Programmatic 3.0 is About Fixing Programmatic 2.0
The current programmatic space is wrought with challenges, but programmatic 3.0, as an Advertising Week panel coined it, pales in comparison to the challenges of programmatic 2.0.
Programmatic 1.0 arose from a need to sell remnant inventory, explained Shenan Reed, president of digital for WPP's MEC in North America. "There was better ROI for us [in 2.0], but it led to a lot of pushing down on price and dilution of quality," she said. "[Programmatic] 1.0 had better quality, but 2.0 was wrought with challenges. 3.0 is our turn to say we want to make it work harder for us."
In the early days of programmatic, when publishers were trying to sell extra inventory, sell rates were only 10% to 30%, she said. "The challenge was in creating revenue that was meaningful. They ultimately sold off too much inventory at too low a price."
Today, it's about getting back to quality inventory that reaches the right people with the right messaging, agreed panelists.
"There was a time we had to sacrifice scale for quality. Now big publishers like me don't need to do that anymore," said Jeremy Randol, VP of programmatic sales strategy at Pandora. "2016 will be the year of programmatic mobile. We've seen companies make strides in defining cross-device [metrics]. DSPs are doing a better job. And there's a migration toward more quality connections."
He said Pandora one and a half years ago hired people who could make programmatic a mainstream sales tactic. His team has grown to 10 people.
Ms. Reed asked the group if in the next version of the marketplace advertisers will be able to buy against a cost-per-acquisition metric. Currently, most buying happens on a CPM, or cost-per-thousand-impression metric.
"We'll sell against how effective the advertising is," said Mark Zagorski, CEO of Nielsen's Exelate. "We're moving into a world where everything is sold on a CPA basis."
"We'll get to a place where sellers can make some real money again," added Ms. Reed. "We've been pushing media partners down and down on these CPMs because we don't see it working. If we can get to the conversion we want, and the metric of success we want, I'm willing to pay more for that success metric."