Programmatic: Advertising’s ‘New Frontier’

Television advertising sales has been a business of relationships. Stations, networks, and rep firms work hard to attract and keep the best talent on their sales teams – those individuals who can develop relationships and turn them into advertising dollars. Credit departments also rely on these professionals to leverage their relationships for information, preferably a credit app, in order to make an informed decision about extending credit.  

But times have changed. In the digital world, automated ad-buying tools are replacing human interaction.

Programmatic ad-buying technology is becoming an ever more necessary component of ad sales programs. Citing a Forrester study forecasting programmatic ad spend in North America to double to $39 billion by 2019, John Wren, CEO of global advertising giant Omnicom Group, said his clients’ decision to spend less in the TV upfronts this year was part of “the shift from mass marketing to mass personalization.”

Yet, even the mention of programmatic advertising sales can be enough to elicit a look of absolute bewilderment. One of the reasons the term “programmatic” is so confusing is that it means different things for different situations. In fact, as C. Robin Szabo, president of the media collections firm Szabo Associates, Inc., explains in an article for the current issue of MFM’s member magazine TFM (The Financial Manager), there are four distinctly different types of automated transactions under the programmatic umbrella.

The Interactive Advertising Bureau (IAB) defines these four types as:

• Automated Guaranteed — Closest to traditional digital direct sales, automated guaranteed transactions involve negotiation between one buyer and one seller, guaranteed inventory and pricing, and the offer of equal campaign priority status with other direct deals. The request for proposal (RFP) and campaign trafficking are all accomplished through automation, providing the benefits of traditional direct sales while lowering overhead costs.

• Unreserved Fixed Rate — Attractive to advertisers that demand some predictability within the exchange space, these transactions are pre-negotiated between one buyer and one seller, and the pricing is fixed, using metrics like cost per thousand (CPM) or cost per click (CPC). However, unlike automated guaranteed transactions, the inventory is not guaranteed. The publisher commits to a price, but there is no mechanism for getting a buyer’s commitment to the inventory prior to execution of the deal.

• Invitation-Only Auction — In this type of transaction, publishers restrict participation to select buyers by using a “whitelist” (allowed participation) and/or a “blacklist” (refused participation). Buyers are expected to bid on inventory, and the sale is awarded to the highest bidder. Unlike the previous two transaction types, prices are unfixed and variable, although price floors may be set.

• Open Auction — Described as the “Wild West” of auctions by the IAB, open auction transactions typically don’t involve a direct relationship between the buyer and seller. Any and all buyers can access the publisher’s inventory and buyers are often unaware of the publisher’s identity. These transactions typically use either a demand side platform (DSP) to provide buyers with a list of exchanges or a seller side platform (SSP) that a buyer can automatically opt into.

Understanding Ad Fraud

Unfortunately, as Szabo points out, programmatic advertising includes more than its fair share of fraud. While the “personalization of mass media” drives advertiser interest in programmatic buying, “its performance metrics are vague and systems are easily infiltrated.”

Digital ad placements purchased through exchanges and even directly from publishers are subject to infiltration. The IAB estimates as much as 36% of all Web traffic can be considered fake. Criminals use code to create fake “robotic” traffic, called “bots,” which simulate human behavior in order to generate false ad views, ad clicks, and site visits.

The ‘Transparency Gap’

Programmatic buying is particularly vulnerable to ad fraud because of what DoubleVerify, a company that offers transparency and accountability solutions for digital advertising, calls the “transparency gap.”

“In programmatic buying, the transaction URL often ends up being different from the true URL because of the numerous handoffs required to process the request,” explains Szabo. “While many of these mismatched URLs occur for legitimate reasons, this gap creates an environment that is rife with hiding places for fraud.”

Programmatic ad fraud affects both advertisers and media providers. The name of the game here is eyeballs viewing ads. Since advertisers generally pay for ads that are loaded when a user visits a Web page, bot infiltration results in marketers paying for eyeballs that were never there.

On the other side, it’s considered a legitimate practice to purchase traffic to increase viewer impressions. Media providers can fall prey when their traffic driving agreement turns out to be with an ill-intentioned company. Szabo comments, “By unwittingly buying traffic from fraudsters, media can compromise their available inventory and hurt their relationship of trust with customers.”

With this in mind, he recommends using only traffic sources that have their audiences measured by verifiable third-party vendors. Szabo further suggests that the station’s Web site and other digital media platforms have a policy and technical methodology to distinguish between human and nonhuman traffic as well as processes for removal of anything determined to be fraudulent.

Know Thy Buyer

It is also important to maintain the same due diligence practices used when selling traditional media. Szabo says one tool that can help is “Deal ID,” a unique sequence of characters used to identify buyers and sellers which can be encoded into the exchange. This will allow publishers to provide different information to different buyers and thereby control who gets to access their inventory and to what extent.

He adds, “As in traditional media advertising sales media should continue to apply their credit policies and procedures to the programmatic environment.” This includes engaging the credit manager in deciding whether or not a prospective customer is creditworthy and the level of credit that should be extended.

EMCAPP Can Help

MFM’s BCCA subsidiary, the media industry’s credit association, has been hard at work developing the electronic processes that will help TV stations and other media providers keep pace with the speed of programmatic ad buys. Now in its second year, EMCAPP, The Electronic Media Credit Application, allows advertisers to complete and update one application that can be viewed by any participating media provider via the online portal. As soon as an application has been accepted into the EMCAPP database, BCCA Credit Investigators begin the research process. This shortens the time for stations and other media providers to receive a complete and current media-specific credit report for the applicant.

We have also expanded the amount of credit information that is available via BCCA. In addition to providing members with access to BCCA Custom Reports (media-specific) and Commercial Credit Reports (a compilation of D&B, Experian, Lexus Nexus and Edgar Online information) our database now includes two additional reports, D&B Trade+ and Canadian Equifax. More information about EMCAPP and the BCCA credit reports is on BCCA’s website.

Programmatic At MFM’s CFO Summit

Since programmatic advertising is one of the industry’s hottest topics right now, MFM has engaged programmatic expert Tim Hanlon, Founder and CEO of The Vertere Group LLC, to provide an in-depth look at the topic during our upcoming CFO Summit. Hanlon is widely regarded as one of America’s most influential thought leaders in the concentric fields of emerging media, marketing and digital technology. The Summit is an invitation-only event with attendance limited to the industry’s most senior financial professionals. The group will be meeting Feb. 26-27, 2015, in Fort Lauderdale, Fla. (additional information on the MFM website).

As Szabo concludes in his article entitled “Advertising’s Perplexing New Frontiers,” which is also available on our website, the fast pace of change in the media marketplace and the challenges to credit departments associated with it will not be slowing down. He recommends staying abreast of changes, meeting the challenges head on, and taking steps to safeguard inventory from fraud.

Welcome to advertising’s “New Frontier.” At MFM and BCCA we are here to help you navigate it; let us know what you need.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.