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New Yahoo, AOL, Microsoft Pact: Automating Direct Sales

Yahoo Piloting Computer-Based Buying of Top-Shelf Supply

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Yahoo has begun automating the sale of its premium ad slots, so that an advertiser or its agency would be able to purchase the portal's top-tier inventory through a computer. In other words, the process will be more akin to booking a hotel stay on Booking.com versus the traditional media-buying process that is more like reserving a room through a travel agent.

Yahoo's automation of premium ad sales – often referred to as programmatic premium or programmatic direct – will ramp up through the fourth quarter of this year and be "full blown" in the first quarter of 2014, said Yahoo VP-Product Management for Display Advertising Dennis Buchheim.

Yahoo's program results from the latest pact the company has struck with AOL and Microsoft. Two years ago Yahoo, AOL and Microsoft started selling each others' low-end display ads through their respective ad networks and real-time bidding exchanges.

Yahoo, AOL and Microsoft are issuing a call for a common technological standard that would make it so a direct-sold media buy like AOL's enormous, app-like Devil banner unit could be plugged into a computer and run without the need for phone calls, emails, faxes or three-martini lunches. Essentially a media buyer could perform this transaction in the middle of the night in bed.

The pact among AOL, Microsoft and Yahoo corresponds with an industry trend toward conducting more complicated and lucrative media buys through automated systems.

"Think about digital advertising in this fast-paced, high-tech world. Then look at how we transact media in the online space, and it's the Stone Age. The idea that we're still pushing paper back and forth is mind boggling," said Daniel Sheinberg, senior director of display marketplaces at Microsoft.

AOL hosted a so-called "programmatic upfront" Monday night to pitch advertisers on TV-style ad-spending commitments for more of its top-tier inventory. And Yahoo has been privately doing the same. The pact, however, would potentially extend the trend to more parties.

With an agreed-to set of standards, publishers, ad tech companies and agencies would build development tools called application programming interfaces that share a common backbone but could be modified to accommodate variations like ad units native to a specific publisher. Yahoo's API would be different from AOL's, AOL's different from Microsoft's, and so on. "It's essentially exposing a direct-sales system," Mr. Buchheim said.

Media buyers, or the ad-tech companies they use to place their automated buys, could one day build a Kayak-like interface that could source premium ad openings from top publishers, including ad products available and prices, in order to compile a campaign that could span the home pages of Yahoo Sports, ESPN and The New York Times sports section.

"If you use the same interface, the way you talk to [publishers] like Dow Jones and CBS is going to be the same so it makes it easier for media companies and buying systems to access all this inventory," said Tom Shields, CEO of Yieldex, an ad tech company that works with publishers including The New York Times, ESPN, Pandora and Conde Nast to get the most money for their ad supply. Yieldex has begun testing a tool built on the common standards agreed to by Yahoo, AOL and Microsoft.

The common toolset could also surface the relationship between premium placements as awareness buys and auction-sold supply for driving transactions. For example, an automated ad buying company like Turn or MediaMath could build a tool that would let an advertiser buy Yahoo's premium auto inventory and support it with the regular, cheaper ad slots sold through real-time auctions in order to retarget consumers who saw the top-tier placements.

"The reality is media plans have never been [separated into] reserved or nonreserved. What this technology and standardization will allow us to do is bring the two worlds together," said Seth Demsey, senior VP-global advertising products and strategy for AOL's ad tech arm AOL Networks.

For all the attention directed toward advertising bought and sold through real-time auctions, Mr. Demsey estimated that less than 50% of the display inventory available today is sold that way. There is "a lot of premium inventory in the real-time market, but by and large it [consists of] what is considered to be class two or class three inventory. Not the crème de la crème," he said.

Automating more of that top-shelf supply could unnerve publishers' sales teams who are traditionally charged with selling those spots and already view the auction-style online advertising ecosystem with the same mistrust that print publishers held against the web. However Mr. Buchheim said that ad salespeople will welcome the shift of their roles from pitching products to consulting with advertisers on how to most effectively target and coordinate their media buys.

Some media buys will still be reserved for publishers' sales teams. "The Yahoo home page takeover will not be available through [an automated system] anytime soon," Mr. Buchheim said.

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