By Kean Graham, for Edwardsturm.com.
It’s been talked about for years, direct premium sales will die a slow death.
Why Header Bidding is Accelerating the Extinction of Direct Sales
With the advent of header bidding, this death has been dramatically accelerated. Header bidding has pushed publisher RPMs to the next level, to a point that it’s competing with direct sales. DSP targeting capabilities have become more sophisticated and header bidding has increased access for advertisers via multiple programmatic sources.
Greater access to impressions and more sophisticated targeting via DSPs vs. publisher ad servers has led to the rapid growth of private marketplace (PMPs) deals via programmatic as an alternative to direct sales. Some advertisers have transitioned to 100% programmatic buying because they have seen better results from PMPs and easier setups. Publishers are benefitting as well, seeing better payouts with decreased sales team costs.
Publishers: The Surge of Header Bidding
Why have you only heard a small bit about header bidding? This is only the beginning. The growth of header bidding is in its early stages.
Only the most sophisticated publishers have been able to setup header bidding in optimal fashions and have been able to increase their profits with PMPs. The ad tech industry has never seen such great innovation since header bidding started to trend.
Expect even unsophisticated publishers to be able to take advantage of header bidding via ad tech partners; and expect tools to simplify the setup process and fix early problems. These early header bidding problems include:
- Increased page latency.
- Significant developer resources for setup and consistent optimization.
- Over-complicated real time tracking for ad QA.
All the above problems are being resolved by the innovation of header container solutions. Header containers consolidate header bid solutions into one setup. Timeouts have been set to decrease page latency and header bid solutions have been optimized to be more light weight.
Databases and reporting tools have been linked to header containers in order to enable stat visualization as the basis for tech optimization and ad quality assurance.
Partners have built solutions to handle the header container implementation from start to finish for the majority of publishers that do not have the necessary internal resources.
Even though PMPs on average tend to earn less than direct sales deals from an RPM perspective, publishers with optimal strategies have seen greater profits. These sophisticated publishers that have been able to increase profits by moving from direct sales to PMPs, have either transferred their most tech savvy sales people or the best sales people in their ad operations team to handle programmatic sales.
Many top publishers have completely converted their direct sales departments into substantially smaller programmatic sales departments. Publishers are seeing lower RPMs from PMPs vs. direct sales but also lower costs from sales team salaries and commissions.
Advertisers: The Surge of Programmatic Buying
The biggest reason why direct sales are dying is because sophisticated advertisers are currently making the shift towards 100% programmatic. With the shift on the sell-side towards header bidding, advertisers have seen greater access to impressions from the largest publishers in the world. The rest of the publishers will no doubt follow, as the word of greater yields continues to spread and header bidding becomes easier to implement.
Direct sales are inefficient, costly, and do not offer the same targeting capabilities as DSPs. The most sophisticated advertisers have opted for the more streamlined solution that yields better performance and requires less management. As a result, these advertisers have been shutting the door on direct sales solicitation and have been pointing them to their preferred network to facilitate PMPs. The most sophisticated advertisers always lead the trends and the rest of the market will follow.
What Does This Mean to You?
What does this all mean for advertisers? Programmatic targeting has surpassed the majority of direct sales’ targeting options. Sophisticated advertisers that have gone 100% programmatic have seen better results via programmatic channels where direct sales cannot compete, even though direct sales tend to charge higher CPMs.
Buying via programmatic channels is also simpler, requires less contracts, relationships, and management overall. Therefore, the media buying costs are reduced from the labor end and the purchasing end. 100% programmatic has led to greater performance and lower costs for advertisers.
What does this mean for publishers? If you don’t already run header bidding, you’re leaving a lot of money on the table. If you are, make sure that you’re dedicating a team of developers and ad optimization experts solely to optimize the header container technology or partner with a header container company that has a history of strong performance.
Dedicate at least one tech-savvy team member that understands ad optimization to programmatic sales as well. There is great opportunity to approach advertisers with PMP deal options that yield great RPMs for publishers and incremental value within that ad inventory for advertisers. Overall, these new initiatives lead to greater ad revenues for publishers and lower sales costs.
It will take some time for the rest of the market to catch up to these recent trends. However, the economics of the trends lead to the conclusion that direct sales’ days are numbered.
What are your thoughts? Are you still relying on direct sales or are you making the shift to programmatic?