The Programmatic 'Upfront': Isn't That Oxymoronic?
With AOL's programmatic "upfronts" behind us, now is a good time to step back and consider how much sense an upfront market for online ads actually makes.
The short answer? A lot.
Long answer? It depends on three questions: Is digital scarce? Can publishers clearly define the "premium" inventory they're offering through these automated systems? And is programmatic ready to grow up?
Full disclosure: Through a partnership with FreeWheel, we started letting agency TV buyers purchase AOL premium video inventory through our software this year. But we weren't involved in its programmatic upfront, and we do have a good perspective on ad inventory and sales of all sorts.
For many smart people -- including Pivotal Research's Brian Weiser -- the problem with programmatic upfronts is simple: online inventory isn't scarce. TV's annual upfront negotiations, where networks secure commitments from advertisers to buy commercial time in the approaching TV season, work because advertisers want to capture the limited pool of good TV spots. Things are different online, where a networks span millions of pages and far more ad units.
There's truth to that. But there's also a problem with that thinking. Premium programmatic buyers aren't looking for random inventory online: they're using software to find precise combinations of audience, context, and price to best engage consumers, and to push their competitors away from those opportunities.
That's a different kind of scarcity than we're used to from TV, but it's absolutely scarcity. And it's worth locking up far in advance, whether in an upfront or another format.
On to the next question: Can online publishers clearly define the quality inventory they're pitching?
But in programmatic buying, that kind of estimation is harder to achieve. That's because programmatic units are generally packaged around loose categories like "fashionistas" or "auto enthusiasts." It's hard to understand exactly how publishers define "fashionistas," so it's equally hard to know what other inventory to run numbers against as a benchmark. That's a real sticking point for planning -- and for media buyers thinking through packages in advance.
That lack of clarity might bode poorly for the future of programmatic upfronts. But at the same time, programmatic upfronts may give publishers a needed incentive to catalog and define inventory more clearly than ever -- good not only for upfronts but for programmatic advertising overall.
I think this will happen, based in no small part on new technologies I've seen that help publishers better categorize programmatic offerings.
Finally, with some of the world's biggest agencies and brands already committing roughly $70 million, collectively, to AOL's programmatic upfronts, things are off to a strong start. But what about the long term? Is programmatic ready to grow up?
Some history might be useful. Programmatic digital buying emerged to let publishers unload unwanted inventory, and to help media buyers easily capture low-cost reach. It has a lot in common with other forms of new media -- like, say, cable TV, which began as a chaotic bunch of remnant inventory.
Eventually, cable networks amassed good content, packaged inventory well, and developed the infrastructure to do real business with agencies. In other words, cable TV grew up -- and joined network TV at the table.
Now, digital programmatic buying wants to join TV at the table.
Publishers including AOL argue that programmatic sales are no longer a race to the bottom, dominated by leftover inventory and other low-quality ad space. But as technology changes the way digital inventory is bought and sold, automated ad sales will play a bigger role in moving high-quality inventory at premium prices.
That's how things look to me, too. And based on the buyers who've committed their money in response, it seems like programmatic publishers should be ready to get serious.