Programmatic might take up the lion’s share of media sales, but it’s still not preferred by premium publishers. While Insider Intelligence reported that in 2022 more than 90% of all digital display advertising was transacted programmatically, numbers can be deceiving. Giant platforms like Amazon, Meta and Google drive most of that volume, mainly through small and local advertisers. A lot of premium advertising is still sold directly. PubMatic recently estimated that 57% of connected TV inventory is sold directly, for example. There’s a good reason: Publishers can get significantly better costs per thousand (CPMs).
The sticking point for publishers is that there is continuous pressure from advertisers to transact programmatically because they are often focused on audience-based media buying and performance metrics that lend themselves to optimization via a demand-side platform (DSP).
Publishers aren’t about to stop advertisers from audience targeting nor are they going to drop programmatic. But they do need to address the gaping chasm that exists between programmatic inventory and high-quality premium inventory. Prices for direct-sold inventory can become artificially inflated because they are’t available on the open market, while programmatic advertising can see depressed CPMs because it’s only being valued for the audience, not the context or content quality.
Converged media sales can give publishers a new approach that can raise overall effective costs per thousand impressions (eCPMs) and close the gap between premium and programmatic.
The Lemonade Equation
I like to think about a publisher’s product catalog as a pitcher of lemonade at my daughter’s lemonade stand. If my daughter has one pitcher to sell, she needs to do some quick math and some good marketing in order to maximize her revenue and her profits.
To stretch the lemonade out, she might decide to use smaller cups so she can sell to more people. Or she might pop an ice cube or two in the glass, which provides her with a bit more wiggle room. If she’s really clever, she’ll bundle the lemonade with a cookie for a price that is a little better than if she sold either one separately.
Compare this to programmatically sold inventory. It’s equivalent to a pitcher of lemonade that’s simply placed on the table with a floor price and a “help yourself” sign. Without the right cup, the well-placed ice cube or the option to add a cookie, that lemonade is not maximizing profits.
Enter converged media sales, which helps sellers package their underpriced inventory more effectively to maximize the overall profit with a better average price.
Bundling the Best of Both
Our benchmarking data shows that overall, CPMs are down this year. At the same time, we’ve seen private-market video CPMs hold strong against other transaction types. In June alone, they grew over 5%, while private CTV CPMs grew 10%.
CTV represents the current growth channel caught in the middle between direct-sold and programmatic channels. Advertisers want audience targeting while publishers want premium prices. The promise of converged sales should be able to deliver both. Publishers could create enticing offers across a number of channels, including CTV, helping to lift their overall CPMs while giving advertisers access to their audience at scale. In particular, private/preferred video ad revenue has been rising over the past year and is now about the same as open auction, which gives publishers an incentive to focus on private-market deals.
One of the biggest barriers to this kind of converged selling is the siloed technology that publishers use across their disparate properties from local linear to CTV to digital, and so on. A good place to focus is on a unified product catalog that can create packaged or bundled offers for advertisers. With a single-product catalog, advertisers have the building blocks to respond to RFPs with better offers and manage ad operations and optimization more seamlessly.
The future doesn’t have to be a “race to the bottom.” With a single view of their inventory, publishers can start to create a more robust yield optimization strategy. Rather than relying on the black box of programmatic, publishers can test different bundled offers that bring up the price of their display while maintaining the control and premium prices of their best inventory. With artificial intelligence adding to the quantity of content in the market for publishers, inventory management becomes more complex, especially across channels.
Publishers need to understand how they're being sold and for what price to ensure they receive maximum value and the highest eCPMs possible. In other words, publishers can have their lemonade and drink it, too.
