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Programmatic
Marketing: Beyond RTB
Understanding the new programmatic
direct landscape

Programmatic
Marketing:
Beyond RTB
Understanding the new
programmatic direct landscape
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Published December 2013

Programmatic Marketing: Beyond RTB Understanding the new programmatic direct landscape Page 3
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Contents
1. Overview .......................................................................... 5
1.1. Methodology................................................................................ 5
1.2. About the author ......................................................................... 6
1.3. About Econsultancy .................................................................... 6
2. Introduction: Pivoting to Programmatic Direct..............8
3. Programmatic Definitions ..............................................11
3.1. Defining programmatic direct ................................................... 11
3.2. Defining programmatic RTB .....................................................15
3.3. Refining and defining by programmatic approaches................17
3.4. Chapter summary: programmatic definitions...........................17
4. The Demand Side........................................................... 19
4.1. Agency trading desks................................................................. 22
4.2. Agency culture and personnel................................................... 23
4.3. Agency pricing models and programmatic............................... 26
4.4. Fraud: the elephant in the programmatic room ...................... 27
4.5. Standards...................................................................................28
4.6. Chapter summary: programmatic direct and the demand
side............................................................................................. 29
5. The Supply Side .............................................................30
5.1. New monetisation options: programmatic direct, native,
etc............................................................................................... 32
5.2. Programmatic direct: a sales channel or real trend? ............... 32
5.3. Programmatic direct and organisational change ..................... 34
5.4. Chapter summary: the supply side ........................................... 35
6. Transactional RFP Workflow ........................................ 37
6.1. Research ....................................................................................38
6.2. Media planning.......................................................................... 39
6.3. Demand-side order management.............................................40
6.4. Demand-side ad serving ............................................................41
6.5. Supply-side order management................................................ 42
6.6. Supply-side ad serving .............................................................. 43
6.7. Billing and reconciliation.......................................................... 44

7. Where Are We Now?......................................................45
8. Contributors...................................................................48

1. Overview
Programmatic Marketing: Beyond RTB is aimed at marketers, agencies, and publishers
who want to understand the new programmatic landscape and its applications beyond real-time
bidding (RTB). Today, new technologies and approaches are connecting buyers and sellers, and
eliminating many of the manual tasks associated with planning and buying digital media.
In this report, we’ll explore the new programmatic direct landscape, the implications for
demand- and supply-side players, and the barriers to successful adoption of programmatic
approaches. The report includes insights from key executives in ad technology, agencies, and
publishers, as well as daily practitioners, to see where programmatic automation stands today,
and where it is going.
It’s hard to believe, but agencies and publishers are still closing digital media deals with fax
machines. However, large-scale growth in web-based RTB platforms and increasing adoption
from marketers is putting pressure on all sides to automate processes for buying and selling
digital media. This report will explore the following key questions:
 What is the difference between programmatic and automation?
 What is needed to embrace a programmatic approach?
 What are the benefits of a programmatic approach to transactional media?
 How will my company’s organisational personnel needs change?
 What are the barriers to successful programmatic strategy implementation?
Readers of this report should come away with a solid understanding of current programmatic
direct approaches, available solutions in the space, and how they can structure their organisation
to implement programmatic techniques.
The report contains key insights from some of the most recognised thought leaders and
practitioners in the space from companies, including Adslot, AppNexus, Bionic Advertising
Systems, Centro, FatTail, isocket, MakeBuzz, Maxifier, Mediaocean, OpenX, Operative, Rare
Crowds, Rubicon Project, SAS, Shiny Ads, Strata, True Media, Yieldex, and many more.
1.1. Methodology
This report aims to provide an unbiased, balanced look at manual process automation in digital
media, aided by leading practitioners in the space. The author surveyed over 19 senior-level
digital media and ad technology executives who provided detailed, written responses to a wide
range of questions.
In addition, the author conducted extensive phone interviews with programmatic thought leaders,
and drew upon his own previously conducted research. The opinions in this report are the
author’s own, and may not reflect the views of his employer or companies in which he holds
equity.

1.2. About the author
Chris O’Hara is the CRO and co-founder of Bionic Advertising Systems,
author of several Econsultancy reports (Best Practices in Digital Display
Advertising and Best Practices in Data Management) and a researcher and
contributor to Econsultancy’s recently published Data Management
Platforms Buyer’s Guide.
A domain expert on advertising platform technology and programmatic
media technology, Chris is a member of the IAB’s Programmatic Task Force, and a contributor to
the recently published Winterberry Group/IAB whitepaper “Programmatic Everywhere: Data,
Technology, and the Future of Audience Engagement”.
He also writes frequently in industry publications including AdExchanger and Econsultancy.
1.3. About Econsultancy
Econsultancy is a global independent community-based publisher, focused on best practice digital
marketing and ecommerce, and used by over 400,000 internet professionals every month.
Our hub has 200,000+ subscribers worldwide from clients, agencies and suppliers alike with over
90% subscriber retention rate. We help our subscribers build their internal capabilities via a
combination of research reports and how-to guides, training and development, consultancy, face-
to-face conferences, forums and professional networking.
For the last 10 years, our resources have helped subscribers learn, make better decisions, build
business cases, find the best suppliers, accelerate their careers and lead the way in best practice
and innovation.
Econsultancy has offices in London, New York and Singapore and we are a leading provider of
digital marketing training and consultancy. We are providing consultancy and custom training
extensively across Europe, Asia and the US. We train over 5,000 marketers each year.
Join Econsultancy today to learn what’s happening in digital marketing – and what works.
Call us to find out more on +44 (0)20 7269 1450 (London) or +1 212 971 0630 (New York). You
can also contact us online.

Recommended reports and content from Econsultancy
Best Practices in Digital Display Advertising
http://econsultancy.com/reports/best-practices-in-digital-display-advertising
Best Practices in Data Management
http://econsultancy.com/reports/best-practices-in-data-management
Real-Time Bidding Buyer’s Guide
http://econsultancy.com/reports/rtb-buyers-guide
Data Management Platforms Buyer’s Guide
http://econsultancy.com/reports/dmp-buyers-guide
Online Advertising Survey
http://econsultancy.com/reports/online-advertising-survey
Improved performance and reduced wastage seen as main benefits of real-time bidding
http://econsultancy.com/blog/63480-improved-performance-and-reduced-wastage-seen-as-main-benefits-of-
real-time-bidding
Four years on: the growing pains of programmatic media (part one)
http://econsultancy.com/blog/63079-four-years-on-the-growing-pains-of-programmatic-media
Programmatic media unpacked (part two)
http://econsultancy.com/blog/63254-programmatic-media-unpacked-part-two
The nuts and bolts of programmatic marketing (part three)
http://econsultancy.com/blog/63464-the-nuts-and-bolts-of-programmatic-marketing-part-three
The future of programmatic media (part four)
http://econsultancy.com/blog/63685-the-future-of-programmatic-media-part-four
How far should programmatic marketing go?
http://econsultancy.com/blog/62082-how-far-should-programmatic-marketing-go
Programmatic premium is not about bidding
http://econsultancy.com/blog/62028-programmatic-premium-is-not-about-bidding
Why you can’t ignore programmatic marketing
http://econsultancy.com/blog/11362-why-you-can-t-ignore-programmatic-marketing

2. Introduction: Pivoting to Programmatic
Direct
Despite almost continuous hype and billions in investment in LUMAscape companies, in 2010
only 25% of $9 billion digital display dollars flowed through programmatic real-time bidding
channels. About 5% was bought on a sponsorship basis, and nearly 70% was purchased through
the manual, highly cumbersome transactional request for proposal (RFP) channel. This ‘middle
slice’ of the market is ripe for automation.
Both buyers and sellers of digital media struggle with the complexity involved in digital media
transactions – planners can easily spend hours manually sorting through available inventory and
discovering prices to begin negotiating deals with the sellers or publishers; and publishers
compete for these sales in a cumbersome, highly manual agency-created RFP process that keeps
them at arms-length from advertisers.
These inefficiencies – coupled with the exponentially increasing amount of inventory to be
transacted online – helped create auction-based approaches to media buying (RTB), in which
today’s programmatic movement was born. These new methods for transacting media rely heavily
on technology and data to efficiently – and often automatically – manage the cumbersome work
of digital media sales.
Growth in RTB technologies, and widening adoption of their use for audience segmentation and
targeting over the past several years has now spurred interest and investment in programmatic
approaches to not just digital display inventory, but content creation and optimisation, and even
workflow and back-end processes. In short, marketers see the potential to leverage digital
addressability, real-time analytics, and granular levels of control to achieve their business and
customer engagement objectives – and do so without the complexity that had previously been
inherent.
Figure 1: The 42 steps involved in the typical display media ordering process has
created an opportunity for ad technology
Source: Bionic Advertising Systems1
1 http://www.bionic-ads.com/2011/05/typical-online-display-media-order-process/

