Programmatic advertising: What I learned managing a local news website

“What’s programmatic advertising?” Ok. Yes. That was the first thing I had to learn when I started working as the digital marketing director at a local news organization. Let’s start there.

Programmatic advertising is the automated buying and selling of digital advertising. Let me explain more about that- how it used to be done, how it’s done today and why marketers need to understand how it all works. Then I’ll cover the deal I made with the devil over programmatic advertising.

How it used to work

The first time I bought an ad on the internet for a client, I researched websites that I thought would reach the right audience; then I called and emailed the “web masters” who managed those sites and asked if I could place an ad there. It was slow because I had to approach them one by one. And it was inefficient because a website owner could charge me whatever they thought I’d be willing to pay. That’s not programmatic advertising.

How it works now- it’s “programmatic”

Programmatic advertising is what happens today when you place a digital ad. There are programmatic advertising “exchanges” which are huge collections of websites and apps that accept digital ads. Google has one called the Google Ad Manager. To place an ad on this network, the advertiser defines characteristics of the audience they want to target, sets a budget and off they go. The ads flow into the network at lightning speed and get placed on sites that reach the right audiences. This video explains how programmatic advertising works.

But let’s get back to my experience managing this news website for a local media company. Upon taking this job, I knew I had to maximize revenue from advertising. And part of that fell to our advertising sales team but there was a big problem. The sales people met with clients and sold them advertising impressions on the website. But this was inefficient because, in case you haven’t checked recently, ad impressions are cheap. We sold ad impressions on the basis of “cost per thousand” or CPM. And we sold 1,000 ad impressions for about $10. So that’s why it’s not very efficient to have sales people getting in the car, driving to see customers, getting rejected most of the time, and occasionally bringing back an order for peanuts- maybe $500 - $1,000.

The other problem was that many advertisers knew that advertising on our site had real limitations. First, we couldn’t offer targeting of specific audience types- we just didn’t have that data about our website users. And second, we had limited audience reach. Sure, we got a lot of local traffic, but we couldn’t target audiences outside of our market and we couldn’t expand our audience size for advertisers who wanted to buy more impressions. These limitations hurt our ability to compete against programmatic ad buying and limited the amount of advertising we could sell. Educated advertisers knew they could jump into an ad exchange, like Google Ad Manager, and have extremely precise targeting and unlimited reach.

Making my deal with the devil

So that’s when I made the deal with the devil- I opened up our news website to receive programmatic advertising in addition to the advertising that our suffering sales people schlepped around selling. That meant that we could start making additional money by selling ad space on our website to the ad exchanges, like Google.

But here’s why it was a deal with the devil. Programmatic advertising was exactly the source of our problem- it was the competitor that kept local customers from buying more of the ads that we were selling. Plus, and this is a big one, the amount that the programmatic exchanges would pay us to place ads on our site was a fraction of our local sales price. We sold ads to local advertisers for $10/thousand knowing that that the same advertisers could buy ads like these on the big ad exchanges for less.

Was I the first digital ad director to shake hands with Lucifer? Hardly. Every local news organization in the country is doing this. And to be fair, we did try to create valuable advantages for local advertisers to buy directly from us instead of from the exchanges (discounts on other services, bundled packages, etc.), but these efforts were mere fingers in the dike holding back the massive deluge of programmatic advertising that’s drowning local news organizations.

Today the programmatic advertising market is gigantic. eMarketer shows the size of the programmatic advertising market in the U.S. to be $59 billion in 2019. And it’s estimated that half these dollars go to Google and Facebook. These were scary numbers when I was managing the local news website because it showed the transformation of the local advertising marketplace from one that used to be led by local news companies to one that is now flooded with dollars controlled outside of local markets.

Today I work as a consultant to business owners helping them understand marketing so they can get the highest performance from every media dollar they spend. And while both they and I know the importance of local news media in our communities, we also know where to look for the best value when we’re buying media. Sorry, but it’s on the ad exchanges.

This post was written by John Walker, Principal at J. Walker Marketing. Contact John directly to discuss your marketing challenges. John@JWalkerMktg.com.