Programmatic & Video: The Time Is Now
publishers are missing out on an opportunity for more revenue through added competition and the dynamic CPM bidding that comes from programmatic
The InStream Video ad product has been a recurring theme in discussions across most of Improve Digital’s publisher partners lately; all-things-video has emerged as one of the top priorities and a core element in business planning. The adoption of programmatic sales for InStream, however, has been rather slow, particularly compared to the rapid rise of programmatic display. What’s behind this lag? Most publishers sell the majority of their premium video inventory via direct/guaranteed buys. Only then is the remaining inventory sold via programmatic channels (e.g., Programmatic Direct and RTB).
The dynamic on the display side is a bit different, where, due to excessive supply, there was quick adoption of programmatic. Publishers had abundant unsold display inventory and looked for an automated way to effectively monetise it. Programmatic trading of display inventory started out with low pricing due to the excess supply and a lack of transparency, but it has since rapidly evolved beyond just a ‘remnant’ monetisation solution.
The introduction of rich media, highly targeted audience buying, full control and transparency, innovative price controls and performance optimisation capabilities have enabled programmatic to move beyond ‘just RTB’, driving prices up and generating even higher revenues for publishers. Those publishers who took the leap to programmatic have reaped the benefits, lowering cost of sales, improving yield, and having first crack at new programmatic-only media budgets.
To illustrate the value and importance of programmatic sales, let’s look at some pricing trends. In Figure 1 below, we show the average programmatic prices Improve Digital sees compared to market averages for display (NL). Figure 2 below shows the price difference between programmatic display and programmatic InStream (NL).
Improve Digital’s RTB Display eCPM average in the Netherlands was 82% higher than the Market RTB average (‘Market’ data source: Deloitte/IAB).
Compared to display, InStream RTB pricing is 695% higher, reflecting the considerable premium marketers place on this ad format.
In H2 2013 Improve Digital’s RTB Display eCPM average in the Netherlands was 82% higher than the industry average. Not surprisingly, we also see very strong prices for RTB In-Stream video inventory, nearing €11.00. However, as noted, the shift to programmatic sales of video advertising has been slow, and we think that already-strong price dramatically understates the actual opportunity. We think the potential programmatic price for video could go much, much higher.
Because publishers are selling the majority of their InStream inventory at high CPMs through direct/guaranteed buys, there is little supply for the programmatic market and artificially low competition for that inventory during the auction process.
So, is there an added value of moving more InStream direct/guaranteed buys onto a programmatic monetisation platform like ours? The answer in short is, yes. Most of those guaranteed video buys are scheduled at very high eCPMs. Given the relative scarcity of video inventory and bid-based competition for the inventory, combined with a high willingness-to-pay in direct sales channels, this would have a huge impact on price realisation via programmatic sales channels.
See Figure 3 below, showing RTB “first bid” price for NL InStream inventory compared to the price realised via the Improve Digital second price auction. Auction prices are set at second price plus one cent, and the gap between the highest bid (‘first bid,’ below) and the price realised represents potential missed revenue.
First Bid price peaked near €35.00 in late June, with a corresponding closing price of €11.00, a 209% difference.
The difference in first bid price and eCPM has its highest peak on 23-June, which saw a 209% difference between first bid price and eCPM. If publishers moved their direct InStream campaigns into Improve Digital’s 360 Platform, their average eCPMs would be even higher, as the direct/guaranteed campaigns would be competing in the auction with the RTB bids. This means the average eCPMs on RTB could end up being one cent higher than the price of their direct campaigns, as opposed to one cent higher than the second price coming in on RTB.
– If we assumed a publisher’s direct campaign had a CPM of €28.00, the winning eCPM average could be €28,01 as opposed to €11.
– That is a potential uplift of 154%.
Is this an over-simplified example? Sure, but it illustrates the overarching point: Running direct campaigns in competition with RTB and Programmatic Direct could result in a higher overall InStream eCPM for the publisher. Given the scarce inventory and high willingness-to-pay on the part of buyers, the ad format is perfectly suited for the auction sales model.
But wait, some might say – what about ensuring impression goals? And how about price floors? Neither is ever guaranteed in an auction.
There is a risk in most auction environments, with the limited inventory, that guaranteed campaigns may not reach their goals in the given time period. Not so via the Improve Digital 360 platform, though. Publishers can utilise the “Smart Guarantee” feature to give their direct-sold orders priority and a ‘hard push’ if they ever start falling behind on impression goals. As for pricing, publishers shouldn’t worry about prices dropping if their inventory is offered programmatically, because they still hold the control. They can set price floors and bid minimums based on buyer type and demand source using our Pricing Control Centre (PCC), which has been designed to enable smart pricing strategies for more complex scenarios, such as this, ensuring publishers see the highest revenue possible for every impression served and sold.
Perhaps the reason for the hesitation lies in the attitude (if you’ll pardon the American expression), “If it ain’t broke, don’t fix it.” In this case, it may not be that anything is broken, but there is always room for improvement. A deeper look and a different perspective could allow for advancement and innovation, changing strategy slightly to allow for the best possible yield per impression. Due to its scarcity, each InStream impression is extremely valuable, and by pushing all of the inventory to fixed CPMs (however high those prices may be), publishers are missing out on an opportunity for more revenue through added competition and the dynamic CPM bidding that comes from programmatic.
To our publishers and supply partners, I understand that this is not a simple yes or no decision. However, I encourage you to step back and approach this with an open mind. When it comes to a product like InStream, the downside risk is almost non-existent and the potential for value creation is enormous. The numbers I have put forth are simply intended to illustrate the opportunity, and we welcome you to work with your account manager to test the opportunity on a small, safe scale to understand the incremental revenue opportunity for your business.