Considering the complexity of digital media, the variety of creative sizes, millions of ad-supported
sites, and dozens of ad servers, analytics platforms, order management and billing tools, it goes
without saying that digital marketing is a hard competency for any organisation to master. On the
demand side, advertisers have gone from managing the relatively limited number of media outlets
offered by TV, print, and radio to a digital channel with literally thousands of choices. Publishers,
facing a marketplace oversaturated with display inventory and a cumbersome workflow system,
have had to become experts in technology and yield management to realise the most revenue from
their readership.
For both sides, RTB systems offered a way to buy and sell inventory via a web-based interface,
rather than over the phone. From the start, advertisers realised the benefits that data-driven
audience targeting brought, enabling specific audience segments to be found across ad exchanges
– the major transaction platform for programmatic – rather than by purchasing contextually
relevant content, or those whose visitor logs index highly against a desired demographic profile.
Publishers, oversaturated with their own inventory, found a new channel to monetise mid- and
long-tail inventory, which proved difficult to sell on a direct basis.
Most marketers have embraced programmatic RTB vigorously for lower-funnel marketing activity
such as retargeting, enjoying the ability to cherry pick segmented audience members without
making large spending commitments, and have come to expect the kind of robust analytics that
programmatic RTB platforms provide. The pipes have been laid to transact bidded media in near
real-time, there is a seemingly endless amount of third-party data, and an ocean of exchange-
based inventory upon which to place targeted media. Programmatic RTB works, is growing, and it
is here to stay.
That said, there is a reason why programmatic RTB has attracted more direct response dollars
than branding dollars, and that is largely inventory quality. Publishers, afraid of data leakage and
desirous of control over pricing and availability of top-tier inventory, have been unwilling to
contribute premium inventory to exchanges. The most coveted placements must still be
purchased via manual insertion order, and the transactional layer of inventory still commands the
lion’s share of digital display budgets. This dynamic has led to what Bionic Advertising Systems
founder, Joe Pych, calls the “Sutton Pivot”:
“Willie Sutton robbed banks because ‘that’s where the money is’. Today, we are seeing
many companies that provide automation in programmatic RTB pivot to try and
provide programmatic solutions for guaranteed inventory.”
Figure 2: Programmatic is just getting on the radar in 2013, as compared to RTB
Source: http://www.google.com/trends/

Make no mistake about it: there is a race to build technology that can provide programmatic
access to higher classes of inventory, and everyone from small software startups to large service
companies and well-funded leaders in programmatic RTB are looking to get in on the action. But
how will digital marketing automation be accomplished: through new web-based programmatic
direct software built from the ground up, or by leveraging existing technologies, and building
features atop today’s programmatic RTB systems? Also, what side of the transaction will be most
influential in creating the standards and protocols needed to make programmatic direct buying
operate at scale: inventory owners, or marketers and their agencies? Over the next several years,
we will see many of these questions answered, and the proof will be demonstrated by how much
of that middle layer is automated.
For Ian Lowe, CEO of Adslot, the programmatic direct platform which recently acquired Facilitate
Digital2, the automation of this critical middle layer faces three distinct problems. First is the
issue of cost:
“The cost to buy and sell and fulfil of the average campaign schedule amounts to
approximately 28% of the dollar value of the media itself. The vast majority of this is
spent on the manual labour required to create complex iterative documentation, and
manual data entry into multiple systems such as planning tools, ad servers, finance
tools, billing tools and reporting tools.”
The second issue is speed to market, which Lowe described as “agricultural in execution”. And
the third barrier has been the absence of scalability, to wit:
“The economies borne of scale have so far eluded the guaranteed display segment. As
display ad spend scales the $40 billion barrier and continues to grow at 15% CAGR, and
no evidence that our toolset of choice (spreadsheet and faxes) will ever offer us the
scalability we need, we simply cannot sustain this level of inefficiency. More
importantly, the stakeholder that bankrolls our industry – the advertiser – should not
have to fund these inefficiencies.”
Lowe, Adslot, and many other stakeholders are betting on the fact that marketers and publishers
alike will not tolerate high transactional costs, slow execution, and lack of scale when it comes to
procuring higher classes digital media.
What is the dream of a programmatic direct future? The day when a media planner can log into a
system, discover inventory, create an order for a guaranteed amount of impressions, deliver that
order electronically to a publisher who can press an ‘accept’ button, and transmit that order
through to his ad server. It’s a one-to-one transaction that eliminates thousands of keystrokes,
dozens of spreadsheets, hundreds of emails, and even the occasional fax. It is also a future that
both inventory buyers and sellers have desired since the first banner ad was sold nearly 20 years
ago, and today an entire industry is hard at work trying to deliver.
2 http://www.adslot.com/adslot-to-acquire-facilitate-digital/

3. Programmatic Definitions
The rapidly evolving world of online media has been criticised for its ‘alphabet soup’ of ad
technologies (RTB, DMP, SSP, etc.) and it is no surprise that confusion reigns in the
programmatic landscape. Although the Internet Advertising Bureau (IAB) has recently released
guidelines for nomenclature (see table below), consensus has settled around two types of
programmatic buying: programmatic direct, which focuses on process automation, and
programmatic RTB, which involves real-time, auction-based approaches. In this section, we
will define and discuss both.
Figure 3: IAB definitions
Source: http://www.iab.net/media/file/IAB_Digital_Simplified_Programmatic_Sept_2013.pdf
3.1. Defining programmatic direct
Also called ‘automated guaranteed’, ‘programmatic guaranteed’, and ‘programmatic premium’3,
programmatic direct refers to the methodology by which advertisers and publishers automate the
workflow process that exists for buying and selling media. According to an analysis of digital
display spending by Arkose Consulting4, of the $9 billion dollars spent in 2010, nearly 70% were
transacted in the negotiated market, in which buyers reserve inventory from sellers in a highly
manual process. Despite the rapid growth and adoption of RTB over the last two years, the large
majority of digital advertising still happens through the transactional RFP process, rather than in
an automated fashion.
The process for securing reserved inventory is notoriously inefficient, often taking up to 42 steps5
for an advertising program to go from conception to ad serving, and involving multiple systems.
The typical agency will leverage comScore or Nielsen for research; rely on the RFP process to
3 http://www.adexchanger.com/data-driven-thinking/programmatic-direct/
4 http://www.arkoseconsulting.com/files/42501951.pdf
5 http://www.nextmark.com/wp-content/uploads/2012/06/Online-Display-Media-Order-Sequence-
Diagram.pdf

discover inventory pricing and availability from publishers, build their media plans in Excel,
transact deals with paper insertion orders, even receiving approvals via fax, and will typically go
on to enter placement details manually in an ad server interface. Once the first ad impression
runs, more manual work ensues, involving manual optimisations, change orders, and the
inevitable billing and reconciliation work to make sure invoices match differing inventory delivery
numbers from demand- and supply-side ad servers.
As other programmatic digital advertising solutions (Google search, Facebook, RTB) have taken
hold, marketers have seen the first hand benefits of data-driven media buying through a web-
based interface. Marketers that have benefited from having fast access to inventory, pricing
control, seamless delivery, and the availability of built-in performance analytics, are increasingly
eager to find similar efficiencies in other channels – especially in terms of reserved inventory.
Increased efficiency has benefits for both sides of the transaction. Larger ad agencies that still
operate on cost-plus pricing models are starting to get pushback from clients who are eager to
shift the 8-12% of budget they are spending on non-working media spend to working media
spend, increase their reach while decreasing their hourly labour bills. Smaller agencies, or those
that operate on a fixed-fee basis, obviously benefit when they can shift low-value labour activity
such as data entry to higher-value tasks (strategy, service) that result in performance gains for
clients.
Table 1: The experts weigh in
What does programmatic direct mean to you? What inning are we in?
Raju Malhotra, SVP, Products, Centro
“It means automated or ‘machine to machine’ transaction. A media
buy can be researched, negotiated, purchased, trafficked,
optimised and billed all in one cloud-based interface that has a
direct connection to the publisher’s ad server. In this model,
theoretically, there should be no need for a buyer to ever contact a
direct seller or even an ad operations person. Machines conduct
this business for you.”
“We are early in the game. Maybe it is the
top of second inning, so the heart of the
line-up is still coming up, because we
obviously haven’t been hitting homeruns in
the first inning.”
Eric Picard, CEO, RareCrowds
“There are two key aspects to programmatic direct. One critical
aspect of programmatic direct is the automation of the buying and
selling of premium inventory. The second key aspect of
programmatic direct is ensuring that buyers are able to acquire the
precise inventory they are seeking at a valuation that benefits both
buyers and sellers. Programmatic direct means bringing a level of
automation to the direct sales process and improving the current
resource-heavy RFP / insertion order / targeting process of buying
and selling ‘premium’ impressions.”
“All media, even ‘traditional media’ will
ultimately be bought and sold
programmatically. Digital media will be
completely programmatic within the next
five years, and even traditional will be
programmatic within 10 years.”
Tom Shields, Founder and Chief Strategy Officer, Yieldex
“The automation of some or all of the processes involved in
buying, selling, negotiating, trafficking, optimizing and billing
guaranteed media.”
“Still in the first or second inning, 5-7 years
from maturity is my prediction.”
Ben Trenda, CRO, isocket
“Programmatic direct creates interoperability between buy-side
systems and publisher-side systems, allowing people to find each
other and do business together seamlessly.”
“Second inning. We could get to the fourth
inning pretty quickly if some of the largest
holding companies move forward with what
they are currently working on. I like the
analogy of RTB better. We’re at about
2009 on the RTB timeline.”

