The programmatic path to profit for publishers

Publishers’ growth in programmatic revenue is outpacing traditional direct sales for desktop and mobile across display and video advertising. New technologies like “programmatic guaranteed” are further blurring the lines between direct and programmatic channels. Despite these trends, recent research done at The Boston Consulting Group found that many publishers are failing to appropriately capitalize on the programmatic opportunity.

The reasons for this are many starting with publishers failing to take a strategic approach to programmatic. They treat programmatic as an incremental rather than core source of sales, and leave increasing amounts of revenue on the table as a result. Another reason is that they do not organize themselves to realize the most value from their programmatic efforts. The study found that less than 25 percent of programmatic team time is spent on value-creating activities, and that publishers use nowhere near the full range of technology tools that can increase programmatic sales and profit margins.

As the marketplace evolves, and outmoded distinctions lose meaning, best-in-class publishers increasingly view programmatic as core to their businesses. These companies continue to grow traditional direct sales and increase total CPMs. They also leverage programmatic technology to outperform the market and improve overall profitability.

One publisher in the study has built programmatic revenue to more than 50 percent of its digital revenue while increasing direct sales and total CPMs. These outperforming companies employ increasingly well-defined approaches to achieve their success. Much more than others, they:  

• Deploy a cross-channel data-driven sales strategy that encompasses both traditional direct and programmatic sales and is tailored to the publisher’s market position and market dynamics.
  
• Understand what advertisers value in terms of inventory and audiences and why, and leverage technology and data to match audiences to buyers and achieve higher prices.  
  
• Assemble the right technology, both as an efficient way to access demand and as a decision engine to maximize revenue.  
  
• Develop the right capabilities (particularly in sales and yield management) and realign their organizations and incentives to support a cross channel strategy and programmatic sales goals.
  

It’s clear that publishers lacking in an aggressive cross-channel strategy that includes programmatic risk loss of revenue, commoditization of inventory, and lower market share in the future. On the other hand, those that position themselves to deliver value to their advertisers in the programmatic market will both increase revenues in the near term and have a big and growing advantage over their competitors as the digital market grows and evolves.

The report outlines the four best practices that best-in-class publishers follow to create this strong path to profit.