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Will 2013 Be the Year of ‘Programmatic Premium’?

Written on
Jan 30, 2013 
Author
Tom Shields  |

There has been a lot of debate lately about the definition of programmatic buying and selling of digital advertising. For most people, programmatic means computers doing things instead of humans — think program trading on a stock exchange. Real-Time Bidding (RTB) fits this definition nicely: the computers use algorithms to decide which impressions to buy, how much to offer, who wins and at what price.

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Programmatic buying has benefits for buyers: It is easier to buy lots of inventory, it is easier to pick through to find just the inventory that’s wanted, and because there’s tons of inventory available, it’s a lot cheaper than other methods. There are also seller benefits: They save on sales costs, and, by having multiple bidders, increase the value of their inventory.

What’s missing from this picture is the “premium” part — the value created during a process that involves both the buyer and the seller working together to increase the benefit to both. Marketers can get access to publisher first-party data, publishers can craft special packages and placements, and publishers can offer to lock up scarce inventory with a guarantee. This value-add is what makes the inventory “premium.”  But, by their very nature, these are things that resist “programmatic” automation. This is why 80% of the market is still sold directly, and why even the most optimistic pundits don’t predict more than 50% of the market going to RTB any time soon.

Of course, this only considers the sales process. Other parts of the execution, like sending tags, trafficking flights, changing orders during a flight, reconciliation, and billing, are all tedious, often-manual tasks that could benefit from automation. This suggests that there is worth in “programmatic execution” that still respects the value of direct selling.

So, if there is “programmatic premium,” it would seem to include the following:

  • A direct sales force that can close deals quickly without a tedious RFP and IO process.
  • Sales planners empowered to analyze, package, and sell any audience target.
  • consultative sales approach that marries the best of publisher content and data with  the marketer’s goals.
  • “Programmatic execution” that helps automate campaign execution and billing.

Fortunately, several companies are engaged in building these platforms today, so 2013 may well be the year of “programmatic premium.”





Co-Founder & Chief Strategy Officer at Yieldex, Tom Shields is a pioneer in Internet advertising, having co-founded NetGravity in 1995 to create the world’s first internet ad servers. As CTO, Tom developed mission-critical real-time ad server software that was successfully deployed at over 300 customer network operations centers. This rapid growth led to NetGravity’s IPO in 1998, and subsequent acquisition by DoubleClick in 1999 for over $500m. Tom also received a Service Award from the IAB for leading the group that created the first ad impression counting standards.

Tom was most recently a Managing Director at Woodside Fund, where he led investments in early stage technology startups. He served on the boards of companies in a wide range of sectors, including open source and enterprise software, Web 2.0 and Internet services, optical networking, and microprocessors.

Prior to NetGravity, Tom was a development manager at Oracle, and was a member of two technology startups. He received a BA in Computer Science with honors from Harvard College.

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