Roy Pereira, Founder and CEO, Shiny Ads
“Programmatic: server-to-server, automated, real-time.
“Direct: Connect the dots from the buyer to the seller, without any
(or much) vendors or people in the middle.”
“Over the next 12 months, we shall see not
only small and mid-sized agencies
embrace this new way of buying premium
inventory, but large agency holding
companies and their trading desks,
demand-side-platforms, as well as buy-side
ad tech vendors.”
Matt Gay, SVP of Customers and Partners, Operative
“We are using the correct terminology in the real world, but not in
the way it’s gotten twisted in the media industry. What we are
trying to do here (that has been done decades ago in other
industries) is transact business in an electronic manner vs. manual
manner. [Programmatic direct] means automating manual tasks
between buyer and seller.”
“We are in the fourth inning. We’ve had a
couple of infield hits, 28 errors, a rain
delay, a first-ever manager change in the
middle of a game, 16 balks, seen an infield
fly rule called (twice), and ejections based
on HGH use. My point is, I think we’ve
finally hit the ball out of the infield.”
Doug Burke, General Manager and Chief Revenue Officer, FatTail
“We are comfortable with programmatic direct to describe
automated guaranteed sales of premium inventory. We only have
clients with premium guaranteed inventory. [Programmatic direct
means] an automated guaranteed selling solution for premium
inventory.”
“We are in the first inning. The media
buying behaviour around the RFP process
will have to radically change for
programmatic direct to become the norm.”
Jason Fairchild, Chief Revenue Officer, OpenX
“Programmatic direct is a phrase aimed at pushing the notion of
programmatic beyond the trading of low-value ‘remnant’ inventory
on open spot marketplaces/exchanges powered by real-time
bidding. The idea is not to automate the selling of all publisher
inventory, but to partially automate the sale of ‘the fat middle’:
medium-to-high-value, standard-format inventory transacted
between known publishers and buyers.”
“Perhaps the third / fourth inning? We’re
really yet to see programmatic transactions
hit the substantial majority, but if Karsten
Weide at IDC is correct, we’ll likely be
experiencing 80% of total US display ad
sales being traded via real-time bidding by
2022.
6
”
Jay Sears, SVP Marketplace Development, Rubicon Project
“Programmatic is the ability to break a buy down to the impression
level for decisoning and/or the application of advertiser or
publisher data. This is commonly associated with real-time
bidding. Workflow is the replacement of manual processes (often
phone, fax and email) with a more unified process, often in an
easy-to-use user interface. Some companies present solutions
that focus only on programmatic or only on workflow. Others
deliver solutions that encompass both. Make sure you know the
difference.”
“We are in the third inning. Bases loaded,
no outs.”
Andy Atherton, SVP, AppNexus
“I still prefer ‘programmatic reserve’. I think most of the market is
still conflating two distinct segments: applying technology to
improve the efficiency of direct sales transactions – as I have
advocated in the past, I would call this ‘programmatic reserve’;
enhancing the capabilities of RTB infrastructure to better
accommodate creation and execution of custom trading
relationships. Call this ‘negotiated RTB’ maybe?”
“We’re still early. I am more of a music guy
than a sports guy. I’d say we’re somewhere
in the first chorus.”
6 http://www.pubmatic.com/reports/IDC-RTB-2013.pdf

Ana Milicevic, Lead Industry Consultant - Digital Media and Advertising Technology, SAS
“At its most basic, it’s the ability for a buyer and seller to execute a
set of insertion orders in an automated way.”
“The majority will shift and embrace
programmatic within the next 3-5 years. A
large player on the buy side (like an
Omnicom) can accelerate this process
significantly if they aggressively come out
in favour of programmatic.”
Bill Wise, CEO, Mediaocean
“Premium, guaranteed inventory should be available to purchase
without an RFP process and should be a direct conversation
between buyer and seller, without ANY intermediaries other than
true SaaS enablers who don’t have a voice in the transaction.
We’ve coined the term RTP (for) real-time procurement.”
“We are very early in the process. The
publishers are generally sceptical as they
do not want to cannibalise their
sponsorships and premium ad offerings.
However, we need to get to a point where
publishers can confidentially expose their
yield curve through technology such that
the market can dictate true market pricing.
Mediaocean will be enabling this through
partnerships with a select few market-
leading SSPs in our Avails offering.”
Joe Pych, CEO and Co-founder, Bionic Advertising Systems
“Programmatic direct is simply automating the process of direct
buying and selling of advertising inventory. It's just process
automation. A defining characteristic of programmatic direct is its
focus on standardizing and automating the transactions between
buyers and sellers (versus automation inside the walls of an
organisation).”
“We're in the top of the second inning. In
the first inning, we saw enthusiastic play by
rookies who made some comical errors.
But we also noticed some solid base hits
from the rookies. We also saw all stars
getting into the game. I'd score the
announcement that AOL, Microsoft, and
Yahoo! made during Advertising Week
about standards collaboration as a double.
But at the end of the first inning, there was
no score. As we enter the second inning,
the focus is on creating and implementing
interoperability standards. Those that get
behind industry standards will be the
winners of this ballgame.”
Voice of the expert
“We’re clearly in the early days of this space, maybe the third inning. But we’re early partially due to the slow
adoption rate of this new form of media buying. Culture change is really the key issue. I believe that many of the
vendors enabling ‘programmatic direct’ today will be assimilated into larger platforms where their technology is
behind the market need.”
Anthony Katsur, ad tech veteran and former CEO of Maxifier

3.2. Defining programmatic RTB
Programmatic RTB is exactly what it sounds like: digital media which is accessed through a
platform where inventory is secured on a bidded basis. With concepts born in search marketing
(biddable keyword terms, sold on a cost-per-click basis), programmatic RTB generally refers to
the method of buying and selling inventory through ad exchanges. On the demand side,
advertisers can apply first- or third-party data segments to find audiences across a large swath of
inventory, and set bid pricing to automatically compete for users.
Programmatic RTB has been a tremendous boon to advertisers, who have increasingly easy access
to vast amounts of inventory (often at a low cost) and widely available third-party behavioural
data to use for targeting. Most marketers now leverage RTB to employ an ‘always-on’ digital
display strategy that retargets existing customers, lookalike audiences, and key segments of likely
‘intenders’.
Programmatic’s first proving ground – bidded media accessed through ad exchanges – has shown
great promise. Despite certain drawbacks (predilection for fraud, lower inventory quality, and
commoditised ad units) – likely the result of the early-evolution stage – RTB is expected to soar to
$3.3 billion in 2013, up nearly 74% from last year and accounting for nearly one-fifth of all display
media sold. 7 These huge numbers are a testament to the fact that marketers crave programmatic
access to audiences.
Growth in RTB has fuelled interest in programmatic access to not only display inventory currently
unavailable in exchanges, but also other media channels – including addressable television – as
well as broad approaches to customer engagement. In short, enabling the discovery, purchase,
and management of targeted audience impressions has quickly become a huge priority for
marketers. This drive for efficiency is rapidly changing the way marketers, agencies and inventory
owners are structuring their businesses and plans for future growth.
On the supply side, large publishers and networks add tags to their site(s), which enable third-
party networks and exchanges to value and sell their inventory to their demand-side users.
Publishers are able to monetise large swaths of mid-premium and long-tail inventory without a
direct sales force, and use supply-side platform (SSP) to manage their yield, and adjust floor
pricing for inventory based on dynamic data.
That said, RTB – essentially the notion of buying audience rather than inventory – has been both
a blessing and a curse to publishers. Larger publishers have often seen premium prices decline as
less expensive RTB alternatives (i.e. reaching the same audience segment elsewhere, for a lower
price) gain demand-side adoption, yet they have still benefited from monetizing more of their
long-tail inventory. Smaller and less known publishers, who find it expensive to monetise
inventory through direct sales, have benefited from being able to programmatically compete for
demand in a variety of platforms.
Programmatic RTB adoption has been rapid, and widespread. Programmatic RTB technology is
evolving rapidly, and participants now have access to several different buying methodologies,
including:
 Open auction: The traditional methodology for programmatic RTB, in which buyers
compete for users in an open auction, and the highest bidder wins. In these cases usually a
second-price auction applies, in which the winning bidder pays the second highest bid price.
 Invitation-only auction: On certain exchanges, publishers have the ability to set aside
pools of inventory for specific buyers, and thus create private marketplaces. These invitation-
only marketplaces enable specific demand-side partners to get priority in the ad server (a ‘first
7 http://adage.com/article/digital/rtb-ad-spending-growing-faster-expected/243798/

