This week, we caught up with Emmanuel Josserand, Senior Director Agency, Brand and Industry Relations at Freewheel and Lead for the Freewheel Council for Premium Video, Europe on the programmatic paradox of premium video.
Like so many journeys of innovation, the programmatic evolution has been a complex progression of developments on both the buy-side and the sell-side. In an ideal world, this evolution would eventually lead to a solution that works for everyone, but in the case of premium video, the promises of programmatic have not yet delivered their full value. This is the programmatic paradox.
Overview of the paradox
It would be easy to explain the disconnect between sell side and buy side by saying the sell side wants a high value for its inventory, while the buy side wants to drive prices down. But this – of course – would be too simplistic.
When media agencies first emerged and began buying TV inventory, we saw the emergence of a ‘winner takes all’ approach, using the upfronts to buy as much volume as they could at the best possible price to resell to advertisers. The advent of programmatic theoretically enables a similar approach, just with easier trading mechanisms, better access to inventory at large, and more data. This saw the rise of a number of tech platforms that intended to concentrate demand. However, with so much competition and inventories it proved very complex for traders and DSPs to consolidate demand, innovate and deliver for their buyers, while guaranteeing the best prices for publishers.
Programmers, on the other hand, need to find a balance between the advertising their audience is willing to accept, and the value they need to create from impressions. There are only so many viewers, and time to consume video, so programmers need to make the most of every impression. They cannot simply add more units to a page or move audiences to additional pages as often happens with display – where inventory is plentiful and easier to target. This situation is complicated by the disparity between players where, in many European markets, some programmers will have masses of inventory, enabling them to accept lower prices than smaller premium video suppliers. The latter may offer better value, with audience targeting and niche inventory, but delivery can be an issue in addition to the inability to push prices beyond the psychological threshold set by the market leader. These obstacles, along with concerns around the impact on customer experience of opening up inventory to unknown buyers, mean premium video suppliers are being cautious and methodical about moving into programmatic.
Working around the programmatic paradox
As the TV and premium video industry tries to work around the programmatic paradox, there has been a significant increase in adoption of programmatic guaranteed. This model enables programmers to reserve specific inventory for buyers with value added through efficient delivery via a DSP, and to charge a pre-agreed price. It allows premium video providers to maintain control and almost replicate the direct sold model by prioritising programmatic guaranteed and pushing inventory through that business channel first before moving on to others, should inventory remain unsold. For smaller broadcasters this helps to deliver volume, while market-leading programmers can seek guaranteed value.
While programmatic guaranteed has some important upsides, it is a step on TV and video’s programmatic journey, not an end goal. There is no one-size-fits-all solution, so the industry should aim for a comfortable mix of channels including direct sold, programmatic guaranteed, Private Market Places (PMPs), open market and inevitably other options that have not yet emerged. To keep moving forward it is critical that both sides of the industry expand their knowledge of the other, as well as increase their understanding of the programmatic processes in premium environments.
Considerations for the sell-side
Programmers understandably want to sell their high-end inventory, but it is necessary to recognise that not every buyer has the budget to buy these high-value placements and will be looking for cheaper alternatives. By driving impressions in a way that works for advertisers, DSPs are simply fulfilling their mission.
In addition, it is important to understand that the TV and video business is very cyclical – much like many other businesses – so offers must be regularly revised. Impressions that are considered premium one month may not be the next, as new shows are launched and audiences fluctuate. TV and video buyers are incredibly sensitive to the latest trends and even minor shifts can cause significant price erosion in a way that is not often seen in digital display.
Reflections for the buy-side
From the buy-side perspective, the idea that programmatic is only used for unsold and low value inventory is long gone. This may have been true in display some years ago, but it is no longer the case, and never has been for premium video. Any inventory can be made available through programmatic pipes, so ideally buyers need to structure the way they do their buys and decide early on what to deliver through direct, and what to deliver through programmatic, finding the right balance to meet their/advertisers’ goals.
The media industry is complex, and more needs to be done to bring clarity to the world of programmatic, particularly for premium video. For instance, there is a lot of discussion around supply path optimisation (SPO) which attempts to minimise intermediaries and ensure the most direct path to publisher inventory. While this might make a lot of sense in the world of display, it is different and hardly applies to premium video. Indeed, with many broadcasters and premium video suppliers operating private exchange models to avoid diluting value by spreading their inventory around, buyers are already enjoying an almost direct relationship. When a private exchange is set up, a dedicated agency seat via a DSP is created, drawing a direct line between the buyer and the seller. This can then be used to effectively operate models such as programmatic guaranteed or private marketplace and set up one-to-one arrangements.
The idustry is currently at a crossroads where the knowledge and skills of TV and digital, on both the buy and sell sides, need to be shared as a matter of urgency to avoid greater confusion. There is an opportunity for buy-side partners like DSPs to achieve higher performance against their client’s advertising goals by further investing to include premium video audiences. To respond to advertiser’s needs DSPs should adhere to specific broadcasters’ standards that articulate particular processes and unlock access to these desirable and highly engaged audiences. The uncertainties created by programmatic which led to the paradox itself has been temporarily answered by programmatic guaranteed, but to use this channel in a more permanent way, and further move forward with the programmatic journey, all parties need to be more open to learning, sharing and understanding. The industry can choose a path that takes the premium video ecosystem beyond the programmatic paradox, but it will require patience, transparency and collaboration to reach the final destination.