As programmatic advertising gains a growing share of the digital market and the line between traditional direct and programmatic sales blurs, publishers that base their strategies in both channels boost revenues and CPMs, outperforming the market, according to a new report by The Boston Consulting Group (BCG).
The report, titled The Programmatic Path to Profit for Publishers, was released last week in partnership with Google. .
Key findings from the report include:
• Fewer than 25% of the publishers studied regularly translate data analysis into sales initiatives
• Publishers continue to approach programmatic in a reactive manner, often delegating programmatic decisions to operational teams
• Less than 25% of programmatic team time is spent on activities that create value
• In a typical month, publishers spent an average of just 11 hours on value-creating activities and 48 hours a month on admin tasks
• Publisher success stories:
o One publisher built programmatic revenue to more than 50% of its digital revenue while increasing direct sales and total CPMs
o Condé Nast UK, in its first year of programmatic sales, discovered that 60% of its top 50 advertisers that buy programmatically were entirely new customers
o American Express aims to be 100% programmatic within 18 months and a major North American broadcaster aims to completely replace direct sales with programmatic guaranteed within the next two years
Many publishers still treat programmatic sales as a lower priority: fewer than 25 percent of publishers regularly translate data analysis into sales initiatives. Those that embrace this fast-rising opportunity and deploy technology to operate more efficiently are increasing revenues and margins and establishing a solid foundation for long-term competitive advantage.
While some publishers organize themselves to realize the most value from their programmatic efforts — one company has built programmatic revenue to more than 50 percent of its digital revenue while increasing direct sales and total CPMs — the study found that most companies do not. Less than 25 percent of programmatic team time is spent on value-creating activities; publishers use nowhere near the full range of technology tools that can increase programmatic sales and profit margins.
“It’s clear that publishers that lack a coherent cross-channel strategy, including an aggressive programmatic capability, leave money on the table today and risk loss of revenue, commoditization of inventory, and lower market share in the future,” said Paul Zwillenberg, a BCG partner and coauthor of the report. “On the other hand, those that position themselves to deliver value to their advertisers in the programmatic market will both increase revenues in the near term and have a big and growing advantage over their competitors as the digital market grows and evolves.”
The study found that outperforming companies employ increasingly well-defined approaches to achieve their success. Much more than others, they:
— Deploy a cross-channel data-driven sales strategy that encompasses both traditional direct and programmatic sales and is tailored to the publisher’s market position and market dynamics.
— Understand which advertisers value which inventory and audiences and why, and leverage technology and data to match audiences to buyers and achieve higher prices.
— Assemble the right technology, both as an efficient way to access demand and as a decision engine to maximize revenue.
— Develop the right capabilities (particularly in sales and yield
management) and realign their organizations and incentives to support
a cross-channel strategy and programmatic sales goals.
“Programmatic is no longer limited to desktop display; it is fast gaining traction in mobile and video,” said Benjamin Faes, managing director, partner business solutions EMEA, at Google, “Large advertisers are increasingly shifting budgets to programmatic, including branding budgets, as more premium inventory becomes available and marketers gain confidence in the benefits, especially as they realize the richness of data available. ‘Programmatic guaranteed’ will accelerate this shift even further.”
A major North American broadcaster aims to completely replace direct sales with programmatic guaranteed within the next two years.
The study, which was commissioned by Google, involved 25 digital publishers, including print and digital-only publishers, broadcasters, e-commerce companies, and Web portals, based in Europe, North America, and the Middle East. The study involved in-depth operational workshops to understand the details of programmatic sales and operations and where these create value. BCG used the lean management methodology of value stream mapping to visualize and measure both sales and operations processes, and it conducted interviews and analyses around the key drivers of revenue.