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The Reality of Publisher Programmatic, Hot Topic, UK, June 8th, 2017
- 1. Prepared by Danny Spears June 2017 The reality of publisher programmatic 1
- 2. 2 How did we end up here? The reality of publisher programmatic The rise of the automation Supply Decisioning Transactio ndata
- 3. 3 Inside the publisher’s digital ad business The reality of publisher programmatic The impact of intermediaries is significant Digitaladrevenue 12 - 13 13 - 14 14 - 15 15 - 16 16 - 1711 - 12 * Model assumes total impact of transactional fees = 70% reduction in advertisers' programmatic 'working media’. Intended to be representative of market average over period. Programmatic revenue Direct revenue Tech tax
- 4. 4 What’s the impact of this inefficiency? The reality of publisher programmatic Simple...advertisers’ are being warned to stay away.
- 5. Publisher, you have been hacked
- 6. 6W Taking back control. The reality of publisher programmatic The publisher’s server-side toolkit PUBLISHER
- 7. 7 Good news, for change is coming! The reality of publisher programmatic 5 x immediate recommendations Demand OR decisioning? There’s no such thing as free Reward good behaviour Collaboration is key Take control of your bidstream data Thanks daniel.spears@theguardian.com
Editor's Notes
- Good afternoon, I’m Danny Spears and I’m Programmatic Director at the Guardian. I'm your last presentation this afternoon, which in cricket would make me a tail-ender. Now I don't know much about cricket, I do know that you put your shittest player in to bat last. The irony isn't lost on me...thanks Digiday. So, what am I going to talk about… Well, I thought it might be interesting to talk about the battle for control of our digital ad business… Now I’m sure you’re all familiar with the Guardian brand. What you may not know is that The Guardian is 196 years old, and is one of few global media brands that isn’t owned by a private individual or corporation...instead we’re owned by a trust. We started life in Manchester, setup in response to the Peterloo Massacre which saw members of the public, and journalists, beaten and killed by the police and the army. More recently, our biggest investigations have exposed the truth around tabloid phone-hacking, of secret service surveillance and of tax evasion amongst the global elite. Times have moved on, but our journalism continues to expose items of public interest, and which influence societal change. But societal purpose isn’t unique to the Guardian, of course - we believe that a plural, diverse media is a key pillar of democratic society. And only more so in uncertain times - like today. Now you might be saying; what the hell has this got to do with header-bidding? Well, it talks to our business-model; in order to maximise our influence and efficacy, we believe in removing barriers to access our content - and so we’re free, not behind a paywall. And which means that we are part of the free internet. But journalism that changes the world is an expensive activity - and so our business model is our hugely dependent on advertising revenue. There was a day some time ago when a harsh reality struck like a bolt; the realisation that we’d completely lost control of our business. Our pricing, our distribution, our market intelligence and our customer-relationships were actually being controlled by external parties - and not by us. And so, we’d been completely disintermediated. {SLIDE} Anyway, I presented this realisation to Exco and the Board and I dressed it up as best I could. And I told them; “the bad news is we’re fucked, the good news is the only way is up!”
- So how did we end up here… The entrance of programmatic technologies, and adtech began shortly after the economic crash of 2008. The global digital ad market was still huge at around £60bn, but it was a time when advertisers were looking for increased efficiency from their declining marketing budget. Meanwhile, publishers were crying out for incremental revenue. Adtech seized this opportunity to sell the promise of automation and efficiency as a means for them to take control of three things: Firstly, captive-supply of user-engagement, the commodity at the heart of all advertising. Secondly, to take control of ‘decisioning’ – the function that determines which buyer is connected to each opportunity made available by the seller. And thirdly, to establish control of bidstream data, which of course is a rich form of market intelligence and a view of intent. Now this shift had been seen before; the finance markets went through their big bang in the1980’s, and which provides a model for disintermediation which lent itself nicely to digital advertising. However, there is a significant difference between finance and advertising in that our market isn’t regulated. This creates a unique opportunity for vendors to establish a lucrative position as media-owner, broker, market-maker and exchange....which simply wouldn’t be allowed in the finance world. But what does that mean for the publisher?
- So let’s have a look at the Guardian’s digital advertising business over the past six years. Now these grey bars are representative of the gross media spend that our advertisers have pointed towards us over the period... Looking at this trend, you might be asking; how on earth have these guys defied the market?! I can assure you, we haven’t...let’s look at the detail. (BUILD) The dark blue blocks represent monetisation that the Guardian fully-controls by virtue of our selling direct to the customer. We’ll label that ‘direct revenue’. (BUILD) The light blue block is monetisation that we don’t fully control; by virtue of it being conducted by an intermediary. Whilst they work for us as our agent, they control pricing, distribution - and they also broker bulk trading deals with our customer. We’ll label this ‘programmatic revenue’. (BUILD) And this leaves the red block; money which buyers’ think they have spent with the Guardian- but which is ultimately lost to tech fees and margin. And we’ll label this ‘tech tax’ (BUILD) And so whilst we think that our gross adspend has grown considerably, you can see that our net advertising revenue is pretty much flat. And I think this chart quite nicely captures the impact of intermediaries on the publishing industry - and it demonstrates how adspend that advertisers’ intend for publishers actually ends up in the hands of others. If you’re an advertiser, or buyer, you might point to this as a publisher-problem; but this is very much your issue too.
