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Programmatic is 'inefficient'

News, 11 March 2016

SYDNEY: The inefficiency of programmatic is preventing online travel brand Expedia from moving all its digital spend into programmatic trading, according to a top executive.

Only 20% of its marketing spend currently goes into digital, and of that just 20% is traded programmatically; 80% is spent on TV.

Vic Walia, Expedia's director of brand marketing, told Ad News he wanted to double his digital spending and turn most of it over to programmatic but he had issues with the current structure of the sector.

"The industry has shared data about how much money goes to the publisher, and I've done the exact same analysis internally with our campaigns over the past 18 months, and I've come up with the same number," he said.

That number is "40 cents on the dollar", with the rest being taken by various vendors in the middle. "Because of that, programmatic today is still largely inefficient," Walia stated.

In his view, publishers need to "definitely get more than 50 cents on the dollar" and even as much as 80 cents. "At that point we will feel we can be much more efficient with our buy," he said.

He argued that such inefficiencies in the cost-structure are leading brands to take programmatic in-house. And that's especially the case for an aggregator like Expedia which is selling someone else products. "You're working off a different margin base," he noted.

But setting up your own programmatic business unit, whether in house or within an agency, is not necessarily a cheap option. Nick Reid, managing director of TubeMogul, told the recent ISBA Annual Conference that there were significant costs in recruiting the required talent.

"We see digital-only businesses that don't spend that much on TV but that have always had search and social in-house and they're the ones that tend to run it [programmatic] in-house."

Reid suggested that this decision very much depended on where a business stood in regard to ownership of data versus focus on price and likened it to paying for an all-inclusive holiday or wanting to know spending on the separate components of flight, accommodation, food etc.

Data sourced from Ad News; additional content by Warc staff