The programmatic economy looks like every other market - supply, demand, and technology. Most of the usual economic theories apply, but I believe this efficient market is not driven directly by supply or demand - it’s driven by technology. First let’s define the market as a refresher from my last post:

Demand: Brands or agencies buying media in a programmatic format.
Supply: Publishers selling advertising inventory (either on-site or extended audience)
Technology: The DSP (Demand Side Platform), SSP (Supply Side Platform), and Ad Exchanges which power the market.

Picture technology as a pendulum swinging between demand and supply, and watch the state of the market. Whether it’s causation or correlation is up for debate, but there’s an obvious connection. Humor me for a minute:

Flashback to ancient times - Pendulum swings to supply...

• Brand calls publisher, says hey I want to advertise
• Publisher says great, pay me a premium fixed price for guaranteed placement
• Brand says cool, let’s run for 6 months
• Publisher says great, you won’t have any tracking or optimization but my audience is so valuable that you don’t care.
• Buyer says cool, your audience is so valuable that I don’t care.

The lack of technology actually benefitted publishers, because buyers didn’t have an automated way to buy better, cheaper inventory. Take a wild guess what happens…

Small/Medium publishers (the 80% of supply) struggle to sell their inventory direct to brands. Brands struggle to create return on ad spend so marketing budgets get cut. Technology evolves.

Flashback to a few years ago - Pendulum swings to demand…

• Brand calls agency or logs in to trading desk
• Brand builds campaign to maximize CTR & eCPA at max bid $2 CPM
• Brand buys hyper-discounted inventory
• Publisher can’t sell, so they discount inventory to wholesale prices and sell programmatically
• Publisher takes $1 CPM from the $2 CPM bid. *sigh*

The advent of technology allowed buyers to capitalize on the discounted inventory, ad fraud errupted, and publishers weren’t making any money. Technology evolves.

Now - Pendulum swings to supply…

• Brands want the ease of programmatic buying, with the safety of publisher direct buying
• Publishers want the ease of programmatic selling, with the high CPMs of brand direct selling.
• The SSP has evolved to make ‘programmatic guaranteed’ or ‘programmatic direct’ buying simple and automated. Everyone’s happy.
• Brands get premium inventory, viewability, and guaranteed placements with the same efficiencies
• Publishers are able to maintain the value of their #1 asset (the audience) while maximizing revenue.

So what’s next? Technology evolves. The rise of the SSP is benefitting both publishers and marketers. Better inventory, better quality, and market value pricing. 

I've got a few predictions for what we'll see next in the industry. Stay tuned for the next post!