Publishers who embrace automated ad selling improves overall profitability, study says.Peter Power/The Globe and Mail
As advertisers move toward automated computer systems that help them buy ad space online faster and cheaper, the publishers that sell that space are "leaving money on the table" because of a lack of understanding of this fast-growing marketing tool.
That's according to a new study released on Friday by Boston Consulting Group (BCG). Some publishers are reluctant to embrace "programmatic," or automated, ad selling, even as major advertisers such as American Express and Procter & Gamble have expressed the goal of shifting a majority – if not all – of their digital-ad budgets into this form of buying.
The study was produced through interviews, surveys and workshops with 25 publishers – the companies that own news websites, for example, or e-commerce sites – in North America (including one company in Canada), Europe and the Middle East. Those included companies that publish the website of a print publication as well as digital-only publishers.
It found that publishers who are embracing automated ad selling "outperform the market and improve overall profitability."
Those that don't are at risk of losing a major competitive edge in the future.
"Those who haven't embraced automated selling do so out of a belief that this is another form of remnant selling" – selling off ad space that no one else has purchased to get rid of it at bargain prices – "that drives prices down and debases the value of the ad space. They're leery of it," said Neal Zuckerman, a New York-based partner with BCG and co-author of the report. "The savvy publishers know that their customers want it: Advertisers want the ability to buy through automated means."
It's an important issue for publishers. Automated buying has doubled in Canada in just the past two years, according to research firm Magna Global. It is expected to account for almost 30 per cent of all the money flowing into digital advertising this year, or roughly $1.2-billion, with no signs of growth slowing down. Growth in automated ad selling is outpacing other types of digital ad sales in both desktop and mobile, according to BCG. That matters for publishers struggling to maintain revenues in a cluttered digital world.
Despite all this, less than one-quarter of the publishers involved in the research are taking full advantage of the technology: Most are failing to make data analysis part of their sales initiatives. That's a major failing, because for the advertisers on whom publishers rely for their revenues, data is central to the promise of automated ad buying. Advertisers are focused not just on cost cutting by automating buying to make it more efficient – they are keen to learn more about the customers they are trying to reach.
"Appending primary data [which publishers gather about their subscribers] to let advertisers target your consumers – that's a win," Mr. Zuckerman said.
Publishers are missing out by delegating responsibility for automated selling to hived-off teams and not integrating discussions about automation into their sales calls, BCG found.
Furthermore, 81 per cent of the time staffers spent on automated processes had to do with purely administrative tasks such as billing and monitoring campaigns, as opposed to "value-creating activities" such as analyzing the bids that came in through automated auctions for their ad space in order to price ad space more effectively.
Those who avoided pitfalls like this saw rewards: One publisher in BCG's study has seen automated selling grow to half of its overall digital revenues, and has not seen prices for its ad space fall.
"We [price] programmatic at least the same as [ad space sold the traditional way, directly with advertisers and their media agencies,]" one unnamed U.S. publisher told the researchers. "It's the same inventory so it should have the same value … We have seen both our revenue and our [prices for ad space] grow and our programmatic approach has been key to that."
The study was commissioned by Google, which provides automated ad services for both publishers who sell ad space and advertisers and their agencies that buy it.
Google had no control over the content of the study, according to BCG.
Among the recommendations BCG makes to publishers is to ensure their ad sales departments understand automated selling – it is a topic still overrun with jargon and, because of the technical aspects, it is confusing to many people on both the buying and selling side. Sales reps need to understand it so that discussions about automation are part of the overall selling process. Automation does not have to be the territory of leftover unsold ad space or low-quality websites.
"Quality still matters to advertisers. Being adjacent to the right kind of content, really matters," Mr. Zuckerman said.
"You're not just taking [automated bids] to get the marginal dollar. You're exposing the right inventory to buyers who want that value," he added.