When it comes to distributing its glossy magazine brands like Cosmopolitan and Good Housekeeping, Hearst Magazines Digital Media has been fearless about putting its content everywhere, from Facebook to video on demand to Snapchat Discover, the messaging app’s new editorial distribution feature.
Under Mike Smith, the vp of revenue platforms and operations, the digital media programmatic approach is similarly ecumenical. After Smith was hired from Forbes last summer, he opened the door to letting multiple ad tech companies bid on its inventory. The popular belief says the shift to ads sold programmatically will lead to rate erosion. Hearst is a private company, and Smith wouldn’t reveal figures, but he said Hearst’s experience has been the opposite.
“We want to be as maximally available to buyers as possible,” Smith said. “That goes against the conventional wisdom that you hang your shingle in one place, because if you make yourself available in different places you undercut yourself by letting people buy you where you’re cheapest. We fish in a lot of ponds, and that has driven our CPMs and revenue way up.”
Hearst sells its ad inventory three ways: via guaranteed direct, non-guaranteed programmatic direct and public auction. It’s the programmatic direct that Hearst sees the most upside, because it appeals to clients who are making the transition from direct to automation but still want to be able to buy premium inventory and have their hands held in the process. Hearst’s sales team is trained to sell all digital products, although there are sales engineers who accompany them when selling programmatic. Smith said it’s important that sellers be able to fully serve the advertiser in whatever way they want to buy.
“Most of the direct advertisers want to receive full service when they’re buying us programmatically, to help them bid better for our media,” Smith said. To that end, Hearst struck a deal last fall to sell premium ad units on its websites through Varick Media Management.
Hearst’s openness extends to the rules it sets for advertisers — or doesn’t. Publishers developed premium programmatic marketplaces to cash in on the shift to programmatic while keeping rates high for their direct business by blocking their best advertisers from participating or setting rate floors. Hearst opened its private exchange two years ago with no floors or blocks. Smith said opening the door to more advertisers has helped Hearst capture more revenue as spending shifts from direct to programmatic.
“When you offer advertisers the opportunity to buy you without restrictions, minimum spend, you make more in the aggregate,” he said. “The advertiser rewards you for the convenience of being able to buy you in a variety of ways. Ten years ago, I can only imagine there was a list of digital advertisers that were in the hundreds. Maybe five years back it was 1,000. Today, we service literally tens of thousands of advertisers.”
Hearst has an advantage over peers in that it publishes a wide variety of media properties reaching a diverse audience, said Brian Ko, managing partner for digital at MEC. “By building out this private exchange, it nicely fits in where for large brands, it gives them something that’s safe and unique and eliminates a lot of waste. You’re being a lot more effective with their buys.”
Hearst’s more open approach than others may please advertisers. But there is a small concern among digital publishers, just like in TV, print, radio, that a publisher offering perceived comparable inventory at lower rates puts them at a disadvantage, said Matt Prohaska of Prohaska Consulting, a consultant to publishers.
“However, given the continued overwhelming supply levels found in display and mobile throughout open auctions today, no single publisher is greatly impacting that overall pricing floor for all buyers,” he said. “The Hearst team has a focused strategy with their total yield management and seems to be executing well against it.”
There are still inefficiencies in programmatic selling. Some advertisers are buying print as well as digital, and are still informed by legacy print-buying practices like value added, bonus impressions and make goods — practices that run counter to programmatic. “Rate cards and auctions are antithetical,” Smith said. As the dominant player, Google has an edge over other ad servers. The whole ad tech system is complex, lacking in transparency and fraught with bogus inventory. “The number of companies in the Lumascape — it’s not clear how these companies fit in and how revenue has been shared by these companies,” he added. “These are somewhat preventing programmatic from reaching its potential.”