Programmatic media is a fast-growing phenomenon in the global media and advertising industries. Also known as programmatic marketing, the term encompasses an array of technologies that automate the buying, placement and optimization of media inventory, replacing humans in part of the process, according to AdvertisingAge.
In this process, supply and demand partners use automated systems and business rules to place advertising in electronically targeted media inventory.
Programmatic has made headlines in the past year, becoming a buzzword among agencies and clients, according to WPP, a British multinational advertising and public relations company with main offices in London and Dublin.
But what exactly is it? Programmatic media buying, or programmatic, is an automated way of buying digital advertising in which supply and demand partners make decisions on a per-impression basis, adhering to business rules provided by the operators of each platform.
In its most basic form, programmatic equals automation, according to WPP,
Real-time bidding, or RTB, is how ad inventory is bought and sold on a per-impression basis, via programmatic instantaneous auction, similar to financial markets.
South African buyers and sellers knew from looking at their peers in the U.S. and U.K. that they needed to develop a programmatic strategy, according to a report in AdExchanger.
But publishers were reluctant at first.
From AdExchanger. Story by Sarah Sluis.
Publishers were initially reluctant because of the cost of programmatic tech and the old fear that buying in a real-time bidding environment devalued inventory. This concern led WPP to help create SouthernX, a publisher coalition for programmatic that spans South Africa and sub-Saharan Africa.
“Local publishers in this market have been apprehensive and reticent to enter programmatic space,” said Paula Raubenheimer, general manager of SouthernX. “They were very concerned it would be a race to the bottom.”
As a small market in a continent filled with developing nations, South Africa-based SouthernX faced several unique challenges. Because of the weakness in South African currency, the rand, it was too expensive for publishers to buy programmatic technology on their own.
SouthernX purchased programmatic technology from AppNexus – which had high adoption among buyers in the region – on behalf of these publishers to run the exchange.
But technology was only part of the problem. Because of the limited inventory in the market, many premium publishers sold direct at high CPMs (the term for cost per mille, or advertising cost per thousand views.) They were doing fine without programmatic.
Ensuring that remnant inventory would be sold at high prices was key to getting publishers on board.
“We’ve been rigid on floor pricing,” Raubenheimer said. Some publishers with strong direct sales teams sell their inventory blindly in the exchange, marked only as “news site,” for example, to preserve those direct relationships.
“WPP realized was that in this market specifically, and potentially other smaller markets, no one could buy programmatically if the publishers didn’t create something,” Raubenheimer said. “This is WPP trying to support the sell side.”
The business model emphasizes transparency.
“There’s no funny margins or arbitrage,” she said. “We take a percentage of the revenue that a publisher achieves, and ensure that the full price and revenue achieved by a publisher is known to them.”
After being formed in April, SouthernX brought on 60 publishers. One group of publishers represented by the sales group The SpaceStation joined, as did Junk Mail Group, which represents huge classified sites.
The exchange started slow, at just 100 million impressions when the exchange launched last October, to avoid overwhelming the market with demand. One billion impressions a month are potentially available through the platform. It now puts 200 million to 300 million impressions a month on the exchange.
It’s still working on building up demand on the buy side. Some buyers might tap into SouthernX using their own programmatic technologies. But others, often delving into programmatic for the first time, use the SouthernX-sponsored AppNexus tools to receive access just to SouthernX’s pool.
SouthernX sees some trading activity from global buyers, like Cadreon or Sizmek, “but the majority of the spend is coming from local agencies, local brands, local people,” Raubenheimer said.
Beyond South Africa, SouthernX also allows buyers and sellers to transact programmatically in Kenya and Nigeria, the second- and third-largest English-speaking markets – both of which are smaller than South Africa, but more mobile.
But South Africa, the most digital of African nations, is highly mobile as well.
Only 30 percent of the population, or 20 million people, access the web. And just 11 percent of those people access the web with a desktop. A whopping 89 percent use mobile devices. And of those mobile devices, many are feature phones, not smartphones.
Feature phones access the Internet (and publishers serve ads using cobbled-together solutions that leverage DoubleClick for Publishers), but no programmatic solutions exist, nor are they likely to be developed.
Instead, SouthernX is betting on an influx of affordable Chinese-produced smartphones to the South African and sub-Saharan markets that will bring more of the population to the mobile web, where it’s easier to serve ads.
“When I started working for SouthernX a year ago, the concern (around mobile ad solutions) was much greater,” Raubenheimer said. “Thanks to these Chinese Android smartphones people are adopting, a (feature phone solution) may not be as necessary in six months’ time. Right now, we probably should have a feature phone solution, but there is no tech solution that solves for it.”
At News24 Nigeria, for example, mobile inventory has 10 times the volume of desktop inventory. That puts SouthernX in an odd place, waiting for bigger advertising markets to develop technology to catch up to its mobile-first population.
With programmatic, SouthernX can serve ads sized to the device a user is on, but it still relies on the banner units that many in the industry see as interim solutions until the industry figures out what ads work best on mobile.
Eventually, it hopes to add mobile video ads to the mix, but inventory is in short supply, “limited by smartphone penetration and the fact that data a still quite expensive in South Africa,” Raubenheimer said.
In the meantime, it will continue to scale up publisher supply as it builds up more demand, bringing programmatic liquidity to South Africa and sub-Saharan Africa.
Read more at AdExchanger.