look’ at a publisher’s inventory), and are usually sold at a higher floor price. A smaller amount
of bidders compete in an auction to win inventory inside the marketplace.
 Unreserved fixed-rate buying: Despite its name, today’s RTB systems can also be used to
trade unreserved inventory on a fixed (rather than bid-adjusted) rate.
Despite its growing use and functionality for enabling private transactions, programmatic RTB
has its challenges. Challenges for marketers include click fraud (estimated to be as much as $400
million per year, according to an AdWeek report8), privacy concerns regarding cookie-based
targeting and inventory quality concerns. The latter has been the largest barrier to wider adoption
for RTB, as publishers have been largely resistant to placing premium inventory into exchanges.
Larger publishers – especially those with marquee properties in specific verticals such as
automotive, travel, and healthcare – generally retain control over their highly premium inventory,
selling it manually through their direct sales force, and allocate lower classes of inventory to
exchanges. This has made programmatic RTB buying a staple for lower-funnel marketing activity,
judged on direct response performance metrics, rather than a natural channel for higher-funnel
branding initiatives.
Private exchanges are starting to offer publishers more granular control over their inventory and
the ability to manage demand-side partner access, but broader programmatic RTB adoption will
be curtailed until privacy, brand safety, and inventory quality issues are addressed.
Ultimately, whether transactions take place via programmatic direct or programmatic RTB – or
whatever the terminology ends up being – the goal is not just efficiency in the procurement of
digital media, but adding intelligence to the process.
Voice of the expert
“Adding a layer of business intelligence to transactional media is critical because today both buyers and sellers
are faced with overwhelming numbers of choices that are decided mostly in an ad-hoc manner without much
reason. Providing simpler ways to understand how campaign goals can be solved while automating the processes
of spending the budget ultimately creates new opportunities.
“Today the intersection of manual processes with lack of business intelligence and intelligent automation means
that campaigns are naturally basic and not very valuable. Going forward, automation, intelligence and
optimisation technologies driving this process means massive leaps forward in effectiveness of advertising on
almost every conceivable metric. The power of software can be unleashed on this problem in fundamentally
game-changing ways.”
Eric Picard, RareCrowds
8 http://www.adweek.com/news/technology/suspicious-web-domains-cost-online-ad-business-400m-
year-148788

3.3. Refining and defining by programmatic approaches
Before arguing which programmatic approaches work best, it is valuable to have a taxonomy that
enables practitioners to discuss the various methodologies. Although the IAB has been helpful in
defining terms (see Figure 3), Jed Nahum, Microsoft’s senior director of programmatic sales, has
added some needed definitions9
which RareCrowds’ Eric Picard has expanded upon, adding
examples of vendors in the space that are engaged with various approaches:
Figure 4: Eric Picard’s expanded taxonomy of Nahum’s programmatic buying
tactics10
3.4. Chapter summary: programmatic definitions
 Nomenclature: It seems that the industry has coalesced around programmatic terminology
in general, although there are still subtleties in terms of definitions to describe the various
methodologies being used to connect buyers and sellers. One thing has been clear however,
that the players involved in what was called ‘programmatic premium’ have coalesced into two
distinct camps, based on the methodology of approaches:
– Programmatic direct, which loosely describes process automation in media
transactions. From a technology perspective, this is about streamlining formerly manual
processes and creating integrations between systems used to buy and sell digital media.
From a business perspective, it’s about providing programmatic access to media
traditionally bought and sold under the transactional RFP method.
– Programmatic RTB, whose ‘pipes’ can be leveraged to create private marketplace
access to inventory, and perform fixed-rate deals. From a technology perspective, this
means bypassing the traditional transactional RFP process by modifying auction-based
systems to secure guaranteed deals.
 Timing: The consensus view is that we are in very early innings of the programmatic direct
game – anywhere from the first to the fourth inning in terms of both technology development
9 http://www.adexchanger.com/data-driven-thinking/what-we-mean-when-we-talk-about-
programmatic/
10 http://www.adexchanger.com/data-driven-thinking/programmatic-platforms-vs-standard-digital-
platforms/

and ecosystem adoption. All agree that agency holding companies and large marketers will be
the key to pushing for broad scale adoption and moving the programmatic direct needle from
its current early stage into significant growth.
Voice of the expert
“Private exchanges via RTB protocols can be considered a ‘bottom-up’ approach to programmatic direct since
they extend the existing RTB approach currently associated with remnant to higher-value inventory by providing
publishers with additional controls and restrictions that they can apply to their non-guaranteed inventory on
spot marketplaces. Private exchanges are confined trading relationships operating within existing RTB
platforms. As with open RTB exchanges, private exchanges involve the use of audience data (provided by the
buyer and sometimes the publisher), allow buyers to pass on impressions they don’t want and tend to align with
performance goals.
“Programmatic guaranteed via ad server APIs, on the other hand, can be considered a ‘top-down’ approach to
programmatic direct, since it provides a level of automation to traditional, directly-sold, guaranteed sales
between publisher and buyer. Via APIs hooked into the ad server, buyers can discover and purchase inventory on
a guaranteed basis, subject to rules determined by the publisher. Some of these systems also partially automate
RFPs, price negotiation, insertion orders, the trafficking of creative assets and/or optimisation. Like traditional
direct buys, these orders don’t (currently) involve the use of audience data, force the buyer to commit to certain
number of impressions and tend to be used for branding goals.
“Eventually the two will merge to provide the simultaneous advantages of reaching defined audiences at scale
with the volume predictability and spend guarantees provided by forward buys.”
Jason Fairchild, OpenX

