Published July 2015
Paul Zwillenberg is a partner and managing director in the London office of The Boston Consulting Group, Global Leader of the firm's Media Sector and a coauthor of the BCG report, commissioned by Google, The Programmatic Path to Profit for Publishers
There’s a big opportunity out there for digital publishers to increase revenues, boost profits, and steal a march on the competition. But, they must move fast.
The opportunity lies in programmatic sales, but it’s much bigger than that. Publishers that reset their digital ad sales strategies can take advantage of long-term shifts in the market that are just gathering steam. If they apply a coherent cross-channel approach that addresses buyer preferences by playing to the strengths of each sales channel, they’ll reap immediate rewards in terms of higher revenues. And the big payoff will come over the next few years as the ad market evolves.
Programmatic is no longer just for desktop display; it’s fast gaining traction in mobile and video. Some SSPs report that about a quarter of all programmatic transactions now involve ads served on mobile devices. Programmatic sales will overtake direct sometime in the next few years. Many are predicting the rapid growth of programmatic guaranteed, which means that the lines between direct and programmatic sales will blur even further.
Still, most publishers today put the priority on direct sales and some continue to regard programmatic as mainly a channel for remnant inventory. Those that don’t factor the changes taking place into their marketing and sales strategies risk being left behind.
BCG recently completed a comprehensive study on programmatic ad practices involving 25 publishers in Europe, North America, and the Middle East. We found that the most successful and forward-looking digital publishers are already moving to a data-driven strategy that embraces direct and programmatic channels. These companies do not get hung up on out-of-date distinctions; instead, they probe advertiser and user data to develop a clear view of the propositions that sell best in each channel, which then shapes both their sales and their pricing approaches.
“We [price] programmatic at least the same as direct,” said a senior vice president of a major US news publisher.
I don’t have remnant inventory any more; instead, I just have inventory that I sell via different channels and models. We have seen both our revenue and CPMs grow, and our programmatic approach has been key to that.
To maximize revenue today and avoid cannibalization and price erosion in the future, publishers need to comprehensively think through pricing structure and go-to-market approaches across their direct and programmatic strategies, including their guaranteed and non-guaranteed models. One North American broadcaster aims to completely replace traditional direct sales with programmatic guaranteed within the next two years and is already working through the pricing and organization ramifications of the move.
“It won’t be direct versus programmatic soon,” said a publishing executive. “We’ll need our sales team to understand when bespoke [as opposed to] standard is right and guaranteed versus non-guaranteed.” Said another, “Programmatic guaranteed is the next big thing.”
Best-in-class publishers ensure their go-to-market approach, technology, and capabilities support their cross-channel strategy. They leverage technology and data to match audiences to buyers and achieve higher prices. They develop robust go-to-market and analytic capabilities to drive revenue across channels. And they also optimize their technology stack to act as both an efficient way to access demand and a decision engine to maximize revenue. As the COO of a European Web portal told us, “As a result of reassessing priorities of different demand sources, the performance of campaigns running in programmatic is much higher than we’ve seen before. We've increased our fill rate to about 95 percent. We've seen an uplift in our eCPMs of more than 100 percent.”
This new digital sales model is detailed in our report, The Programmatic Path to Profit for Publishers. Publishers that are taking these steps are already outperforming by increasing market share (both programmatic and direct), overall CPMs, and total revenue. More important, they are positioning themselves for explosive growth in the programmatic market over the next few years, when billions of dollars of revenue and market share will come up for grabs.