Direct Supply Paths Are Becoming Standard Practice in Programmatic

In programmatic, the advertising industry has lost the value of direct relationships. The rapid expansion of the ecosystem resulted in a chaotic web of platforms and providers, with countless intermediaries between the brands who buy ad space and the publishers who sell it.

In programmatic, the advertising industry has lost the value of direct relationships. The rapid expansion of the ecosystem resulted in a chaotic web of platforms and providers, with countless intermediaries between the brands who buy ad space and the publishers who sell it.

This paved the way for inefficiency, a lack of transparency, and the potential for questionable practices. An increase in inventory sources across the ecosystem exacerbated the situation, with duplication and overlap in publishers causing the volume of bid requests to skyrocket on the buy side.

But this situation is now changing as both supply-path optimization (SPO) and demand-path optimization (DPO) techniques are employed across the ecosystem. As we approach the start of a new decade, direct integrations in a simpler, cleaner supply chain are fast becoming the norm – and reopening direct paths from advertisers to publishers.

A Demand Side Perspective (SPO)

Every day, demand-side platforms (DSPs) and agencies place more importance on finding the most direct and efficient paths to quality inventory, allowing them to successfully execute media buys through fewer supply-side partners.

While smaller DSPs are largely doing manual SPO and talking to supply-side platforms (SSPs) to identify overlapping supply, larger DSPs are already exploring algorithmic SPO. They are using new transparency standards such as sellers.json to determine which supply sources are directly integrated with publishers, and which are resellers of inventory.

Jounce Media recently published the SPO Fact Pack, compiled using  ads.txt and sellers.json files. It is designed to help buyers make smarter decisions around SPO based on the scale of ad exchanges and how directly they are integrated with publishers.

Some DSPs are already switching off traffic from sources listed as resellers because reselling can introduce supply-chain fees, cause latency, and provide redundant access to supply that is available through a more direct path. But it’s still too early for most DSPs to take the blunt action of switching off resellers altogether. This could block access to unique and valuable inventory sets that particular supply partners perform well on.

Instead, buyers should take a more considered approach to SPO, using resources like the SPO Fact Pack to create a shortlist of trusted exchanges that predominantly use direct integrations and provide scale, efficiency, and transparency. In addition, buyers should look for exchange partners that offer differentiation in supply, have transparent fee structures and inventory floors, and are third-party accredited for brand safety, fraud, and viewability.

As the industry moves toward direct paths, buyers might be tempted to cut all resellers, but for now it might be more appropriate to make smaller changes when looking at which partners to cut or keep, rather than eliminate them all.

A Supply Side Perspective (DPO)

With the demand side looking to streamline supply with fewer partners and direct paths to publishers, SSPs need to prove their value, leading many to employ DPO techniques. The reverse of SPO, DPO helps the supply side gain a better understanding of buy-side capacity limitations, as well as the type of inventory buyers want to see, so they only send impressions DSPs will value and want to bid on.

By using data – such as win rates, payment terms, bid response times, and ad quality – SSPs can identify their best buyers and ascertain how they like to buy inventory; they can then adjust the demand path to make it as easy as possible for those buyers to win auctions. SSPs can optimize toward DSP-specific KPIs and work to queries-per-second (QPS) limits to avoid bombarding buyers with bid requests.

For publishers, DPO means higher revenues from committed buyers, the security of working with credible ad tech vendors, and fewer latency issues (currently caused by sheer volume of bids).

The Path Forward

For too long the complexity of the programmatic ecosystem has obstructed the direct relationships that are vital for business success, but with the advent of sophisticated SPO and DPO techniques this is changing.

Buyers want simple, transparent supply chains with direct paths to publishers, and collaboration between the demand and supply sides is facilitating this trend. As a new decade beckons, the value of direct relationships is being reestablished in programmatic advertising as direct supply paths become standard practice.

Marketing AI Is Overhyped, and That’s Good

Today, marketing AI is a know-it-all with a short resume. Just like Big Data and personalization, it is also a catch-all phrase that is becoming harder to define. As a result, it is no surprise that most marketers are rolling their eyes at the topic. Nevertheless, this is also the time to take the topic seriously, unless you plan to retire into seclusion in the next few years.

