Guest Articles

Mad Man to Math Man – The Future of Digital Trading

By: Prashant Nandan

Senior Director – Digital Media Trading & Buying at Amplifi (Dentsu Aegis Network)

Global countries are competing to shape the future of digital trading & Data sharing. In recent years primarily three groups have emerged – the U.S., the E.U. and China. Each group brings in different government interventions, especially in the area of data sharing and digital trading. The primary goal of States is to ensure freedom of internet, and they aim at removing digital trade barriers whereas the E.U. leads watchdog camp and created a GDPR law in May 2018. Therefore, competition is likely to intensify before digital trading & data sharing norms can be cemented globally.

What can we expect from the year ahead and how should advertisers be prepared for digital trading in future?

 

Outcome economy buying – There is a theater in Barcelona where customers are paying for number of laughs (cost per laugh) during a comedy show than just paying ticket to see the show. TeatreNeu, a theater in Barcelona, have a facial recognition software and they charge customer based on how many times they laugh. The business model is based on economy where buyers are looking to buy an outcome and the sellers are selling a promise of an outcome. Outcome economy buying is going to transfer the way media industry will buy and sell media inventory. Agencies will shift from competing through selling products and services, to competing on delivering measurable results for customer/client. This shift from buying products to buying outcomes would require digital agencies to have a deeper understanding of customer need and context in which products and services will be used. Client will have to develop capabilities that would enable them to measure, analyze, and adjust their offerings in real time in order to deliver and quantify value. The outcome economy will have many consequences on digital industry. Agencies will need better data to mitigate risks and track all the factors required to deliver the promised value. Agencies’ ability to take risk will increase, as clients move to value, based on outcomes. Forward Buying and different arrangements of media insurance will emerge to help agencies manage the risks associated with guaranteeing outcomes. Digital industry will need technology and products that have the ability to deliver those outcomes & know if the outcome is met and eventually to measure the outcome.

 

Blockchain & digital advertising: –Digital advertising has been ramping it’s investment in blockchain technology in the hopes that it can eventually provide three things: Transparency, Reconciliation and Efficiencies in the overall digital supply chain. Blockchain in digital advertising is not an academic fascination; it is live and happening all around us. NYIAX the world’s first inventory exchange powered by blockchanin technology. NYIAX provides advertisers and publishers a platform to buy, sell, and re-trade premium-advertising contracts in a forward/futures methodology.  It is the only premium guaranteed ad exchange in world and addresses a U.S. annual digital display ad market that currently stands at $32 billion – which is projected to reach $47 billion by 2019.  Media buyer & seller on the exchange will forward – contracts or agreements to buy and sell an asset at a specified price and a set future date.  The goal is to offer a more efficient and transparent way for players in the advertising market to sell and buy inventory.

IBM & Mediaocean is bringing blockchain technology in programmatic media buying and their pilot project has expanded to large advertisers like Unilever, Kelloggs, Kimberly-Clark, and Pfizer.

 

The shifting surface of Auction Dynamics – In the context of programmatic, auction dynamics is auction rules, pricing structure & platform fees.  There are two types of auction, that takes place while buying any digital inventory.

First Price Auction – Auction closes at the highest bid price

Second Price Auction – Auction closes at something less than the highest bid price (often a penny more than the second highest bid)

Digital industry is working mostly on second price auction like Google AdWords. The implementation of second-price auctions has allowed advertisers to bid high prices to secure impressions, but ultimately pay a much lower price, typically the second-highest bid plus $0.01. However, in future, as more control will be at publisher’s end to maximize their yields, they will move to first price auction. In this model, SSP passes the first price directly to the publisher, who then determines the winner and the clearing price based upon a second price auction. Every impression has a diverse value and will cost differently in programmatic environment and with first price auction, it will give more control to publisher. On the other hand, buyers will be able to buy, and only pay for segments or data that they care about. With first price auction, it will not be easy for intermediaries to hide any fee. First-price auctions also offer an additional level of transparency that is attractive to buyers. First-price auctions introduced the concept of “you pay what you bid”.

 

V-CPM will be new currency – Ad viewability is dominant in Digital media discussions now a days, with many advertisers concerned about the problem which is whether their ad impressions have actually been viewed by human eyes. The viewability industry standard is lightly estimated at 50%, but we expect this to advance over time. In an ideal realm, we would see programmatic ad impressions have 80% to 90% viewability across the industry, but this might take a bit longer. The main reason Viewability has become such a hot topic is its potential to improve the overall quality of inventory bought, controlling viewability allow advertisers to stop or minimize wasted dollars on ads never seen which can dilute the impact of online advertising.  Many industry experts agree that moving to VCPM as a currency will build up trust in Digital Ad Space.  This increase in trust and reliability will allow for more traditional budgets like TV to move even quicker into the digital ad space. Viewability is still very difficult to measure accurately in video & mobile space. Most of the large publisher still use VAST tag, which is un-measurable for viewability & in mobile space is virtually impossible due to the large variance of environments and a measurement tool often requires Flash in the mobile space.

 

Programmatic TV & Radio will come of age – The manual process of buying and implementing TV & Radio is slow and monotonous.  The biggest opportunity lies in synchronizing TV ads with online activity, programmatically. Digital audio has expanded into voice-enabled devices like Alexa or Google Home.  Looking ahead of 2018 onwards, voice-enabled devices became the next big thing & with dynamic creative and personalization in digital audio & TV, it will be effective in driving brand engagement by using different data set.

I believe that in an ever-increasing digital landscape, fluid and receptive media trading has become a necessity and not an option.