Publishers and broadcasters have long tried to offer advertisers the right audience for their products. Want to sell pick-ups to people who like sports? Buy ads at halftime during a football game. Selling luggage or airline tickets? Buy ads in the travel section of a newspaper or Web site.
In digital advertising, that formula is being increasingly tested by fast-paced, algorithmic bidding systems that target individual consumers rather than the aggregate audience publishers serve up. In the world of "programmatic buying" technologies, context matters less than tracking those consumers wherever they go. And that kind of buying is the reason that shoe ad follows you whether you're on Weather.com or on a local news blog. That shift is punishing traditional online publishers, like newspaper, broadcast and magazine sites, who are receiving a much lower percentage of ad dollars as marketers use programmatic buying across a much broader canvas. Some sites refuse to even accept advertising through programmatic buying because they do not want to cede control over what ads will appear. "It's allowing advertisers to assign value to media rather than publishers," said Ben Winkler, the chief digital officer at OMD.
Publishers, he said, "can't control the price, but they can control the quality of the content and the audience on that site." About 10 per cent of the display ads that consumers see online have been sold through programmatic bidding channels, according to Walter Knapp, the executive vice president of platform revenue and operations at Federated Media, one of the world's largest digital advertising networks.
Advertisers like Nike, Comcast, Progressive and Procter & Gamble are now using the programmatic buying, and luxury advertisers are starting to follow. All ads traded on exchanges, as programmatic ads are, increased more than 17.5 per cent to about 629 billion impressions (the number of times an ad appears) in 2012, from 535 billion in 2011.
Programmatic buying includes a number of different technologies and strategies, but it essentially allows advertisers to bid, often in real time, on ad space largely based on the value they have assigned to the consumer on the other side of the screen. Say, for example, that Nike wants to sell running gear to a particular consumer who has a high likelihood of buying shoes based on the data it has collected, including the type of Web sites that consumer typically visits. Because the ad-buying is done through computer trading, the price for that space can change rapidly.
In the short run, the growth in programmatic buying has forced overall ad prices to fall. While the "halo effect" of buying an ad against premium content has not disappeared entirely - many advertisers still want front-page placement on popular Web sites - the shift is prompting publishers to rethink how they sell their ads.
Clark Fredricksen, the vice president for communications at eMarketer, a data company, said that publishers were "going to have to double down to prove the value of their inventory as they compete with other, cheaper inventory." And some publishers are jumping into the game themselves. During the most recent AOL earnings call, Tim Armstrong, the company's chairman and chief executive, said it was bullish on programmatic buying, despite being a publisher itself with properties that include TechCrunch and The Huffington Post.
Neal Mohan, the vice president for product management at Google, which sells advertising though its DoubleClick network, says that in the long run, publishers could see higher returns from programmatic advertising. In the last year, the number of advertisers and publishers using the DoubleClick platform has doubled. But that means publishers will have to play by different rules. "Context still matters and so does placement," Ebbert said. "But it's only one element."