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“artificial-intelligence-2228610_1920,” Creative Common license. | Credit: Flickr by Many Wonderful Artists

Today, marketing AI is a know-it-all with a short resume. Just like Big Data and personalization, it is also a catch-all phrase that is becoming harder to define. As a result, it is no surprise that most marketers are rolling their eyes at the topic. Nevertheless, this is also the time to take the topic seriously, unless you plan to retire into seclusion in the next few years.

New research by marketing automation provider Resulticks shows that 73 percent of marketers are either skeptical, neutral or simply exhausted by the hype around marketing AI. In addition, large numbers of marketers think that vendors using industry buzzwords are full of it. This is not surprising, considering how most vendors are probably over-selling their AI solution. In the same Resulticks study, only 18 percent of marketers claim that AI vendors are delivering the goods as promised and 43 percent felt they were over-promised.

However, for those of us who have lived through (and even reveled in) industry catchphrases, from “marketing analytics” to Big Data to “MarTech,” these statistics indicate that “Marketing AI” is on a strong growth trajectory. This is because the combination of huge industry-level investments and a few success stories is generally a recipe for a new frontier of innovation. Some time ago, I wrote an article on the VC investments being made in data-driven marketing technology and many of the technology solutions were still evolving innovations, like marketing automation. Today, the phrase “Marketing AI is also heading toward becoming broad and meaningless, with heavy investments in the sector. In a few years, underneath that generic umbrella will evolve smart, pragmatic solutions which will become part of the standard tool kit. For example, under the Big Data and MarTech labels, we now have well-adopted solutions, such as CRM, programmatic buying and marketing automation. While there are still bugs and varying degrees of success, there is also a large body of fruitful use-cases which demonstrate how these tools can be very effective.

So, what is a marketer to do in this environment where marketing AI has yet to evolve to a stage where it is a stable and valued marketing tool? The most important step is to set low expectations and begin to dip your feet in the water. Experimenting now is critical, as new skills sets and operating frameworks will be required to fully take advantage of the coming AI-driven innovations, and building those individual and institutional capabilities will take time.

Marketing Strategy Must Co-Opt AI

Artificial intelligence is expected to change the way we market. And AI applications in customer acquisition and customer experience are already under way. However, effectively leveraging AI to expand strategic thinking will be the most difficult and rewarding challenge.

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“artificial-intelligence-503593_1920,” Creative Commons license. | Credit: Flickr by Many Wonderful Artists

Artificial intelligence is expected to change the way we market. And AI applications in customer acquisition and customer experience are already under way. However, effectively leveraging AI to expand strategic thinking will be the most difficult and rewarding challenge.

Customer Acquisition

AI use in customer acquisition is probably the most advanced. Aside from programmatic buying, there are additional applications that will help marketers better target the right prospects and allocate spend to the proper channels.

The eventual goal is to better understand which campaigns work and which ones drive overall engagement. One critical development area is Virtual Assistant Optimization. This is an analog to SEO and follows similar principles. As consumers rely on virtual assistants, such as Alexa, to do what they used to do on search (find recommendations, find a business, etc.), the ability to set up information in a way that can be easily accessed and ranked by virtual assistants will transform the craft of SEO.

Customer Experience

The application of AI as a driver of better customer experiences is also well under way. Today’s AI applications are primarily driven by historical customer behavior, such as product recommendation engines or algorithms that predict preferences.

However, the future of AI-driven experiences also involves the inclusion of current and future context. This means understanding the customer’s location, weather, time, activity and immediate objective to understand the need better. This means understanding that a customer who bought milk a week ago and is headed on vacation today may not need milk for another week.

To achieve high contextual awareness, eventually, IOT generated data will be critical.

Marketing Strategy

Using AI to drive a better market strategy will provide the most significant differential advantage. This is because AI-driven solutions for customer acquisition and customer experience will be developed by solution providers and will be within reach of most companies.

The use of AI to drive strategic decisions, however, will be more bespoke. For example:

  • Can you use AI to help you make sense of the comments you receive on social media, call centers, customer surveys and other VOC platforms?
  • Can you also use it to identify the strengths and weaknesses of your competitors?
  • Can you then identify universal pain points not currently addressed by the industry?
  • How about recognizing innovative and unintended uses of your product that can lead to new markets?

The ability to answer these qualitative and situationally relevant questions is unlikely to come in a prepackaged solution. Rather, insight mining teams, conversant with AI tools and hungry for data-driven insights will be critical to generating strategic advantages. That means a growing need for talent who can understand how algorithms “think” and still step away to see the big picture.