4. The Demand Side
Recently at an IAB programmatic working session, I overheard a senior-level executive say, “Let’s
face it; any time change comes to this industry, it’s been based on what the buyer wants.” He
was speaking about creating standards for transacting programmatically, and emphatically
dismissing the question of whether publishers could set the ground rules for this new
programmatic direct landscape.
He appears to be correct. Buyers are starting to realise massive gains in efficiency, performance,
and measurability, and are trying to set the terms upon which tomorrow’s advertising spend will
be allocated. Buyers are saying, “Make it easy to buy for me, and you will get more of my budget”
and that assertion has been proven, as more publishers who resisted programmatic RTB have
come back into the fold (e.g. Gawker Media, USA Today, and Turner11). These publishers and
many more have opened up limited amounts of inventory through private exchanges, and now are
looking at making larger swaths of premium inventory available, either via RTB channels or newly
available premium direct channels.
Some direct marketers (most notably Kellogg’s, which has been a vocal advocate of private
exchange buying12) have built their own internal marketing capabilities to have closer control of
media pricing and their first-party data. Agencies have leveraged their access to demand to funnel
huge volumes of spending through centralised trading desks, with some enjoying network-like
arbitrage profits. In short, the demand side loves programmatic marketing: tactics that keep them
firmly in control of media procurement methodology, offers them scale and efficiency in buying,
and the opportunity to profit on a transactional basis.
Marketers and their agencies have accomplished their mission only halfway, though. While access
to lower classes of inventory through exchanges has been affected, along with some select access
to more premium inventory via ‘private deal’ functionality inside RTB systems, the vast majority
of quality inventory remains firmly in control of its owners. The question is not whether access to
higher classes of inventory will be automated, but how: primarily through modifications to
existing RTB methodologies, or through new technologies altogether.
Today, the digital industry is trying to understand how to leverage these individual approaches to
programmatic, and asking whether programmatic direct buying can leverage the existing RTB
pipes – or if we need a purpose-built technology to support programmatic direct buying.
For Eric Picard, “the distinction between RTB and direct technology is essentially meaningless.
There will be convergence in both infrastructure and methodologies, and there will be
convergence of vendors and technologies – no one vendor will remain on one side of a
theoretical ‘fence’. The fact is that RTB technology will need to continually evolve to deal with
the complex and ever-changing nature of programmatic.”
Ultimately, buying higher classes of inventory will involve integrations and connections between a
large variety of vendors that support each buying channel, and marketers and publishers have to
be prepared to partner and plug into multiple platforms that enable programmatic transactions.
To date, almost all programmatic direct success has happened over existing RTB pipes through
the aforementioned private marketplace methodology. These private exchange transactions have
been the first careful stabs at opening up premium inventory to programmatic buying, made
possible because the ‘pipes’ for delivery have been largely put in place through SSP and DSP
connections. Advocates of the RTB approach to programmatic direct have a strong argument,
based on billions of dollars in technology innovation, almost universal programmatic RTB
adoption among publishers, and the embrace of agencies. Media procurement across all channels
11 http://digiday.com/publishers/gawker-ad-exchange/
12 http://www.adexchanger.com/ad-exchange-news/kellogg-company-is-positive-on-private-exchange-
results/

is seen as going programmatic, and continuing development can modify existing pipes to
accommodate a variety of different buying methodologies that include guaranteed buys.
But can RTB systems be tweaked to effectively enable the programmatic direct vision? According
to Jay Sears of Rubicon Project, “The short answer is yes”. For Sears, automating both workflow
functionality and ad delivery can happen together in modern programmatic RTB systems:
“Buyers – especially the holding companies – need to deliver unique access and this now
includes both media (access others cannot get) and data (leveraging unique publisher
data assets as well as leveraging the unique data assets of the advertising). This
deliverable is core to the trading function run by each holding company.”
Robert Burkhart, who heads up digital initiatives for Strata, order management software used by
over 600 agencies, programmatic RTB does not go far enough:
“We see that programmatic (RTB) buying presents many opportunities and challenges
to both agencies and advertisers. The largest challenge is that there is general feeling in
the industry that things are being rushed to adoption without the proper education of all
parties.”
Burkhart thinks that agencies and brands must be able to differentiate themselves by offering
more strategy, and depend less on leveraging programmatic tactics and platforms that are
becoming ubiquitous. Agencies need to “go beyond the short-term benefits realised through
analytics and reporting and more to developing the most strategic campaigns possible. While
there is merit to programmatic buying, more questions need to be answered before we know its
proper context and true value.”
For Andy Atherton, who heads up programmatic direct efforts for AppNexus, the answer is less
technology oriented, than focused on the end user:
“We need new technology. RTB buying and direct buying are done by different teams
with different requirements. This will all converge down the road, but in the meantime
we need to focus on the direct buyers’ particular needs if we want to drive this
transition.”
Anthony Katsur, former CEO of publisher revenue optimisation platform Maxifier, agrees that
programmatic direct is a subset of the larger programmatic ecosystem that has been raised on
RTB methodology:
“Today’s RTB platforms, namely DSPs, SSPs and exchanges (but aren’t they all
morphing into exchanges?), will adapt through a build or buy strategy to support the
features buyers and sellers require to directly transact media on a guaranteed basis.
“I even believe the deeply integrated sponsorships and home page takeovers will go
programmatic. Buyers can reserve the inventory via programmatic channels and then
let the creative/ops team take over to enable the sponsorship. There’s still significant
plumbing required to support this.”
On the flip side, detractors argue that RTB is fundamentally opposed to the guaranteed
transaction, being neither real-time or bidded in nature. Agencies still secure the vast majority of
digital inventory through a transactional RFP process which is clunky, but still enables a high
degree of human control and personal touch. Why not automate the process for transacting on
premium inventory, rather than a wholesale change in methodology? Also, detractors of the
programmatic RTB approach (largely publishers) are concerned with margin erosion, lack of
pricing control, and data leakage. Carefully curated audiences, monetised by advertising, have
made a lot of content free. Premium publishers are right to demand media rates aligned with the
quality of both their content and audience.

Joe Pych of Bionic Advertising Systems believes that there are too many pieces of workflow
functionality needed to enable true process automation inside existing RTB systems:
“RTB cannot be ‘tweaked’ to support programmatic direct. An entirely new technology
stack is required. Programmatic RTB is all about bidding and transactional execution.
It’s basically, ‘Here’s an impression. In the next 30 milliseconds, tell me how much you
want to bid for this one impression. If you’re the highest bidder, we’ll serve your ad.’
“While I think RTB is an incredible advance, there’s no real workflow involved. DealID
and private exchanges can be part of a programmatic direct solution, but they only
solve for one step in a 42-step process: the execution of the ad. A new technology stack is
required to automate the other 41 steps.”
For Tom Shields of Yieldex, the programmatic RTB approach doesn’t make sense:
“There’s no shortage of people attempting to shoehorn this square peg into that round
hole, and some of them might get it to fit. But it seems pretty inefficient to involve an
exchange, a DSP, and an SSP in a transaction that doesn’t need to involve anyone other
than the buyer and the seller.”
To others, including isocket’s Ben Trenda, the fundamental communication protocol and delivery
mechanisms powering RTB are complimentary to programmatic direct, but auction-based
approaches fail to take many of the nuances of negotiating premium guaranteed inventory into
account, such as context, page content, and placement. For Trenda, a former programmatic RTB
veteran, there are even more fundamental issues:
“RTB is a call/response communication protocol. Imagine a bar with 100 customers
where the bartender pours an old fashioned and then asks each person in the bar if they
want to buy it and for how much. Yes, it would be silly and inefficient. But worse, the
bartender would prioritise accordingly to save time, so they would eventually just ask
the 5 or 10 people who tend to buy most of the drinks.
“This was one of the earliest pieces of logic we built into our RTB system at Rubicon once
we got to 50 or so DSPs. We would predict which bidders would make a bid, and then
we would only call those we thought would bid. This is still happening today, and it
should. But imagine being a customer of one of those DSPs who don’t get all the calls. If
you really want to buy what you’ve decided to buy, one of the core reasons to buy
premium reserved inventory, you’d want to know that your DSP is receiving every bid
request.”
For Centro’s SVP of Products, Raju Malhotra, whose company now owns its own DSP (SiteScout)
and is building home-grown programmatic direct technology (Centro Planner), the answer for
marketers is not so black and white; marketers need to leverage both programmatic approaches
to match differing applications:
“We need a combination of new technology, processes, standards and skillsets to suit the
demands of programmatic direct. RTB technology is good for media transactions that
are based on second price auction mechanics. But it is not designed to solve the
workflow inefficiencies for contractual based media buys. Now, programmatic direct
can solve some of these problems, but it won’t have access to some of the most valuable
custom media available. This requires a different solution. There will always be a need
for custom advertising bought direct from publishers.”

