As Publishers Ditch Open Auctions, Advertisers Must Follow

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Publishers often express concerns about the programmatic open market, but Bloomberg Media took a more decisive step recently. The company said it would stop serving open-market third-party programmatic display advertising on its website and mobile app when the new year begins.

Publishers, advertisers and ad-tech players should pay attention to this development because it validates concerns and signals where the rest of the supply side is heading: Publishers are going to move away from the programmatic open market and double down on direct sales capabilities.

Bloomberg cited the user experience and brand safety concerns as the main driver of its decision.

Publishers generally use the programmatic open market to fulfill remnant inventory—media they have not sold upfront through direct sales. This comes with some financial benefit, eliminating unused media, but it also comes at the cost of exposing the publisher to advertisers with whom it might not prefer to do business.

Letting a wide array of advertisers onto a site potentially compromises the user experience. For example, readers of a premium site like Bloomberg or the New York Times may not want to see ads for quick fat loss schemes or dubious supplements. This infringement on UX can then scare off not only readers but also advertisers who do not want to be associated with bad or disreputable actors.

Open-market targeting also comes with privacy concerns. The programmatic open market has historically relied on third-party audience data, especially from technologies like the third-party cookie. By relying on it, publishers allowed ad targeting on their site to be dictated by often probabilistic, inaccurate data culled and monetized without consumer knowledge. These practices risk undermining the reputation of the publisher and even introducing regulatory exposure.

Finally, while selling remnant inventory is a strong use case for the programmatic open market, relying too much on it as a fail-safe can lure publishers into a sense of complacency that takes away from needed attention to a much more lucrative sales channel over which the publisher has more control: direct. By leaning away from the open market and into direct, publishers can regain control over the advertisers with whom they do business, resolve privacy concerns and protect the user experience.

For publishers, giving up the open market may introduce short-term challenges such as a loss in revenue earned from remnant inventory. But for those, like Bloomberg, prepared to handle those losses, a renewed focus on direct sales can bring greater and happier readership, unencumbered by low quality ads as well as the high-value advertisers who want to reach that audience.

The key for publishers is to set up the infrastructure required to reach premium advertisers at scale, thereby fueling a strong direct sales operation. This means building out the ad products and salesforce required to execute programmatic guaranteed and private marketplace transactions. It also means displaying direct products, inventory and pricing at scale to increase competition for them among premium buyers.

It’s this pursuit of scale that has led many publishers to depend on the open market—but the same can be accomplished via direct with the proper technology and personnel.

Advertisers should welcome premium publishers’ shift away from the open market. A focus on direct sales offers advertisers preferred deal conditions such as guaranteed impressions and greater transparency into audiences.

The dip in programmatic transactions with obscure buyers should also assure advertisers that, when they buy from publishers who focus on direct, they are buying high quality media in a trusted content environment. Their ad will not show up next to spam or unseemly content.

But for advertisers to take full advantage of what will become an industry-wide movement toward direct deals, they need to ensure their media buying partners, such as agencies and DSPs, have the power to discover and transact at scale on premium inventory that is only being sold via direct channels—this should become a common question for advertisers to pose when vetting media partners. Gaining access to that inventory will be especially crucial on hot channels like CTV.

The digital media industry has been transforming, opting to sacrifice the easy scale of the programmatic open market in favor of brand safety, premium deal conditions and first-party audience relationships. Bloomberg’s move is one big step in that direction. Publishers and advertisers should expect the rest of the industry to follow—and prepare accordingly.