When programmatic came for digital display, CPMs plummeted. With more agencies trading digital out-of-home programmatically, is the same thing going to happen in the OOH sector? Spinach’s Ben Willee assesses the opportunity and asks what it means for advertisers.
I know it sounds ridiculous but once upon a time, we used to ring up sales reps to do deals for online display ads. It’s hard to imagine picking up the phone for the humble banner ad. Yet that’s exactly how it was done. Go on, call me a dinosaur.
When we put in that call, how much we spent varied dramatically from one publisher to the next. Top-tier publishers commanded a huge premium and, in some cases, the trading metric of cost per thousand (CPM) for quality display was higher than A$30 per thousand. That’s when the rivers of gold ran for digital publishers. Not so much these days.
In the past 10 years, programmatic has come along and started to put its stamp on the media landscape.
First, it came for display and once publishers and media buyers realised they could get computers to do their job, it was game on. And why not? The computers are faster, smarter, don’t take sick days and definitely never turn up to work hungover.
If it seemed too good to be true for publishers, that’s because it was. The associated decline in CPMs was fast.
Economists couldn’t find a better example of supply and demand if they tried. A gushing volcano of digital inventory was pumped into exchanges, making it possible for every brand and its dog to buy display. And that, my friends, was what sent CPMs plummeting.
Initially, the premium publishers held on. They vowed never to trade in the exchanges and continued to sell their wares the old-fashioned way. But the temptation of the machines was too much for them to stand. They couldn’t help themselves and started to dabble in programmatic. First, it was an innocent bit of leftover inventory. Then, it was a bit more. Soon, just about every type of inventory was available programmatically.
Then the damage was done for publishers. Before long, it was obvious to the market we could buy premium inventory programmatically for a fraction of the cost. So we stopped calling those sales reps. And they stopped taking us out to lunch.
DOOH starts to embrace programmatic
With programmatic now gaining a foothold in the digital out-of-home space, the outdoor industry should be on notice as much as a compliance officer at a crypto startup.
The Thorndyke DOOH Verification State of the Nation report found that 16% of campaigns are overdelivered. Which suggests there is a lot more inventory out there than is sold.
Right now, the outdoor market is performing strongly. According to Australian SMI figures, advertising spend on outdoor for the first quarter of the year was up 8.7% year-on-year. A pretty good result given airport traffic, a major driver of out-of-home, was still in the doldrums.
However, there’s a whole lot of pressure on the economy now with rising costs in supply chains, interest rates on a steep incline, inflation on the march and petrol prices heading for the moon; not to mention falling house prices and collapsing consumer confidence.
Saying the corporate sector is under the pump is an understatement. The advertising market appears to have peaked, the stock market is entering bear territory and investors are looking more worried than pack-a-day smokers during COVID. We are in for a white-knuckle ride in the back half. And the ride is going to be a bumpy one in the digital out-of-home space as more agencies and advertisers jump on the programmatic OOH bandwagon.
Depending on where you fit into the media landscape, that could be good. Or it could be very, very bad indeed.
If you’re a client-side marketer reading this, you’re probably thinking cheaper inventory that’s easier and more flexible to purchase is coming. And that sounds pretty darn good, right?
But keep in mind, like any other media, buying OOH programmatically could actually cost more because there’s a fee for each layer you use to do the deal.
Ads must pass through a number of channels before they go live – from the sale-side platform (SSP) to exchanges and the demand-side platform (DSP) with each layer clipping the ticket. And that’s not going toward the effectiveness of your campaign or into the coffers of the OOH providers. So in some cases, you’re essentially throwing that money away.
It might be more efficient to buy this way but you need to weigh up whether the additional spend on services rather than the media is worth the convenience.
It goes without saying that agencies should always be experimenting with new technology. It’s the only way to stay in step with the market. But as we venture into this new space, remember to ensure your agency is putting the brief first. If you’re trying to quickly achieve mass reach of a tightly defined audience, a little extra spend could be justified to go the programmatic route.
Continue to test and learn
As the DOOH channel goes through the next phase of its digital transformation, the best approach for advertisers is to test and learn. Split your budget across direct and programmatic and see what works. By being agile and brave, you can get ahead of your competitors.
You may decide you’re better off going old school and dealing with an actual human to book that billboard. While computers are great at taking data inputs such as traffic, day parts and the impact of specific locations on creative, an experienced salesperson may steer you in a different direction depending on your specific objectives and budget.
The digitisation of the media landscape is far from finished and there is an important lesson here for channels that are yet to embrace programmatic. If you’re overinflating the value of your inventory, your days of raking in the coin are numbered.
There’s absolutely a market for programmatic but I’d strongly urge outdoor companies to avoid putting remnant inventory into the exchanges.
This case study has already been written and those that do not learn history are doomed to repeat it.