Ad(tech) Men

Oliver Leung Huffinton Post

Advertising agencies traditionally sell ads to broadcasted media - television, newspaper, and radio. It required intimate details about its clients, but relatively superficial knowledge of the market. Advertising has come a long way since the Internet could fit into our pockets. The reliance on chronic, repetitive effort is being replaced by machines, which could do what humans couldn't in fractions of a second.

I'm up all night just to get lucky.
- Pharrell Williams, "Get Lucky"

Ever received an irrelevant ad on your mobile? Such as tampon ad for a single guy? It's as if your best friend forgot who you were. Therein lies the problem with mobile advertising - ads are shotgunned to see if they hit something... anything. It's as annoying as that person who tries to get lucky by approaching everyone at a bar. They are simply playing the number game - given enough views, someone will convert. Chances are, if they happen to get lucky, it's usually by accident... like clicks on an ad.

Mismatched ads occur because publishers sell ad inventory to earn revenue, and publishers usually have an excess ad space. So rather than leave a blank space, publishers will attempt to fill the void with an ad, even if it was irrelevant for the user. The opportunity for monetization often comes at the cost of user experience.

The old method is also painfully inefficient because of the endless proposals, negotiations, amendments, and fulfilments required in filling ad space. In all, up to 42 steps are required before an ad would be displayed. Then the process repeats itself like a broken record.

Back to School
Solving this riddle takes us back to Econ 101: Supply and Demand. Publishers have ad inventory (supply) to sell to ad agencies (demand). Naturally, ad agencies want the best audience at the lowest prices. On the other hand, publishers seek to maximize revenues by selling to the highest bidder. At any given moment, a surplus for ad inventory exists (i.e. fill rate <100%), which drives down prices.

By the time you hear this I will have already spiraled up...
- Eminem, "Lighters"

The new school of managing ad inventory is completed through Programmatic Ad Mediation (PAM), using services such as Appodeal. On a basic level, PAM uses automated software to display ads, optimized for revenue and efficacy. PAM solves three fundamental challenges with mobile advertising:

1. Price
PAM uses Real Time Bidding (RTB) to optimize fill rates, which maximizes payout to publishers. Unlike RTB for ad agencies (buyer), PAM leverages RTB for publishers (seller). This is accomplished by aggregating the whole market (ad agencies, exchanges, and networks), then determining which one is willing to pay the highest amount for each ad space. According to Forbes, RTB is "the fastest growing segment of digital advertising" accelerating at 59% year over year.

2. Time

The real benefit of using PAM is the automation, which eliminates the need for manually waterfalling (aka daisy chaining) supply side platforms. Rather than offering space to ad agencies with the highest rates then trickling down to the lower rates until every impression is monetized, PAM utilizes a first bid approach, which every demand source is able to increase their initial bid for impression to outbid other sources . This competition for ad space boosts the value for digital real estate automatically so publishers to focus on delivering content, entertainment, and games.

3. Enriched Data
PAM instantly serves ads that are enriched with demographic user data (i.e. age, gender, location, income, marital status, etc), which ad agencies want to target. This transparency enables ad agencies to bid higher on market segments they are most interested in. This also allows direct deals over OpenRTB Private MarketPlace on any RTB exchange.

The Force Awakens
According to a survey of 153 marketers conducted by the Association of National Advertisers, only 26% of marketers actively use PAM. But this powerful tool isn't going to be a marketer's best-kept secret for long. According to eMarketer, US mobile programmatic ad spending is expected to reach $9.33 billion this year and account for 60.5% of total US programmatic display ad spending. While old schooler's will reminisce on waking up in the morning with a bottle of Jack, they will be caught without a chair when the music stops.