Programmatic Advertising Is Running Amok

Having spent many years in the direct marketing business, I’m usually amused by examples of target marketing gone awry. My personal favorite happened when I was on Amazon purchasing a cell phone bracket for my bicycle.

Target stock imageHaving spent many years in the direct marketing business, I’m usually amused by examples of target marketing gone awry. My personal favorite happened when I was on Amazon purchasing a cell phone bracket for my bicycle. Amazon’s algorithm generated this suggestion:

Amazon wants Chuck to be a pirateNow I don’t know how frequently the pirate boots and the tri-corner hat are bought together with the cell phone mount, but I have to say that the combination was tempting for a few minutes.

The fact remains that direct marketing is not perfect. Many years ago, I made a donation to my alma mater, Rutgers College. The student on the phone asked if I wanted to designate my gift to a particular part of the University, and when I said, “No,” he said, “Well I’m in the Glee Club and we could sure use the money. Will you designate to the Glee Club?”

“Sure,” I said.

For decades now, I’ve been getting mail addressed, “Dear Glee Club Alumnus.” One day, I will attend a Glee Club reunion, certain that many people will remember my contribution to the tenor section.

While these harmless examples of imprecision are humorous, there’s nothing funny about the current exodus of major advertisers from the Google ad network and YouTube. Programmatic ad placement is a boon to target marketing, but like most direct marketing, it’s not perfect.

Major advertisers are in a tizzy over how to control where their ads appear … and the Google ad network is scrambling to get control over placement, as they should be. Advertisers need to protect their brands from appearing in an environment that can harm them.

Just a few examples: Ads for IHOP, Cinnamon Toast Crunch, “The Lego Batman Movie,” “Chips” and others have recently popped up among nude videos from everyday users or X-rated posts from porn-star influencers. Ad Age 3/6/17

A Nordstrom ad for Beyonce’s Ivy Park clothing line appeared on Breitbart next to this headline: NYTimes 3/26/17

Chuck's take on Nordstrom appearing on BreitbartHere’s a great attempt at an explanation for this juxtaposition:

“What we do is, we match ads and the content, but because we source the ads from everywhere, every once in a while somebody gets underneath the algorithm and they put in something that doesn’t match.  We’ve had to tighten our policies and actually increase our manual review time and so I think we’re going to be okay,” Schmidt told the FOX Business Network’s Maria Bartiromo. Fox News 3/23/17

Appearing next to hate speech is particularly problematic for brands:

Google-displayed ads for Macy’s and the genetics company 23andMe appeared on the website My Posting Career, which describes itself as a “white privilege zone,” next to a notice saying the site would offer a referral bonus for each member related to Adolf Hitler. Washington Post 3/24/17

The Wall Street Journal reported Coca-Cola, PepsiCo Inc., Wal-Mart Stores Inc. and Dish Network Corp. suspended spending on all Google advertising, except targeted search ads. Starbucks Corp. and General Motors Co. said they were pulling their ads from YouTube. FX Networks, part of 21st Century Fox Inc., said it was suspending all advertising spending on Google, including search ads and YouTube … Wal-Mart said: “The content with which we are being associated is appalling and completely against our company values.”
Ads for Coca-Cola, Starbucks, Toyota Motor Corp., Dish Network, Berkshire Hathaway Inc.’s Geico unit and Google’s own YouTube Red subscription service appeared on racist videos with the slur “n–” in the title. Wall Street Journal 3/24/17

And as difficult as it is for the ad networks to control, brands have their own challenges trying to protect themselves from undesirable placements. Different departments running different campaigns with different agencies cause ads to appear on corporate blacklisted sites. BMW of North America has encountered that issue because its marketing plan does not extend to dealerships. While the company does not buy ads on Breitbart, Phil DiIanni, a spokesman, noted that “dealerships are independent businesses and decide for themselves on their local advertising.” NYTimes 3/26/17

Clearly our technology’s ability to target has outstripped our ability to control it. And while it remains to be seen what controls will be put in place, it’s likely that, as always, target marketing won’t be perfect.

Which Path? A Better CX for Digital Ads

This past week, there were two research findings that — taken side by side — may show tension in delivering a better people experience for digital ads in programmatic environments.

Top 10 Digital Marketing Trends You Must KnowThis past week, there were two research findings that — taken side by side — may show tension in delivering a better people experience for digital ads in programmatic environments.