- You should be clear that this is having a direct impact on your working media - and therefore the outcome of your investment in advertising. You may well be losing more to transactional fees, than you are spending on working-media. Imagine buying a pair shoes online for a £100, and then being asked to pay another £140 on postage! It would be ridiculous. But that’s the extent of the issue in our industry. This is a view from Ebiquity as to the effectiveness of digital advertising investment versus other media. The issue that we are talking about is killing the effectiveness of digital display advertising. If you’re a TV and out of home person….your area of the market is next in line for automation. Consider this a warning as to how it could play out! And so the programmatic ‘big bang‘ has happened. Whilst we’re through some of the chaos and confusion, we acknowledge the fact that we continue to operate within a fractured, opaque and inefficient marketplace. As a result, programmatic has a massive trust issue - and specifically where advertiser, publisher - and increasingly the consumer- regard adtech as the rather large elephant in the room.
- Now 10 years ago the publisher just had an adserver, and that adserver was as the publishers decisioning-making agent. It would decide how each ad impression should be allocated according to the publisher’s own rules. As the programmatic opportunity emerged, publishers began introducing new technologies to their ecosystems. Some were plugged in ‘round the front’; others were given a back door into the adserver. {SLIDE} But in plugging these systems into the adserver, the publisher started to cede control of decision-making - and which has ultimately led to a complete loss of control of their advertising systems. The optimal setup for the publisher is one which delivers a single, unified and transparent auction within which they can have multiple partners compete in order to to maximise valuable bid-density. For the advertiser, the value is in creating a ‘direct line of sight’ which supports access to the best inventory at maximum scale; and at minimum transaction cost. And of course, these are two of the principles that underpin the concept of header-bidding. Whilst header-bidding was seen a tactic through which a publisher could drive yield, and fill – it isn’t widely recognised as a means through which the publisher could take back control of their ad business. The technology could be have been used to restore their unique position around supply, and to create competition between sources of demand that favour those who operate with transparency and efficiency. Now one of the reasons this opportunity wasn’t realised was because many publishers’, just as soon as they’d restored control, immediately put that control back into the hands of an external party. It’s now widely recognised that client-side header-bidding has other downsides too; there’s latency concerns and limited commercial scalability.
- Now I could tell you that server-to-server is the answer to the publisher’s programmatic challenge. But it’s not; like header-bidding, it’s just a means to an end. This cartoon is from Adexchanger and it depicts the ongoing battle between vendors for control of the publishers’ ad business. This battle also explains their unwillingness to collaborate with one-another – or even with publishers who want to keep control of their business for themselves. What publisher’s actually need is to restore sovereignty - to take back control of their digital advertising business. The server-side toolkit delivers powerful capability that can underpin that strategy to restore control. It creates the foundations on which the publisher can realise their full market value, minimise transaction cost and maximise market intelligence. Meanwhile, vendors will seek to maintain their position of control through offers ‘free’ technology and service. They will talk of match-rate issues, the need for server co-location and other technical barriers. The clear message to publishers is “leave the technology to us. You stick to writing articles”. A friend who works in the City as an electronic-trading specialist gave me some invaluable advice. He said “Danny, always remember….complexity is the weapon of the incumbent”.
- So that is the story of how publishers’ have ceded control of their advertising business. But there’s good news for advertisers and publishers, because change is the horizon… Advertisers are already agitating for transparency; they are growing in the awareness of our supply-chain issue – and it’s beginning to influence their partner selection...as we’ve seen with P&G. However, it would be be naive to think that the market will change on it’s own; because there are still too many agenda’s that are aligned with opacity. So we should be really clear; this is on us to make happen. I'm advocating server-side technology as the toolkit through which the publisher can reestablish sovereignty - and return a position of health. If you do decide to outsource control of your advertising business, make a conscious decision as to whose hands you put it in. (BUILD) Immediate items for your attention! Firstly, for publishers; frame your decisions around ‘adtech’ by distinguishing between an opportunity for ‘incremental demand’ which integrates into your strategy – and a vendor’s appetite for control of your decisioning. I think it’s fair to say, we don’t need another server, wrapper or dashboard…we’ve got them coming out of our ears. Secondly, beware of ‘free’ technology and services - and seek to understand the underlying business model. The ad markets procurement of technology must grow-up; we’ve learnt that buying enterprise technology on a share of revenue is a painfully expensive exercise. And whilst it might avoid a conversation with your CFO about capital expenditure - it will mean that you are carrying unknown cost. Thirdly, let’s kill our dependency on black-boxes. They expose buyers and sellers to uncertainty, and therefore risk. Remove the incentive for opacity - and instead reward vendors who operate with genuine transparency. Fourthly; collaboration is key. Buyers and sellers must work more closely together. At the Guardian, we are already working with our key customers to create a full view of our shared supply-chain, and to identify inefficiency in our pipes. It means that we can make mutual optimisation decisions which maximise our advertisers’ working media. And finally; for advertisers and publishers alike; secure ownership of your transactional data as an urgent priority. Whilst we’ve got to this point as we have, it would be naive to think that we can continue to operating as businesses without basic market intelligence. Challenge those who are withholding it from you. Summary I hope that’s been interesting and useful. I recognise that our view of the market, and it’s problems, is driven by our publisher perspective. For advertisers, I hope this serves as reassurance that publishers are perfectly aligned with your interests. We want to maximise your working media, and to give you every reason to invest in our properties. And for technology vendors – whilst the opportunity for control of my digital ad business is no longer on the table, I hope that this highlights the opportunity for a new type of mutual-partnership. There is an immense opportunity for vendors who are genuinely aligned with their publisher’s agenda, who operate on the basis of transparency and who bring new, empowering capability. We look forward to the next phase of programmatic.