Programmatic Still Small Potatoes at Most Agencies

Only 5 cents per dollar spent, but hope is for big volume soon

Despite all the hype about programmatic advertising, most agency trading desks (which make it their business to be involved in the programmatic game) touch just five cents of every dollar their companies handle.

Despite all the hype about programmatic advertising, most agency trading desks (which make it their business to be involved in the programmatic game) touch just five cents of every dollar their companies handle.

That’s according to the heads of the biggest trading desks on Madison Avenue, who gathered for a standing-room-only panel discussion in New York during the final day of Advertising Week.

Of course, the hope is to rapidly grow the influence of these trading desks, which are their company’s defacto evangelists for automated advertising. When moderator Jay Sears, svp, market development at the Rubicon Project, asked the group what percentage of media dollars they handle now, answers ranged from 5 cents to 15 cents a buck. But what was interesting was the variance between expectations for the future of programmatic.

Magna Global has already made the bold declaration that half of its media spending will be automated in a few years—including digital, TV, and everything else. Other companies see a far more gradual pace of evolution. For example, Josh Jacobs, president of Omnicom’s Accuen, predicted that half of his company’s digital budgets will be programmatic by 2015. As for TV, he wasn’t sure.

Meanwhile, Paul Dolan, svp, global business development for WPP’s Xaxis, saw programmatic climbing from 5 percent of spend to 7-10 percent in two years.

Revealingly, when Sears pressed the group to compare what function they play versus classic ad networks (where arbitrage is commonplace), three out of the five panelists said they do essentially the same thing. Sears also asked how many of these trading desks “administer” ad networks for their agencies, and three executives responded affirmatively.

So is the endless discussion about programmatic—which seemed to dominate half the panels during this year’s Advertising Week—much ado about nothing? Especially if we’re just talking about agencies grabbing a bigger piece of the DR-heavy ad network money?

Of course not, according to the panel. Adam Kasper, chief media officer at Havas, noted that ad networks don’t offer basic tactics like frequency capping. And networks run up much bigger margins than agencies. Though according to Sears, Xaxis’ Dolan admitted that his trading desk is itself focused on charging higher margins. “I admire greed,” joked Sears.

Regardless of where things stand now, the group of trading desk heads sees all media adopting elements of automation eventually.

Of course, the very definition of programmatic was up for discussion. Some tended to lean towards workflow—meaning that to adopt programmatic is really about eliminating paperwork (RFPs and insertion orders). “We are getting smarter about the way we work,” said Michael Brunick, svp, programmatic, Magna, who cited a desire to reduce the number of vendors that bill his agency. “We have some partners with $72 insertion orders.”

Others touted programmatic as the future of intelligent, data-driven advertising that is bought and sold by machines. “I can improve workflow and make more margins,” said Dolan. “We are too focused on tools. It should be about effectiveness.”

The group was split as to whether companies like AOL should be hosting “programmatic upfronts.” “We are doing more of our buying on an upfront basis,” said Dolan. But per Sears, VivaKi president Kurt Unkel had previously called AOL’s effort an “oxymoron.” Unkel declined to comment, saying only that he thought future upfronts ought to feature programmatic elements.

The group also wrestled with the very future of trading desks, which have endured longer than some critics had expected. Some see their functions being absorbed by individual agencies, or spun off. Others see them as perfectly positioned to usher big holding companies into a more digital future.

Currently, media agencies are seeking more synergies, said the panelists. “In our case, our trading desk is right down the hall from our media group,” said Kasper. “That helps.”

Brunick urged publishers to follow suit—particularly when it comes to compensation. Right now too many sites disincentivize programmatic, since sales execs are paid on commissions.

“You’re going to see the lines getting blurrier and blurrier,” added Jacobs.