Establishing a blueprint for programmatic

There is no one blueprint for programmatic, not now and not in 12 months’ time. The route that each brand takes will be determined by its business principles and by its approach to marketing.

Nevertheless, the choices that all brands make will be driven by some common themes, including resource, transparency, integration, geographic footprint, data and technology.

The key question that all brands will be asking is whether they have the resources or the reason to run these services in-house, whether to develop a hybrid alternative or to continue with Agency Trading Desks (ATDs) but on different terms.

The truth is for all the talk of in-housing programmatic, this may not work for all. WFA research conducted into ‘media transformation’ in May 2016 found that resource remained an intractable issue. We’ve seen companies make strides towards up-skilling in this area, even within the past eight months, but providing the heavy-lifting on a global basis is still a challenge. In the main, this model is likely to be the preference only for brands that have an intrinsic connection to commerce, directly from advertising.

Of course, the way that businesses sell to customers is evolving rapidly, and an ambition to provide ‘commerce everywhere’ is something we hear regularly within our chief digital officer community. Further into the future, the in-house model may become increasingly viable.

Our research found that hybrid models were growing rapidly, and it feels easier to predict with confidence that these will continue to be selected by clients. ‘Hybrid’ models are now used by more than a fifth of respondents in total having been conducted just at the fringes of WFA’s membership two years ago.

For many WFA members, the hybrid approach offers the ‘best of both worlds’, combining both outsourcing with control and has considerable appeal for many marketing organisations.

‘Precision at scale’ became the mantra of the media director in 2016, delivered through technology. But technology is not a silver bullet for transforming business or for building brands, as P&G chief marketing officer Marc Pritchard outlined in his speech to the IAB recently and as WFA president David Wheldon has previously expressed.

That said, understanding the ad tech space is, of course, important. Hybrid approaches help to draw outside influences in, helping to transform from the outside in.

And increasing proximity to vendors is not unique to the programmatic marketplace. We’ve found that many WFA members are consolidating their ad serving rosters and 30% of survey respondents are establishing their own direct relationships, both to cut costs and gain more control over data, ensuring they have the feedback signals from their digital media.

At the same time, the practice of building direct partnerships and joint business plans with the largest digital media companies is now being followed by over half of WFA’s membership.

Thanks to these wider experiences, it no longer seems like a huge step to contract directly with programmatic companies as it might have done a few years ago, when spend volumes were smaller and knowledge levels were much lower.

Independent Trading Desks and programmatic agencies have seen usage increase significantly by 12 percentage points compared to the previous wave of WFA’s programmatic research.

But ATDs remain the principal approach for nearly 40% of the world’s biggest brands and for good reasons. Ease of integration with existing products and services, the range and scale of deals, geographic footprint as well as the ability to keep master comms strategy together with execution are all compelling factors. The ability of ATDs to pull strategy and execution together has increased as they migrate down to agency brand level.

Other changes to the programmatic market will also likely work in the agencies’ favour. Industry research into ad fraud, such as ANA’s Bot Baseline, WhiteOps’ Methbot insight, and even our own Compendium, which predicted that fraud could represent in excess of $50bn today, have all helped to raise the profile of the threat. We are seeing greater numbers of clients pursue the relative sanctuary of Private Market Places (PMPs) as a consequence.

Two thirds of respondents to our survey are increasing their usage of invite-only auctions, and over half increasing their investment via fixed price exchanges. This will also help them boost their often very low ‘premium’ inventory access as brands recognise that context matters even in an era of audience targeting.

The ability of agencies to negotiate these deals and secure these environments, could be a strong reason for brands to continue down the path of ATDs.

How far large brands will move away from the ATD model that still dominates the landscape, of course, depends on what happens in the agency and tech landscape. Agencies are nothing if not entrepreneurial and we can be confident that they will go to extreme measures to retain client accounts.

The success of Omnicom’s Hearts & Sciences outfit has been at least in part due to its willingness to subscribe to a model where “clients can look behind the curtain”. Agencies will have to open the doors to their systems and deals far more than they do today to succeed in the future.

Marc Pritchard has highlighted client concern around the whole digital marketing arena as well as the fact that brands will start to set minimum standards both in terms of the ad formats and platforms they are happy to buy but also in terms of the advertising technology they are happy to use.

The world of programmatic is currently in flux, which makes it hard to predict the future with any level of certainty. At the very least, our research suggests that clients are making considerable changes to the way they work.

Many have chosen to stick with ATDs because they represent integration and consistency, but it won’t be on the terms of the past. No major brand will commit without a comprehensive review of their contracts. The work done by ISBA in the UK to prepare template contracts, now reproduced in the US and Australia, illustrates the appetite for contract scrutiny among clients.

The only guarantee for the next 12 months is that every word in the terms and conditions of the trading contract will be poured over.

Originally published in The Drum (23.2.17)