Dr. Mark Grether
Dr. Mark Grether is the COO of Xaxis, an agency trading desk owned by WPP. Grether recently spoke with eMarketer’s Lauren Fisher about the latest trends in programmatic ad buying and real-time bidding (RTB), as well as how Xaxis is using the two to provide clients greater audience precision and ad delivery guarantees.
eMarketer: What are some of the broad trends you’re seeing in the programmatic space today?
Dr. Mark Grether: We’re seeing a big shift toward premium programmatic or programmatic direct. One of the main reasons for that is the shifting of dollars from performance to branding. Originally, when programmatic started, it was all about performance, and where you bought inventory from was not so important so long as the performance was good. So a lot of the early programmatic inventory was bought from the exchanges.
But as branding and video come to the forefront, the quality of inventory becomes more important. Still, media buyers want to be able to buy that inventory efficiently and be able to do things like overlay audience data from their data management platform (DMP), which is what programmatic would enable them to do.
As a result, you’re seeing more and more publishers offering programmatic direct deals, where they basically come to an agreement with media buyers on the type of inventory and the price for that inventory. The only difference is, they’re using the same pipes you would use for RTB to actually execute the buy. This provides the efficiencies of programmatic with the benefits of buying direct.
eMarketer: Would you say you’ve seen a large increase in programmatic direct ad buying in the past year or so?
Grether: Yes, I have absolutely seen an increase in programmatic direct ad buying. Growth depends on a few factors though. As a rule of thumb, I’d say the more you’re looking at video and branding, the more you’ll find programmatic direct. The more you’re a performance company, the more you’ll see RTB.
“As a rule of thumb, I’d say the more you’re looking at video and branding, the more you’ll find programmatic direct.”
Specifically in the US, we’ve seen a tremendous increase in programmatic direct business that’s flowing through Xaxis.
eMarketer: Any specific numbers you can offer in terms of the percentage of ad spending going to programmatic direct vs. RTB?
Grether: It really depends. I don’t have a number for the US, but I do have a number for Europe, which is about 70% or so [of total programmatic ad spending] that’s actually programmatic direct. The number is likely smaller in the US, but basically, I think that’s about where it will end up.
eMarketer: You mentioned video as one of the growth drivers for programmatic direct, but I often hear there’s a limited amount of video inventory available via RTB and programmatic ad buying today. Are you seeing this?
Grether: Yes. That’s an area the industry has to work on. But I do think 2014 will be the year of programmatic video, and you’ll see a lot of media buyers having conversations with publishers to make sure they have enough programmatic video inventory available. Right now, the lack of available inventory is one of the biggest bottlenecks.
eMarketer: Is it an issue of publishers not having programmatic capabilities? Or is it that some just prefer to sell video inventory direct through their sales force?
Grether: I think it’s both. In some cases, publishers don’t have enough inventory, or they’re not programmatically enabled. Others feel that if they sell programmatically, it would mean lower rates. But when you’re talking about programmatic direct, that’s not the case, because you’re not buying inventory via an auction.
“Clients want to be able to reach an audience across all different publishers with one frequency cap, with the same definition of their audience and with one unified analytics report.”
And a lot of media buyers aren’t even interested in buying inventory via an auction. Instead, what they want to do is to pay the same rates they pay buying direct, but just use the programmatic pipes to more efficiently run the campaigns. This is an area where publishers could benefit from a little bit more education on the whole area of programmatic so they can see there’s a lot of benefit for them.
eMarketer: Besides being able to use audience intelligence from a DMP in buying display programmatically, what are some other benefits to being able to buy programmatically?
Grether: That audience component—so being able to layer the DMP on top—is especially powerful. But even then, a publisher having that programmatic capability could also help it to define and package its audiences in a much greater fashion.
Clients want to be able to reach an audience across all different publishers with one frequency cap, with the same definition of their audience and with one unified analytics report. These are the things a single publisher typically cannot offer, which is why a brand would work with an agency trade desk like Xaxis. With programmatic and a DMP, we’re able to do that across all publishers. That’s a win-win situation for us as well as our clients and our publishers.
[There are also] gross rating points (GRPs), and programmatic is enabling us to both measure and control the cost of the GRP by having everything integrated with the DMP. What we’re then able to do is offer our clients a GRP guarantee.
eMarketer: What does that type of guarantee look like?
Grether: We promise a certain CPM, and they only have to pay for the GRPs that we actually delivered. It takes into account the viewability of each impression, but it’s also about the data quality and accuracy of each impression. If we promise the client we’re going to deliver its ad to a male, we’re going to confirm that it’s a male using a third party such as Nielsen or comScore to verify it. If it’s not a male, the client doesn’t pay for it.
“Right now, most of the mobile campaigns are performance-oriented, so they’re not focused on GRPs.”
eMarketer: Does this type of guarantee apply to mobile as well? Would you have the technical capabilities to verify all of those audience datapoints in a mobile environment?
Grether: Theoretically, yes. But right now, most of the mobile campaigns are performance-oriented, so they’re not focused on GRPs. Technically, it’s a little bit tricky to verify mobile, but we’re getting closer and closer. By the end of 2014, I’m hoping we’ll be able to solve that challenge.
eMarketer: Given the fact that mobile is more of a performance-oriented marketing medium, are you seeing any programmatic direct deals involving mobile at the moment?
Grether: That’s a tough question. Everyone talks about mobile, but then everyone struggles to run campaigns at scale. Clients are really interested in mobile, but then they struggle with it when it comes to the execution of campaigns.
I think part of the problem is that there really is no solid definition of mobile. Because if it’s an ad delivered on the iPad that you have in your living room, is that really a mobile campaign? If the ad isn’t taking into account an individual’s location, then I don’t consider it mobile. Until we’re able to leverage the location aspect of mobile at scale, I think we’ll continue to see mobile lag.
eMarketer: Would you say that until we figure out how to integrate the location aspect into programmatic, mobile will continue to lag?
Grether: To some extent, but it’s not so much about the technology—there’s an ample supply of mobile inventory out there—as it is a marketing problem. Marketers need to learn how to redefine their marketing campaigns to take location into consideration. Most marketing campaigns aren’t detailed enough to do that.