On the one hand, Ad Lightning’s “The Ad Quality Report for Publishers” found that “41 percent of tracked ads surpassed the (Interactive Advertising Bureau’s) approved maximum, which is 200 (kilobytes) or less for banner ads and 300 KB or less for display ads.” On average these ads exceeded IAB specifications by a magnitude of four!

Furthermore, “Processor-intensive ads, often video ads, can also cause page delays … exceeding IAB’s limit of 300 milliseconds to render,” the report stated.

Obviously, these flaws can hamper the user experience — and lead consumers impatiently to click elsewhere. That does brands and publishers a disservice, nevermind the most important stakeholder — the consumer herself.

On the other hand, the pressure to go bigger with ads, at least in pixels, appears to be growing, based on cost-per-thousand (CPM) data in Choozle’s white paper, “Digital Advertising Findings & Best Practices Whitepaper.” Where physical size of digital display ads are concerned, 200×200 and 300×600 (pixels) ads have the highest CPM values — with retargeted display ads “had the highest ranked CPM value at $18, nearly five-times more so than any other ad targeting strategy.” Retargeting and contextual targeting generate higher click-through rates, too, over IP and data targeting — though the latter interestingly commands a CPM premium.

Takeaway? If bigger is indeed better in performance, then let’s make sure that the ads delivered are people-friendly. IAB’s LEAN Principles — light, encrypted, AdChoices-enabled, non-invasive — and other IAB ad specifications are intended to protect the overall consumer experience. That also protects brands and publishers. All parts of the programmatic ad supply chain ought to educate themselves quickly about how to enable a better CX, before she clicks herself away.

‘Programmatic’ Goes the World – Media Buying Is Audience Buying

Direct marketers have long had a love affair with data-driven media buying. In the world of direct mail, for example, list rentals and exchanges are filled with data cards (once print, now electronic) rich with audience measurements—the very attributes marketers need to intelligently target their offers to would-be buyers.

Direct marketers have long had a love affair with data-driven media buying. In the world of direct mail, for example, list rentals and exchanges are filled with data cards (once print, now electronic) rich with audience measurements—the very attributes marketers need to intelligently target their offers to would-be buyers.

Response lists not only indicate consumers (and business) buyers who are pre-disposed to buy remotely—half the hurdle overcome—but often household income ranges, gender and other characteristics that enable exceptionally performing customer lookalike and predictive behavior models. Compiled lists supplement and enhance the audience profiles, too. Yes, the offer, strategy and creative each and all are vital, but it’s the list (the data) that makes the success of the offer, strategy and creative even possible.

Of course, this is all old news to direct marketers, including digital marketers who have “grown up” in traditional direct-response channels (direct mail, DR print, DRTV, etc.).

You have to love this LinkedIn piece from Pamela Carr—founder and general manager, Chicago Trib Shops Marketplace—who is advocating that while it is important to have long-term strategies in place to college educate a new generation of marketing students in digital marketing and execution. We have much more to gain, and more immediately so, by retraining the direct marketing professionals we already have to be fully digitally conversant. Why? Because direct marketers, old ones and new ones, truly understand data-driven marketing and audience measurements that unlock any media channel’s potential.

The turn to digital and rise of programmatic media buying exchanges for many media channels. Twice during the past year, The Winterberry Group and the Interactive Advertising Bureau have co-published two white papers on the rise of data-driven, programmatic buying: “Programmatic Everywhere: Data, Technology and the Future of Audience Engagement” and “Going Global: Programmatic Audience Development Around the World.” How wise that the emphases in these programmatic studies are on “audience” engagement—underlying data on audiences—rather than “media.” No wonder Google’s CMO recently announced that 60 percent of its digital media spend will be conducted through programmatic buying. (Google says digital here, but why not other media, too?)

I’ll be looking forward to The Winterberry Group’s Bruce Biegel, in his annual address to the Direct Marketing Club of New York on January 8, where he’ll detail a media recap of 2014—and for the first time projections for 2015—on total media spend, direct marketing media spend, and digital media spend—and the drivers (and inhibitors) of each category.

Who better knows audience engagement than traditional direct marketers? The sooner we can put direct marketers in charge of the programmatic exchanges, the better for all of advertising—and for the audience-brand interactions that will surely follow. Time for retraining!