4.1. Agency trading desks
You cannot have a discussion on programmatic marketing and not discuss the profound impact
agency trading desks have had on adoption of buying technologies, techniques, and business
models. Only a few short years ago, agencies were the ultimate arbiter of where to allocate digital
marketing dollars. All deals were transacted directly with publishers, and digital agencies were
specialist shops that could help marketers with the discovering media and the complexities of
delivering technically complicated digital campaigns.
That era was brief, however. Ad networks quickly sprang up to take advantage of the ultimate
market opportunity: an infinite supply of banner inventory, the availability of audience data, and
marketers eager to find efficiency, measurability and scale. Networks like Tacoda created new
ways to access audiences, and quickly disintermediated agencies’ monopoly on audience
discovery. Agency trading desks (ATDs) were eventually created to take advantage of the
emerging technologies (DSPs) that would enable them to leverage their access to demand and
turn the tables. They have been extremely successful at doing so. Programmatic buying
methodologies offer some agencies the ultimate in marketing: one-stop shop that gives
advertisers access to a one-to-one conversation with potential customers.
Agency trading operations like WPP’s Xaxis are benefiting from the network effects of
programmatic buying, and earning significant profits from arbitrage – leveraging programmatic
technology platforms to buy low and sell high. With technology poised to deliver programmatic
access to more than just banner ads, trading desks are turning their attention to building a
programmatic technology stack that enables the agency to acquire all kinds of inventory, from
online video to addressable television. At the moment, the lowest hanging programmatic fruit is
premium display inventory, accessible through existing RTB pipes and being made increasingly
available through private marketplaces. According to Shiny Ads CEO Roy Pereira, this is a
relatively recent phenomenon:
“Agency trading desks, much like DSPs, are now recognizing that they need to buy
inventory on more than just remnant-based exchanges. Thus they are now looking at
how to purchase premium inventory for their agencies through programmatic direct.”
Are trading desks a sustainable solution for marketers? For Tom Shields, chief strategy officer of
publisher yield management solution Yieldex, the future is unclear:
“Arbitraging inventory without transparency to the marketer is a problem. But
centralised buying for economies of scale might make sense in the long run.”
Naturally, publishers are eager to benefit from the ‘always-on’ revenue stream that the
programmatic RTB sales channel has been consistently providing, but reticent to expose their
closely held inventory to be purchased on ad exchanges. For Doug Burke of FatTail, a software
provider that helps publishers manage their directly and indirectly sold inventory, the distinction
between the programmatic and direct channel will fade as agencies understand how they interact:
“The agency creates a separation of the guaranteed buying process and the RTB buying
process with agency trading desks that is a historical anachronism at this point. The
two processes of guaranteed buying and RTB buying need to be connected at the agency
to deliver the most effective return on investment to the brand client.”
Although all ATDs add a layer of cost for the marketer (whether through arbitrage, or via a
transparent media mark-up or service change), it is generally accepted that they offer value by
leveraging data and technology to meet specific marketer needs – and deliver digital messages at
scale. For Centro’s Raju Malhotra, the missing ingredient is “transparency and value”, which
clients will increasingly demand. Also, it is obvious that some clients will grab the programmatic
reins themselves:

“Agency trading desks address a business need for marketers. As marketers get smarter
and more comfortable with programmatic direct and ad exchange buying, the self-serve
model becomes easier to use for broader adoption.”
Clearly, accessing the large ‘middle layer’ of premium inventory programmatically is and will
continue to be a focus for agency trading desks, who must continue to innovate and provide ways
for marketers to gain programmatic access to consumers across the many digital channels they
are spending time in, including online video, addressable television, tablets, and mobile devices.
With a strong embedded investment in RTB-based programmatic tools, it seems likely that early
efforts at programmatic direct will continue to build upon their existing stacks, rather than
embrace new technologies. However, agencies’ reliance upon legacy order management and
billing systems for media buying across channels will continue to be influential, as agencies seek
to take digital out of its current silo and align processes with traditional media procurement
methodologies.
Voice of the expert
“For agency trading desks to continue to thrive there is no doubt that they will need to address the questions that
some marketers have raised about agency trading desk transparency. Trading desks operate today on an
arbitrage model for the most part, and that won’t be allowed by marketers in the long-term, especially as the
proportion of budget going to RTB has grown significantly.
“Ultimately, trading desks will be absorbed back within the individual media agencies, rather than being held
separately. The approaches, processes, and technologies of the trading desks will become best practices within
media agencies, but the business model will change. Marketers that have significant amounts of business data
that can be applied to digital advertising will likely build out their own stacks of technology and vendor
relationships, and will build their own equivalents of a trading desk but will optimise exclusively for their own
benefit. They will give their media agencies access to their systems and enable them to work within them – but
on a traditional media agency model, not the trading desk model.”
Eric Picard, RareCrowds
4.2. Agency culture and personnel
Another large factor influencing the pace of programmatic direct adoption is within the media
agency itself: namely, the legacy business models of holding companies built around hourly
labour charges, which rely upon a steady stream of young, inexpensive hires. This has given rise
to the popular meme of the ’23-year-old media planner’, often described as an underpaid agency
employee, who wields unusual power over multimillion dollar media budgets, and susceptible to
being influenced by ‘sneaker parties’ and other off-the-books incentives to select one media or
technology vendor over another. Unfortunately, when it comes to selecting guaranteed media, this
unkind assessment of the typical agency is highly valid. Often, agency personnel with less than
five years of media experience are asked to make sophisticated digital investment decisions, and
often at the forefront of vetting new ad technology opportunities.
Moreover, agency media planners are notorious for job migration; a recent Digiday/Bionic
Advertising Systems joint survey found that more than half of agency planners (56%) are either
“actively looking” for a new role, or planning to leave their current job within the “next two
years”.13 This has much to do with long hours and low compensation – but the same study
indicates that media planner unhappiness also has a high correlation with the tools they use.
Around half (45%) of media planners spend between one and four hours per day in Microsoft
Excel performing manual tasks – and over a third (35%) spend over four hours a day in the
spreadsheet tool. The large percentage of that work is concerned with cutting and pasting data
from one system to another (placements from an Excel-based plan into an ad serving interface,
13 http://www.slideshare.net/fullscreen/jpych/next-mark-upstream-seller-forum-2013-06/1

and then again into an order management system). This modern drudgery manages to get digital
ads from conception to serving, but at a high cost to the agency, who deals with the cost of
constant turnover within the ranks and the accompanying inability to capture institutional
knowledge.
For Joe Pych, whose web-based Bionic Advertising Systems is on a mission to replace Excel at
agencies, the advantages of a programmatic direct approach to planning are clear:
“When a media agency loses a planner, all of the knowledge that planner acquired over
two years goes down the elevator with them. They go to another agency, and lend that
company the sum of their acquired knowledge. The information on the best places to
place media is locked up on computers, ad servers, and various files – but almost
impossible to access and make actionable at the organisational level.”
Programmatic direct approaches that streamline media discovery and acquisition not only add
the critical layer of efficiency necessary to turn grunt workers into knowledge workers, but also
add a layer of business intelligence to guaranteed media selection previously only available in the
algorithms of programmatic RTB systems.
Shiny Ads’ Roy Pereira sees a future with fewer young planners:
“There will be a lot of personnel changes in our industry in the next five years. There
will be fewer media buyers and media planners at agencies and they will have a lot
more technology in their hands to accomplish their buys. The job of a media buyer,
specifically, will need to change as the actual buying process becomes incredibly easy
and quick with just a push of a button. Media planners will be able to discover the right
inventory from thousands of top-tier publishers, get an accurate assessment of
available inventory and be able to create digital RFP or even IOs within seconds.”
For Centro’s Malhotra, younger planners can be activated using easy-to-use technology:
“We need to make the ’23-year-old media planner’ appear like a seasoned executive
using a combination of technology and advanced analytics so they can plan millions in
advertising spend like a true professional.”
If agencies had access to solutions that placed an organisation’s proprietary planning data in an
easy-to-use tool, they would be empowered to act on behalf of agency clients more effectively.
Malhotra added:
“The industry is filled with disparate point solutions that create clutter, confusion and
complexity for them and their agency leaders. Planners and buyers are limited by the
low-quality tools. We are betting in favour of superior, easy-to-use technology
empowering them.”
Andy Atherton, whose company has been empowering agency personnel with programmatic
tools, thinks technology can enable planners to spend less time on manual tasks and actually be
happier in their roles:
“There has been surprisingly little investment in trying to make [planners’] lives better…
and empowering them to leverage their skills and add more value. So I don’t think
today’s buyers are ‘replaced’. I think they will be empowered by technology to become
happier, more productive and more valuable contributors to great business outcomes
for their clients.”
But new programmatic direct approaches for the demand side must involve more than just
efficiency gains that remove manual grunt work and free time for creativity among agency
personnel. Centralisation of the media planning and procurement function must also lead with
data, and add a layer of business intelligence to the process.

