Tuesday, April 14, 2015

‘No-hands’ ad sales challenge legacy media

Ever since legacy publishers and broadcasters got serious about selling interactive advertising, they have struggled with how to do it. 

Should veteran ad representatives be cross-trained to sell portfolios of traditional and digital advertising? This came to be known as the two-leg sales call.

Should specially trained digital ad specialists accompany legacy reps on four-leg sales calls?  

Should digital marketing strategists accompany digital ad specialists and legacy reps on six-leg sales calls?  

Now, some of the biggest names in digital publishing are going in a decidedly different direction than flooding the zone with sales power: They are moving to zero-leg sales calls that eliminate human beings altogether.  

As the new year dawned, Microsoft and AOL jettisoned hundreds (but not all) of their ad sales people in favor of turning their digital inventories over to powerful computers that auction individual page impressions in 0.0000002 of a second – or less. The phenomenon, which aims to maximize the value of an ad by matching the right offer to the right person at the right time, is called programmatic ad buying or real-time bidding. (See video explainer below.)
The shift is being propelled by the growing adoption among marketers of systems that slice and dice Big Data about existing and prospective customers to target expenditures as efficiently as possible. The most ambitious implementations not only send ads to carefully targeted prospects but also dynamically tune product offerings, sales messages and even pricing to boost in-store and online sales. 

The reason three-martini Mad Men are being replaced by triple-latte Math Men is simple, says McKinsey & Co. in a white paper celebrating what it calls the “New Golden Age of Marketing” (here). “Long gone is spending guided mostly by intuition,” writes McKinsey. “Instead, organizations are seeking greater precision by measuring and managing the consumer decision points where well-timed outlays can make the biggest difference.” 

Prominent consumer brands are jumping in. As reported last year in Advertising Age, Proctor & Gamble elected to shift some three-quarters of its interactive ad spend to programmatic buying systems, while American Express tasked computers with disbursing 100% of its digital ad dollars.  

More than half of the estimated $11 billion in digital display ads purchased in the United States in 2014 were bought via programmatic systems, according to a survey by Magna Global, the international ad agency. Magna predicts that 82% of digital display ads will be bought and sold by computers by the end of 2018, driving more than $25 billion in volume.  

The rapid and enthusiastic adoption of programmatic advertising by major national and international brands is great news for major national and international digital publishers like Microsoft and AOL. 

Because they serve hundreds of millions of page views per month, Microsoft and AOL – which consistently rank among the 10 largest digital properties – attract enough visitors to serve the needs of marketers seeking everyone from vegetarian Scrabble players in Scotland to burger-munching baseball fans in Muncie. 

Given the operating scale, financial heft and technical prowess at these digital behemoths, they (and their peers) have invested in the technology necessary to track and categorize users so they can efficiently provide access to marketers arriving via the increasingly sophisticated ad-buying networks operated by Google/DoubleClick, Facebook and others.  

In other words, the digital heavyweights essentially are abandoning the ancient practice of selling banners by the bushel, encouraged by the realization that the ever-growing inventory of web and mobile inventory will continue to commoditize, and thus depress, the pricing for untargeted ads.  

While the efficiency inherent in programmatic selling encouraged Microsoft and AOL to trim their sales staffs, they did not axe all their ad folk. The companies retained representatives to make big, strategic deals that involve not only advertising, but also promotions ranging from content development to product placement to native advertising. 

The shift to no-hands selling by the digital biggies puts legacy publishers and broadcasters at a competitive disadvantage. Because they don’t operate at the breadth and scale of the major digital brands, the legacy media lack the traffic and, quite often, the detailed data necessary to extract full value for their inventories in the RTB marketplace. 

While local publishers and broadcasters can improve ad yields by partnering with third-party data firms to optimize their RTB performance, they likely will be forced to continue to rely on person-to-person selling for the foreseeable future. 

To amortize the high costs of high-touch selling by actual humans, the legacy media must become indispensable marketing partners to local businesses by providing a host of holistic, premium and recurring services, such as: digital site development and hosting, content production, native advertising, search optimization, reputation management and social media marketing. 

Local presence is the key advantage that legacy media have over their digital competitors. If they don’t use it, they will lose it. But they have to do so efficiently. 

© 2015 Editor & Publisher