When Matt Prohaska joined The New York Times as its first-ever programmatic advertising director, he claims to have begun meetings by drawing blood from his arm. "I wanted to show everyone I was human," he said.
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There was no actual bloodshed. Mr. Prohaska, hired in April after running his own consultancy, was making a point about his last seven months educating the Times' sales staff about programmatic buying. And part of that education is assuring them programmatic will not cannibalize their direct-sales commissions. "Some people are understandably concerned," he said, referring to the industry at large. "They're seeing programmatic numbers going up, and their own book of business going down."
In fact, Times executives blamed a 3% decline in third-quarter digital-ad revenue partly on programmatic buying. This year, marketers are expected to spend $3.3 billion on display ads bought through real-time bidding, according to eMarketer, representing 19% of total digital ad spending. By 2017, it's expected to reach $8.69 billion, or 29% of total digital dollars.
About 70% of the programmatic pie is flowing to large portals, according to buyers and publishers, with the rest going to premium publishers. Although premium publishers say only a small part of their revenue comes through programmatic buys, some are establishing private exchanges and carving out separate departments to handle programmatic in hopes of capturing more digital dollars.
Several publishers pay their ad sellers a commission for guaranteed inventory sold through programmatic technology. But a question remains: How do publishers encourage salespeople to sell programmatic when direct sales usually fetch a higher price? Because clients want to buy this way. "If publishers choose not to participate, then they're going to lose out," said Brian Gleason, managing director-North America at the Group M agency Xaxis.
"Most clients look at these programmatic activities from very different budgets than premium direct," said Todd Haskell, senior VP-chief revenue officer at Hearst Digital. When Hearst equips its salespeople to sell programmatic, he added, they "sweep those additional budgets into the coffers of the Hearst Corp."
The Times hired Mr. Prohaska to help its salespeople understand programmatic. But instead of segregating programmatic from direct sales, the Times has integrated the two platforms. Mr. Prohaska goes on sales calls, but is not charged with selling ads. Salespeople are compensated for selling programmatic if they "own the client relationship" and are contributing to a sale, according to Mr. Prohaska, who declined to outline the specific compensation structure. Mr. Prohaska said he is charged with fulfilling a series of key performance indicators to help grow the company's programmatic business. "The same sales rep on AT&T handles everything," he said. "I intentionally don't have a team of 10 off on the side that do programmatic sales."
Alanna Gombert, general manager-CatalystDesk at Condé Nast, oversees a staff of four. CatalystDesk, introduced this year, works with agency trading desks on programmatic deals, according to Ms. Gombert, who said Condé Nast has had a private exchange for the last three years. CatalystDesk, she added, is a natural progression. Similar to Mr. Prohaska, Ms. Gombert or a member of her team are brought on sales calls to discuss clients' programmatic options. "We're really becoming a holistic part of the planning cycle," she said.
The sales team is compensated on programmatic sales, Ms. Gombert said. Her team earns a bonus if it reaches a certain number. "We're not sales folks by definition," she said. "We have an overall number we have to achieve."
Hearst Magazines compensates its salespeople for programmatic sales when it's part of a larger campaign. "If a campaign is booked with us, and it's guaranteed inventory, we consider it a sale just like any other sale," said Mr. Haskell.
Hearst's digital salespeople might begin a conversation about a programmatic sale, then bring in Mike Smith, the company's VP-revenue platforms and operations, or a member of his team, which handles programmatic buying for Hearst.
But even the most well-planned programmatic strategies can run into some major problems as they are executed. "Six years ago they were selling a print magazine," said one magazine publisher of his overstretched sales team. "Now they're being asked to sell print, online, mobile, tablet and conferences. Their lives are insanely complicated."
For those who do understand how to sell programmatic inventory, their publication's offering must also be distinct enough to win buyer dollars and keep them flowing. Even the best programmatic pitch can lose when pitted against the wealth of open-exchange inventory and data-enhanced premium inventory. "A lot of people are kind of freaked out about it. They should be," said Vikram Somaya, general manager of WeatherFX, the Weather Company's data-centric ad group. "The rate of change is not going to slow down."