In discussing programmatic planning needs with the chief digital officer of a large agency
recently, it was clear that being able to justify media selection was as critical as being able to
produce plans quickly:
“Our clients don’t ever come to us and ask what kind of tools we are using to do our jobs.
They really couldn’t care less. But they do come to us and ask for huge media
recommendations, due within several hours. And they definitely want to know why we
are recommending what we are recommending.”14
Moreover, understanding how much budget to allocate to various inventory partners – a process
now operating largely on gut instinct – must be grounded in data.
Christopher Skinner, whose MakeBuzz platform helps marketers understand how to allocate
branded digital media, believes that a lot of today’s procurement strategies are too heavily focused
on reaching customers already in the market for products and services – and not focused enough
on creating new demand. Because programmatic direct buying can leverage data to make media
investment choices, it has the distinct potential to start helping marketers justify branding efforts
with new metrics.
MakeBuzz, as an example, measures success based on profit potential – the idea that there is an
optimal number of specific customers in a geo-targeted area – and uses that data to drive
investment decisions in display. “Digital marketing is still stuck in a DR (direct response)
mentality. DR accounts for 6% of ad spend globally, meaning that until we start thinking
proactively about creating demand, we’re not going to command the attention and respect of
the boardroom,” remarks Christopher Skinner, the company’s founder and CEO, adding:
“A big part of why many are stuck in this mindset is that they rely too heavily on data of
the past, and we’re including so-called ‘real-time’ data under that heading. What
[programmatic direct must do] is look at potential – using diverse data sets to
understand our client’s potential growth, market-by-market. So we’re looking at upper-
funnel media that can drive demand for our clients, not just capture it.”
“[Efficiency and business intelligence] are inextricably linked. We need to provide the right
technology to get the manual transactions into some sort of system so we have the data
available for analysis,” remarks Andy Atherton, adding, “The creation of basic transactional
efficiency is the foundation for the more transformative improvements that can be driven by
business intelligence (BI). I don’t think you are likely to get the second one without the first one.”
Voice of the expert
“My bet is [that 23-year-old media planners will be] replaced. Like spreadsheets replaced legions of bookkeepers
because the execs could update the sheets themselves.”
Tom Shields, Yieldex
“Most of the ‘23-year-old media planners’ that I have worked with are very smart and talented and there is
always a demand for those types of people in any industry. Automated tools should allow the more traditional
planners to transition into the digital media realm however.”
Sean Cotton, True Media
14 http://chrisohara.wordpress.com/2013/10/29/programmatic-direct-isnt-just-about-efficiency/

Voice of the expert
“Some [planners] will adapt and the less qualified will be replaced. I don’t necessarily see programmatic
replacing most roles, but the people and roles will evolve. I believe that there is an opportunity for the machines
to replace some personnel over time, but there is still so much to automate, integrate and build across our
ecosystem that we’re a long way off from that moment.”
Anthony Katsur
4.3. Agency pricing models and programmatic
Terence Kawaja, the creator of the famous LUMAscape maps which depict the 300-plus
companies who enable the 20% of display buying that happens programmatically, once said that
“inertia is the agency’s best friend” when asked why holding companies were not doing more to
bring innovation to advertising. I imagine that part of what he meant was that their common
business model (billable hours plus a negotiated margin) does not create an incentive for
efficiency. On the contrary, complexity in media planning means more billable hours – as well as
a built-in need for agencies’ existence. After all, if media buying were easy, then marketers would
do it themselves.
That means today’s large media agencies actually have a perverse incentive to gain efficiency;
because they get paid for planning media on an hourly (cost-plus negotiated margin) basis; the
more time it takes to plan a complex campaign, the more they get paid. The efficiency of
programmatic direct approaches actually hurts the bottom line. That said, marketers – exposed to
self-service tools that enable direct access to digital channels like Google and Facebook – are
pushing agencies to gain efficiency in media procurement. In the effort to take control over their
own data and how they apply it to digital messaging, will brands and marketers build their own
technology stacks and internal practice groups?
OpenX’s Jason Fairchild thinks it’s “more than possible they will”, but stresses that only certain
types of marketers will benefit from such an undertaking – those with extremely large and
valuable first-party datasets. Once marketers adopt data-driven marketing practice groups, and
the technology (especially DMPs) to capture and activate customer and sales data, marketers are
“going to be a lot more particular about what their agencies will do for them once they begin to
develop the strength and skill to build their own customer solutions. It’s likely that some of the
big marketers will begin to invest in buy-side workflows, data management and reporting /
analytics tools that are custom solutions for their unique environment. They will then leverage
these outputs in more sophisticated ways to instruct and utilise agencies.”
Ben Trenda of isocket compares the likelihood of agencies adopting their own programmatic
stacks to early marketplace dynamics in search marketing. Early on, only a few agencies built
their own internal search practices, and an entire “cottage industry” of SEM providers quickly
rose, eventually to be acquired by agency holding companies, once the market matured and
stabilised.
Initially, however, agencies can react negatively to efficiency tools. “Process efficiency might
appear to be bad for agencies at first glance,” says Trenda. “One agency exec once said, ‘I hate
when people say it’s inefficient that we still use fax machines – we like sending faxes’. But in the
next sentence that same agency exec said, ‘but we understand that automation is inevitable so
we want to get involved and get in front of it’. There are some really smart people at the holding
companies, and they’ll adapt to the future.”
For Bill Wise, the Mediaocean CEO whose Prisma platform processed over $17 billion of display
spending in 2013, it is the ad tech ecosystem that is causing the most imbalance in the current
media ecosystem. Wise argues, “ad technology intermediaries are charging a king’s ransom by
combining their tech stack with quasi-planning and media buying. That’s what needs to be
disrupted, not agency business models.”

For Jay Sears, the future seems clear: marketers will inevitably begin to bring on internal
programmatic capabilities:
“Some marketers – especially those that have already taken functions such as search
and social in house – will look hard at bringing automated media in house as well. This
is good for the business as this pressure will force agencies, trading desks and others to
continue to innovate to maintain relevance and grow business.”
But will marketers commit to organically developing and sustaining expertise required to keep up
with the technologies and techniques required in digital? The future remains unclear.
Voice of the expert
“Planning and buying media well is hard work. Digital media is twice the amount of work. I am not sure how
many companies want to bring that in house and try to learn new platforms that would enable them to do that.
What could happen is that more large companies could start working with smaller agency shops that are nimble
and efficient due to implementing automated tools that compensate for the large workforces of the holding
company shops.”
Sean Cotton, True Media
4.4. Fraud: the elephant in the programmatic room
Rather than a being a barrier to programmatic direct adoption, the increasingly visible problem of
fraud may end up being its largest driver. Because the overwhelming majority of click fraud and
robotic traffic happens inside of exchanges, it would seem to be a problem inherent in
programmatic RTB. Marketers therefore should be more willing to seek direct connections with
trusted inventory sources to ensure their media investments are not wasted on ‘non-human
eyeballs’.
Some reports suggest that as much as 46% of display inventory is ‘suspicious’, and may be
robotically generated.15 Despite growing awareness of non-human traffic, however, programmatic
RTB buying continues to rise. This can be accounted for by the act that the large majority of
programmatic RTB buying is done on a direct response basis. Centro’s Raju Malhotra questions
how much fraud matters for performance buyers:
“At the end of the day the advertiser is tracking return on ad spend (ROAS) all the way
to a conversion. Therefore all of the ‘fraud’ gets thrown together with the real clicks, etc.
and if the ROAS is there, the advertiser does not care as much as we may think they
should.”
isocket’s Ben Trenda agrees:
“If all you want is to find your cookie pool on cheap inventory, you’re not going to let a
little fraud get in your way.”
Of course, when measuring against cost-per-order or other DR metrics, fraudulent clicks do not
contribute significantly to the marketer’s cost, and can be ignored. For programmatic RTB to
successfully attract branding dollars, direct connections to higher classes of inventory need to be
established along with significant viewability and fraud protection guarantees. Viewability
standards should be embraced by all publishers with quality inventory as a key differentiator.
15 http://www.adweek.com/news/advertising-branding/bots-infecting-nearly-half-web-traffic-report-
152300

