Forget the RFP. Why 2016 is the year of automated guaranteed

2016 seems to be the year that automated guaranteed (AG) is finally entering the industry’s consciousness in a tangible way. Major trading desks have announced their ambitions in this area, in some instances publicly stating that they see it as a central part of their future offering.

Some of the largest ad-tech providers, ourselves included, are scrambling to innovate around AG. All are reporting rapidly increasing volume from trading desks and agencies. Significant growth is clearly expected, but in reality, AG has been slower to emerge than many industry forecasts predicted. Why? Lack of technological maturity is definitely a factor. More importantly, the industry is only just getting its head around other forms of programmatic.  We haven’t quite decided where this piece will fit yet.

So let’s figure it out by focusing on its strengths and weaknesses relative to its closest routes to market; the private marketplace (PMP) and the good ol’ RFP.

First up it’s important to know that, as the name suggests, the inventory is guaranteed. Just like direct sales, AG orders go straight to the top of the publisher’s ad server hierarchy, making them first in line. A PMP offers a first look but there is no guaranteed outcome for the buyer or the seller. This means that the type of inventory available through AG is truly premium. Publishers are selling their best stuff so they insist on getting the best possible price. Limited inventory is the key characteristic of this marketplace. This means that AG best serves strategic opportunities rather than tactical ones; brand and not performance.

This inventory is not typically available to the programmatic stack. Traditionally, it has been serviced through the direct sales channel so why not continue to buy it through RFP? Two very important reasons:

First, AG is the most efficient transaction available in the premium digital media marketplace today. RFPs are notoriously inefficient and PMPs have earned a reputation for being cumbersome.

“AG is only efficient if the inventory is available on platform,” I hear you say, but given the current state of technology, this is no longer an issue. The most advanced AG platforms now allow buyers to brief in-platform. Sellers can respond accordingly with any products that are already in their ad server, and opt those products into an open marketplace to be traded with all other buyers. In other words, all of a publisher’s inventory can be sold through AG – at any time.

Second, it’s just straight-up more effective. A connected process inevitably delivers better outcomes than a disconnected one. For buyers, superior discovery tools enable the user to find the right inventory, including all first party targeting options (key value, audience and geographic). Direct access to the publisher ad server provides real-time availability checks, thereby streamlining the planning process. Most importantly, the optimization process becomes much more responsive, with both sides having access to the same data, in-platform communication tools, and ability to execute changes with immediate effect. Therefore buyers and sellers, who are known to each other, can collaborate to produce the best results.

The key hurdle for AG is that it is most closely related to the direct sales channel, sharing many of the same characteristics. Premium inventory is scarce and fiercely protected. Pricing and preference rely on human judgments which reflect the mutual value manifested in a relationship. Decisions are not made on the basis of price alone, and inventory is traded on a forward guaranteed basis. As a result of these shared characteristics, it is harder to drive behavioral change. Some are instinctively protectionist, but the threat is more perceived than real. In fact, the technology complements the direct sales channel. It supports existing relationships and their associated pricing regimes. The end result is a more efficient and more effective process.

In time, it will also emerge that AG will enable everyone to sell more.  Existing clients will benefit from technology that enables the trading of custom products to be built using first party data or audience matching. It will also allow us to sell more to new clients. Open marketplaces are already available, enabling many buyers to trade with many sellers, opening up new sources of demand and supply to each party respectively.

So does AG mean the death of the direct sales channel? Absolutely not. Human relationships and creativity will continue to play an important role. Will it lead to the demise of the PMP? Again the answer is:  absolutely not, particularly for data rich advertisers. In other words, just as the Internet did not replace the high street, there will be many routes to market. One size does not and will not fit all. All channels, whether automated, programmatic or otherwise will all have a part to play, only this time the tool selected will be the right one for the task at hand.