Programmatic Marketing Demystified for Direct Marketers

Programmatic marketing is tailor made for direct marketers. Why? Because direct marketers know the identity of our customers and opt-in prospects and that data can be matched with browser IDs. Matched customer data takes online advertising beyond retargeting. After clearing away the techno-speak, what you discover about programmatic marketing, or real-time bidding (RTB), is a hidden opportunity for direct marketers. With a 35 percent growth rate projected in the next three years, programmatic marketing is an online opportunity every direct marketer

Programmatic marketing is tailor made for direct marketers. Why? Because direct marketers know the identity of our customers and opt-in prospects and that data can be matched with browser IDs. Matched customer data takes online advertising beyond retargeting. After clearing away the techno-speak, what you discover about programmatic marketing, or real-time bidding (RTB), is a hidden opportunity for direct marketers. With a 35 percent growth rate projected in the next three years, programmatic marketing is an online opportunity every direct marketer needs to become versed in.

My hunch is that a lot of direct marketers are lost, either trying to grasp how programmatic marketing can be practically used by them, or if it’s even worth exploring. I’ve recently investigated and researched programmatic marketing for a client to determine if it made sense for them. In the process, I discovered something that suggests direct marketers have a leg up as users of real-time bidding.

I’ll explain how the opportunity for direct marketers works in a moment. But first, let’s review a few fundamentals about programmatic marketing and how real-time bidding enables it to work.

  1. Programmatic marketing is where you establish automated business rules (who is targeted, and with what ad) so you can quickly and efficiently target your most valuable prospects and prospective customers.
  2. This targeting enables you, the marketer, to serve your prospects and customers with digital ads.
  3. Programmatic marketing is a strategy, or a marketing process. Real-time bidding (RTB) is the tactic that enables programmatic marketing methods to work.

Unlike most banner ads that are indiscriminately shown to anyone on a certain website, the goal of programmatic marketing is to eliminate wasted impressions. That is, you only want your ad to be shown to users who have, based on prior online behavior, indicated a likely interest in the category of the product you’re marketing. Through sophisticated tracking systems, in just milliseconds a bid is processed (based on prior web behavior and other attributes) and the ad served in “real time.”

How does RTB enable programmatic marketing?

  1. Ads are served to people based on online surfing. A person using a search engine with the keywords “investment opportunities” or “new mortgage,” is known to be searching for these topics. Those individuals will see ads on certain websites (even those websites that aren’t in the investment or mortgage business) related to the search terms they just used. These are search retargeting ads.
  2. Another powerful feature of RTB is when an individual visits a site and moves on to other places on the web. When that happens, the user sees ads related to a site they just visited. Those are site retargeting ads.

But beyond ads being retargeted to someone based on behavior, programmatic marketing offers a third hidden opportunity for direct marketers. In this case, ads can be served to your customers without them having searched, or even visited, specific types of sites.

Some advertising technology companies will connect you with a third party firm who can match the names and addresses of your customers and known opt-in prospects to their online browsers (e.g. Internet Explorer or Apple’s Safari). The third party firm will a) remove personally identifiable information (called “PII”), and b) append to your customers or known prospects their browser ID. (To emphasize: personally identifiable information is removed from your list during this process. Codes are assigned to your list so that no names can be tracked back and the user’s privacy is maintained).

The result? Your ads can appear online to your customers or known prospects.

“Typically, around 50 percent of a direct mail list can be matched to online browsers,” says Frost Prioleau, CEO at Simpli.fi, an advertising technology firm. “This enables advertisers to communicate with their known prospects through online display advertising across a wide range of web sites, enhancing their brands and driving incremental sales.”

Looking at this another way, it means that whenever your customers or known prospects are on websites that show banner ads, your ad will be shown (or served) so your customers and prospects can click to a landing page with an offer reserved for them. You can even split versions of ads so customers see one ad, linking to a landing page for them, or you can use a different ad for opt-in prospects with a landing page and offer for them.

This is a significant hidden advantage of programmatic marketing for direct marketers. That is, your customers can see your ads without being retargeted based on search or sites they’ve visited.

Ads served to your customers or known prospects can be more powerful than only retargeting for the simple reason that a current (or former) customer will be reminded of your company every time they’re surfing websites that accept ads. If you have been marketing to them by direct mail, email, or other channels, this is one more opportunity for you to be on their radar screen when they may be researching competitors, or have simply reached the tipping point decision to get more information or buy.