“Every media buyer should question why they are buying non-viewed inventory because they
are wasting money and the attribution modelling vendors are using garbage data if they are
including non-viewed inventory”, said FatTail’s Doug Burke, adding:
“The brand lift and clickthrough rate performance on non-viewed inventory is
zero. Only a spider and bot can click on a non-viewed ad. Premium publishers should
embrace viewability because they will be rewarded for their high engagement; high
view rates of their high quality sites and long tail, non-premium, low engagement sites
will be flushed from the market.”
Today, the digital bifurcation between direct response and branding remains strong. Performance
marketers are willing to tolerate a high degree of fraud when buying against strict ROAS metrics,
and even seem to stomach the inevitable price inflation generated by fraud when buying on a
CPM or CPC basis. The efficiency for reaching audiences at scale, and tactical advantages of
cookie-based retargeting mitigate some of the open issues in programmatic RTB. That said, as
new viewability standards become ubiquitous, and publishers embrace new programmatic
approaches to enabling inventory access, fraudulent traffic will be tolerated less and less. This is
both a challenge and huge opportunity for programmatic RTB providers who are looking to pivot
their offerings to capture more branding dollars through programmatic direct capabilities.
Voice of the expert
“Greed outweighs fear of fraud. But it is a real problem, and will come home to roost.”
Tom Shields, Yieldex
4.5. Standards
One of the biggest barriers to achieving programmatic direct adoption at scale is the fact that
there are no standards. Buyers in other fields, such as print and direct mail, have access to
directories that make finding pricing and audience reach easy. Digital has lacked a similar
directory, largely because publishers would rather get a phone call than expose their rate card.
Complexity in ad sizes, differing technical requirements, and the lack of an accepted taxonomy
make it difficult to create an electronic order. The IAB has been trying to engage the industry on
this effort with various committees over the years (see Section 7), but progress has been slow.
What is clear is that, without standardisation that can enable electronic transactions,
programmatic direct cannot achieve significant scale.
Voice of the expert
“Industry standards are absolutely critical to the success of programmatic direct. Without widely adopted
standards, it will fail to live up to anywhere near its potential. The IAB has been trying to set standards for years.
Although they are very polite about it, I think they are frustrated by lack of motivation and involvement by the
players in the industry. But I’ve seen a huge change recently as a new breed of hungry challengers have entered
the market with lots of energy and smart ideas. This has woken up the incumbents and they are getting more
involved. You are going to see more progress on industry standards in the next six months than you’ve seen in
the last 18 years.”
Joe Pych, Bionic Advertising Systems

4.6. Chapter summary: programmatic direct and the
demand side
While marketers and their agencies seem poised for broader adoption of programmatic direct,
there are still barriers to broader adoption, although none significant enough to slow the rapid
pace of technology innovation.
 Technology approaches unclear: When it comes to where the experts think
programmatic direct success will be found, there is a bifurcation between those who see
higher inventory classes being accessed through new systems, aided by direct API connections
to existing ad serving systems, and those who think programmatic RTB pipes can be activated
to create discrete one-to-one guaranteed transactions. Others see both technology approaches
needed for future success. Today, there is no accepted standard for programmatic direct
transactions, no accepted standards and protocols, and few success stories to build broad
models upon. It’s very much an early market with huge upside for startup layers and
established ad tech companies alike.
 Trading desks will be hugely influential in determining how quickly programmatic direct
buying methodologies will be implemented, and also help determine which underlying
technologies will be adopted in the near future. That said, the adoption of new programmatic
direct platforms will eventually result in less centralisation among large agencies, as media
shops within the holding company who own relationships with premium inventory owners
seek to retain control over buying higher classes of inventory. Programmatic direct platforms
– especially if tied into legacy agency operating systems that handle order management and
interface with billing systems – may be the starting point for decentralisation of
programmatic buying.
 Culture: The only certainty of programmatic direct adoption is that it will be painful and
probably slower than expected. Programmatic direct buying represents a wholesale change in
the way digital media buying has been performed for nearly 20 years, and getting media
planners off spreadsheet-based, manual approaches will require significant culture change.
The dynamic of the ‘23-year-old media planner’ may not go away, but roles will shift, leading
to personnel needs more closely aligned with data, analytics, and creative and away from
manual tasks. The way in which guaranteed media is ultimately discovered, selected, bought,
and optimised will also be informed more by data than by instinct and habit – a welcome
change for mid-tail publishers with less sales penetration into media buying agencies.
 Fraud: The entire programmatic space is rife with click and impression fraud, mostly found
in the programmatic RTB channel. This is keeping higher classes of inventory out of
exchanges, and making demand-side players wary of paying premium prices in auction-based
systems. This dynamic has given new (non RTB-based) programmatic direct players an edge
in terms of publisher adoption, but has not managed to impact the growth in programmatic
RTB for direct response buying. The divide between DR and brand buying remains wide.

5. The Supply Side
Publishers struggle with the same inefficiencies as agencies when it comes to implementing
campaigns in the transactional RFP channel. A recent study by Digiday and Adslot16 showed that
the average publisher in North America spends up to 1,600 man hours per month responding to
RFPs, which accounts for 18% of sales (excluding commissions). Publishers who connect with
demand through the transactional RFP process also spend 22.1 hours on RFP-related
transactions, and only win 35% of the RFPs they respond to. Of the winning deals, another 24%
will be cancelled for performance reasons. With those kinds of numbers, it is not surprising that
publishers are also seeking programmatic efficiencies for selling their premium inventory.
Unlike other media industries, such as direct mail, which expose pricing and inventory availability
information directly to their demand-side customers, digital media sellers continue to reserve
their premium inventory to the manual sales channel. Discovering pricing and availability is often
only available through the RFP process, effectively gating access to select inventory behind a
human sales force. Buyers are also subject to a widely divergent set of standards for each
publisher: common ad units have wildly different creative specifications from publisher to
publisher, terms and conditions of sales vary between publishers and publishers leverage a wide
variety of tools for delivering various types of ads. This makes achieving scale in guaranteed
digital placements highly manual, difficult, and expensive.
“The fact is that a significant portion of most salespeople’s work day involves far too much
clerical work. Managing RFPs, IOs, billing, pacing reports, change orders, inventory queries
and reporting all consume a significant part of the typical sales person’s time. Reducing or
eliminating these repetitive clerical functions will allow publishers to hire more talented and
high-end salespeople,” says Eric Picard, adding, “There will be less need for low-end salespeople
and the number of supporting staff will be reduced significantly – at many major publishers
there is a 10:1 ratio between a senior sales person and all the supporting staff such as account,
sales planning and ad operations teams needed to execute against campaigns.”
Operational inefficiency has much to do with how a publisher’s inventory is represented in
programmatic channels, according to Jason Fairchild of OpenX:
“Realistically, there are a bunch of options readily available for publishers to use today
to control their inventory. What’s holding them back is often the reason that there’s not
enough information that can get through the programmatic ‘pipes’ to the buyer – [an]
above-the-fold [or] below-the-fold flag… doesn’t always get through or isn’t trusted. A
lot of the information that you would typically see on a manual IO still isn’t getting
through, and that’s a problem. Until programmatic platforms do a good job about
conveying information in a transparent way, publishers will continue to be frustrated.”
While this is true for all inventory, the challenges in securing premium inventory at scale has
created a two-tiered monetisation dynamic: publishers hand-sell premium inventory with a high
degree of control, and let a chain of networks and tech vendors monetise their remnant, unsold
inventory. There has been little middle ground. Previously, publishers with lots of site visitors and
quality demographics could benefit from their scale and offer marketers relatively inexpensive,
quality reach. Today, however, the story has changed: marketers have easy, cheap access to
cherry-picked audiences through exchanges, and it takes strong share-of-voice in a category for
publishers to command premium pricing.
Moreover, today’s digital publishing landscape is a tale of Haves and Have-Nots; publishers with
category-specific content and quality demographics have been able to command relatively high
CPMs for their guaranteed inventory (e.g. WebMD, TripAdvisor, ESPN) and publishers with
broader content and wider demographics (such as news and entertainment sites) have struggled
16 http://www.adslot.com/blog/study-confirms-rfps-a-time-sink-for-digital-publishers/ and
http://www.adslot.com/soti/

to sell directly at premium rates. This dynamic leaves a lot of quality inventory on the table for
marketers, albeit that which is more difficult to access at scale – what isocket founder Jon Ramey
has described as the ‘fat middle’ in the inventory yield curve.
Figure 5: Today’s digital buyer buys super-premium inventory from publishers manually through
the transactional RFP process, and finds reach with RTB audience buying on long tail inventory,
leaving a relatively unexploited ‘fat middle’ of higher class inventory.
Although it is unclear whether buyers will find ‘mid-tail’ inventory a place in media plans between
super premium display and the long tail of exchange inventory, what is clear is that today’s buying
methodologies and technology have not enabled access to the ‘fat middle’ at scale. Earlier
platforms such as TRAFFIQ (since pivoted to become a digital media agency) tested the concept
of premium mid-tail marketplace aggregation as early as 200917, but failed to gain traction as RTB
took over. Nearly five years later, newer programmatic direct technologies are still trying to solve
for the ‘yield cliff’ that exists today.
That said, technology availability might not matter for every publisher, according to SAS’ Ana
Milicevic:
“It’s really an issue of how premium is your inventory: if you’re not on the comScore
100 probably not that much, and while you can probably gain some operational
efficiency by adopting programmatic, the reality is that it might not make that much of
a difference over current situation. To put it simply, there are many publishers who
should continue to focus on the AdSense check. There’s a reason there’s a ‘premium’ in
‘programmatic premium’.”
17 http://www.adexchanger.com/data-driven-thinking/the-fat-middle-and-other-programmatic-direct-
myths/

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