Media Planning & Buying

Structural Efficiencies and The Opportunity Gap

Posted by Raj Chauhan on April 4th, 2013 at 4:53 pm

Too often I hear people in our industry speak of the inefficiencies in display advertising purely in terms of cost.  Whilst the display segment has scale (at circa $35b and growing), the economies borne of scale remain conspicuously absent for all stakeholders – publishers (supply), agencies (demand) and of course the stakeholder funding the industry, the advertiser.  You may or may not subscribe to the view that the contemporization of the display advertising market is inevitable (for what it’s worth I’m a subscriber), but too few of us view the introduction of structural efficiencies as having a direct and profound impact on display’s revenue opportunity.  The distinction between the impact of efficiency on cost versus revenue is important.

Cost management is a largely protectionist dynamic.  And so whilst technology driven efficiencies at scale can and will reduce cost for everyone, the much larger prize is the ‘opportunity gap’.  While approximately 30% of our total media consumption is online (in its various forms), it still represents only 20% of total ad spend.  This 10% gap – the opportunity gap – equates to circa $70b per annum, meaning display’s pro rata share is worth somewhere between $20-$25 billion a year and growing.  Factor in the growth trajectory of online media via mobile and the real number is even higher.

So how much efficiency improvement is required to close this $25 billion gap and realize display media’s true growth potential?  This is difficult to quantify, but we know it needs to be significant.  Essentially, we need to engineer structural efficiency, that is, materially redress inefficiencies both within and between stakeholders.  This boils down to our ability to deliver on three things.

  1. Automation. Remove the need for manual data entry, manual data validation, manual document creation.

  2. Integration.  Integrate systems and processes, and most critically – integrate stakeholders.

  3. Reinvention. Optimise our business practices and frameworks by reinventing them.  Simply automating otherwise flawed processes and methods is in itself insufficient to deliver structural efficiencies.

Guaranteed Premium versus RTB…really?

Much of what is being said and written around the emergence of ‘programmatic premium’ (more on this anomalous terminology some other blog) is reminiscent of the debate being had back in 2000 about the relative merits of search versus display.  What the marketing community quickly came to understand was that rather than ‘search or display’, the unique merits of each can be leveraged in tandem, and often for superior return because of it.

And so it is with the guaranteed/premium versus RTB debate.  Hundreds if not thousands of advertisers representing diverse budgets and objectives already invest in both guaranteed/premium and RTB.  As ‘programmatic premium’ emerges from nascence, and RTB matures, the share of display budget each segment is able to attract will be driven less by a philosophical consideration, and more by a very practical one, including ‘how easy is the toolset to adopt’?

The characterization of a tool that is easy to adopt includes:

  • minimising the need for organizational change

  • providing interoperability with existing mission critical toolsets

  • is purpose designed and built

Conversely, the toolset that requires it’s users to take one of two or more philosophically opposed viewpoints is doomed.  For an entire organisation to commit to and successfully adopt a new and potentially transformative toolset, the leadership team must be able to engineer broad, meaningful consensus.  This type of consensus is simply not possible in the presence of a philosophical divide.

However the toolset that solves problems as they exist, and simultaneously re-invents to solve others is both transformative and easy to adopt.

At Adslot, the product design team work under a mantra of making our toolset ‘beautifully useful’.  This is a simple yet powerful way to remind ourselves and our customers of the experience we strive to deliver.

And so rightly or wrongly, the speed with which ‘programmatic premium’ emerges, the quantum of structural efficiency achieved, and as a result the scale and scope of display’s growth potential will be determined almost entirely by practical considerations.  Specifically, the extent to which the toolset on offer solves today’s problems and innovates for the future.

This article was originally posted on on April 3, 2013.

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