online environment.

This is another opportunity to take advantage of the huge volume of addressability owned by many publishers in their subscriber bases. By plugging advertiser data into their addressable data, publishers can give brands the ability to execute the same programs and targeting that they currently use in direct channels. Now advertisers not only have the ability to maintain consistent communication with their customers across channels, but also the ability to coordinate strategic message sequencing. They can use both channels to work together rather than clashing with one another. This orchestration can then be used by the advertiser to drive value in many ways. One example is using the same highly targeted, prospecting models that e-mail teams have been successfully leveraging for years, instead of the spray-and-pray approach seen in far too many media campaigns today.

It can be used to manage messages to consumers. Through addressability, advertisers can now ensure that customers are receiving the same creative, offer and value proposition across every engagement they have with a user from prospecting ad to on-site engagement. This means that when a prospect receives a trial offer via e-mail and banner ad, they see the same offer when they come to the site, and not a promotion to existing customers to which they do not have access.

 

Help advertisers reach consumers who are in buying mode.

The third strategy for increasing relevancy with real-time intent data is timeliness. Just as brands need to execute suppression targeting after a conversion event, they also need to make sure that they can take advantage of consumer behavior data as quickly as possible.

Consider an advertiser, such as a shoe brand or retailer, whose product has an average purchase life cycle of about one week. If a customer exhibits a behavior indicating they are in market for new boots, that means that an advertiser has around 7 days to win them over or lose them to a competitor. If it takes 5-7 days to onboard and activate that data into a digital environment, then the window of opportunity will have closed. Not only have you missed your chance for a conversion, you’re right back to wasting spend on someone who has already converted elsewhere.

With behavioral data, every second counts in maximizing relevancy, and every second that passes is an opportunity wasted. Making sure you can act on data when there is still time is just as important as being judicious about when you shut it off.

In short, while the rise of programmatic has carried with it a lot of negative sentiment for publishers due to a perceived decrease in revenues, this does not have to be the case. Programmatic should be seen as an opportunity beyond just driving cost savings. With the wealth of technology and data available to publishers, now is time to use intent and behavior data to drive relevancy on behalf of brands. The publishers that are thinking creatively about how to use data in real time are starting to drive even more relevant experiences than when CPMs were at their greatest premium – and they are seeing that premium come back to them.

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Jon Padilla

Jon is a data-driven marketer who's passionate about using technology to deliver innovative media strategies and create meaningful digital measurement. He the former Director of Product Strategy at Signal.

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