The end of niche websites? Why programmatic buying is a threat to the species

Today’s internet world feels like the Permian period, the disastrous era more than 250 million years ago when a vast number of species became extinct. This time the species facing extinction is the niche website.

Owners of these sites use the word environment to try to get support from advertisers, but the new commercial reality is that buying and selling digital media begins and ends with finding the right people and presenting the right message in the right places at the right time.

The environment is losing its value as the industry moves from buying content to destinations and people. I’m picking targeting and its automated transaction layer as the primary force that will cripple the commercial prospects of publishers whose assessment of worth is solely based on environment.

We’re in the midst of a revolution that has shifted power to buyers. Advertising decisions flow from data and software platforms take care of finding the right people and getting your message to them at prices based on real-time market dynamics. It’s called programmatic buying, which boils down to buying and selling online ad space through an automated exchange, in much the same way shares are bought and sold on the NZX.

There are three main players: the publisher (seller), the buyer (brand owner) and the agency (smart people who analyse data and operate a trading desk to buy inventory on behalf of their advertising clients).

US pundits say 25 percent of all digital media will be purchased through an automated exchange of some sort by 2015. Emarketer says $3.34 billion worth of advertising was purchased this year alone using automated exchange – a 74 percent increase over the previous year.

Get with the buying programme  

Programmatic buying is changing the way agencies work. It’s leading agencies to inventory in new places and prices determined by actual demand. A wellspring of data has opened agency doors to big brains with PhDs, who slice and dice data and operate programmatic platforms to navigate audience research and quirks related to where ads run and how long viewers linger at different destinations.

Media companies are moving fast to stay relevant and refashion their sales organisations to meet agency demands for targeting and scale. For example, Mi9 New Zealand manages a smidgen under two million registered users who can be targeted on a number of levels, right down to their offline location.

Buying is instantaneous, direct and targeted, and speculation about environmental value is marginalised. However, it has required heavy investment in new trading technology and analytics to steer inventory allocation between programmatic buying and inventory retained for other advertising packages.

Fears that automated buying would commoditise vast chunks of our inventory and slash value haven’t panned out. We’ve seen yields increase two to three times from pre-exchange years. So much for the race to the bottom.

Follow the audience

Questions about placement disappear when all pathways lead to people (the right people). But that doesn’t mean environment is off the table. Premium environments protect brand investment. However, you’ve still got to follow your audience – there’s no point in looking your best when everyone’s staring in the other direction.

Dinosaurs didn’t see what hit them, but publishers can see what’s coming. Smart operators are busy building networks that deliver mass reach and platforms geared for targeting and automated buying. Those hanging on to environment alone won’t know what’s hit them.

Dan Robertson is the New Zealand commercial director at Mi9.

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