dmexco Panel: The New Programmatic Playground

Florian Heinemann, Google’s Roberto Ruju, eBay’s Mike Klinkhammer and our very own Alexander Reinhold talk programmatic at dmexco.

For the third year in a row, we organized a seminar session at dmexco—Europe’s biggest trade show and conference extravaganza for all things digital marketing and e-commerce. This time, we decided to dedicate our session to a trend that’s turning the industry upside down: programmatic direct. The surge of programmatic direct  is rewriting the rules of how programmatic works, and everyone—publishers, ad exchanges, DSPs, advertisers and all the players in-between—must abide by the new playbook if they want to stay in the game. The good news? All of these players stand to benefit. dmexco_panel_programmatic_direct

To explain this paradigm shift, we invited four industry experts to join our dmexco panel last Thursday. One of them, Florian Heinemann, is Germany’s resident online marketing guru and co-founder and Managing Director of Project A Ventures. He has been in the industry for 16 years, and we are honored to have had him join our dmexco session for a third time running. From the publisher side, we welcomed Mike Klinkhammer, Managing Director for eBay Advertising, who is responsible for one of the biggest and most advanced international publisher sites. He used to lead eBay’s ad sales team and has been instrumental in shaping the company’s development during the past decade. Roberto Ruju, Head of Programmatic Solutions EMEA at Google, contributed another ten years of digital advertising experience  to the panel, as well as first-hand insights into Google’s programmatic strategies. Completing this team of programmatic pros, we also invited Sociomantic’s own Alex Reinhold, Head of Global Supply, to the stage.

Heinemann kicked off the conversation with anecdotes from the early days of online advertising. From the first search term-based display ads on Alta Vista in 1999—”…for those of you who don’t remember: Alta Vista used to be a relevant search engine…”—to the birth of the first professional ad servers in 2003. “It was all fixed deals and there were only two big spenders: eBay and Jamba. We later used the same tactic at Zalando,” Heinemann recalled.

Sixteen years later, his vision of online advertising is the ultimate open auction: full transparency and derivative products, supervised and regulated by independent organizations and technology. “You don’t have to be a master of auction theory to understand that an auction works best under transparent conditions. It’s rational thinking.“ However, at the moment a fully open auction is still programmatic utopia. “Before this can happen, we have to get more players on board,” Heinemann said, before concluding, “It’s like raising kids—first you have to teach them what’s out there so that they can learn how to move themselves.” Ruju added, “We are still part of an ecosystem in which billions are spent on TV spots based on GRPs, while people actually use the break to go to the toilet. This is the biggest part of the advertising pie, so it’s not rational.”

But it’s not only about rational thinking. It’s also about market education. “Technology rapidly moves ahead so the education of the market is super important, especially on the sell side,” said Ruju. Reinhold concurred: “There are many publishers out there that are still not aware that programmatic direct is possible. It’s such a big advantage for them but it will take some time to make them understand that programmatic direct makes traditional direct deals obsolete because you will always make more money in the auction.”

“In some ways programmatic direct feels like a traditional direct deal, but it has all the advantages of the programmatic pipe, like buying one impression at a time or the increased efficiency based on the value of each user,” Ruju remarked. Once more players in the market understand these advantages, Reinhold said he believes that “we will no longer have a vertical waterfall model in which impressions trickle down until it snaps. It will become a horizontal process. All kinds of channels will compete against each other. It will be one big auction in which the highest price wins, not the prioritized channel in a chain.”

“I expect a big shift to happen from traditional direct sales to programmatic direct sales,” Klinkhammer added. “That’s why our sales people are channel- and platform-agnostic. This is the only sales set up that really makes sense looking at the future of our industry.”

In the end, the conversation boiled down to the agreement that the open auction would be the rational solution in an ideal world. Until then, programmatic direct will be a powerful driver for growth by helping publishers increase their yield and making more inventory available for programmatic trading.

Moreover, the quality of online advertising stands to benefit from programmatic direct. The open auction is already a big step forward from intransparent direct deals and the black-box nature of some ad exchanges. Now, programmatic direct also helps to prevent contamination and fraud.

It will take ongoing collaboration between ad exchanges, DSPs, publishers and advertisers to combat bad apples and fraudsters, but programmatic direct is the first step into the right direction.

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