Ricky McClellen, CTO of Smartclip, Europe’s largest premium video ad network, believes programmatic video needs to evolve from where it is today if the industry is going to sustain premium video. And, he says, this isn’t just about addressing publisher concerns on pricing either. Buyers are frustrated too. “We hear all the time from our top five advertisers that they can’t find good local, premium content on exchanges. Everyone claims they have it and all of the video exchanges claim they have tonnes of inventory, and they might show up on the top of ComScore, but advertisers are telling us that they can’t find what they want.”
“It’s easy to get into that cycle that everyone talks about in the video world, where revenues decrease; so the ability to produce content decreases because there isn’t much funding for it. Then the content quality decreases, so the effectiveness of the advertising placed against that content decreases; so you find yourself in a downward spiral that pushes both the quality of the advertising and the effectiveness of the advertising down,” he adds.
Sellers and Platforms Need to Look at the Wider Context for Each Impression
So what’s the secret to sustainability? And how are Smartclip approaching the problem? McClellen says the secret is for sellers to widen their focus when it comes to valuing each individual impression. “What I mean by that is, if you’re a publisher, and you’ve a commercial deal with an agency who represents a top ten advertiser, and that agency has said they’ll guarantee you €2 million in spend this year. When they bid on an impression, at one price and another advertiser who’s only going to spend €50,000 the whole year bids the same price, or a little bit higher, which one is more valuable to the publisher?
He continues, “So, you see, you can’t always just look at the highest individual bid for an impression in an auction. You have to look at the value of an impression, which includes total spend and the publisher’s relationship with the buyer, so you’re looking at a more weighted idea of value for the impression.”
McClellen says a straightforward example of this more holistic approach would be a situation where a high value advertiser could be given priority by multiplying each of their bids by 1.2. However, it gets more complicated when you also factor in what the DSPs/trading desks are doing.
“They want to be able to see impressions and they want to make choose different impressions, where the value isn’t just the inventory, but they’re also using data to inform decisions about which impressions not to bid on, because they know who those users are. So you can look at the publisher side from a platform perspective, and look at what a particular agency is bidding on, and that creates some idea of value. That’s the core of why media will be traded programmatically and not necessarily auctioned, because the process of using data to create models and evaluate value is simply too complex for anyone to do it manually,” he adds.
Publishers Need Flexibility
McClellan believes publishers need to be given more flexibility to create deals with their customers and not be forced into a specific type of commercial arrangement. “Many of the platforms that are out there today, whether they’re SSPs or exchanges, the model is clearly a second price auction. That’s what happened in display and it’s happening in video as well. So publishers are worried, because they want the freedom to be able to structure commercial deals with their advertisers.
“The market’s response has been to facilitate private deals, but the challenge of that is, that the value of programmatic access isn’t that it will enable you to keep all of your prices high. The value is to distribute your yield in the way that makes the most sense. Let’s look at that from a guaranteed perspective. When you have a private deal, almost all platforms carve that inventory off so you allocate say, ten million impressions a month. And how is that distributed? Well, it’s distributed by an ad server to ensure you get the ten million impressions to fulfil your private deal.
He continues, “But there are plenty of scenarios where those 10 million impressions could be more valuable if you were to distribute them through different channels and offer them to different customers. But what happens now is that an ad server does that, and those impressions aren’t made available in the auction model. So if you were able to determine the true value of every impression and evaluate whether it should form part of your guaranteed channel, or be part of your second price auction model, you get the best optimisation and the best yield across the board. And that’s where we think the current systems fall down and I think that this is what has led to the lack of premium inventory in exchanges in pretty much every market – even in the United States,” he says.
Smartclip as Part of the Adconion Stack
Smartclip’s move into programmatic came earlier this year with the launch of SmartX, which McClellen and his team built from the ground up so the company could offer more advanced yield optimisation capabilities, while also allowing for the control and protection of publisher data.
The move is a significant one for a video ad network that has been around since it was founded in Germany in early 2008, making it ancient in online video terms. In late 2011, the company was bought by Adconion Media Group, but 18 months on the Smartclip brand is still going strong.
I ask McClellen if the video business is likely to be more deeply integrated into Adconion’s multichannel stack of ad technologies? “One of the core reasons behind the acquisition of Smartclip was to offer a full-funnel marketing suite. So I definitely think that is the direction we’ll go in as the market becomes more sophisticated and the technology improves. But even now we’re already looking at the full funnel, with video at the top, but we’re also able to make use of things like email data and display data. And that type of thinking is hugely valuable from both a performance and a brand perspective.”
Does that blur the lines between brand and direct response? “At the end of the day, if it doesn’t contribute to an advertiser’s bottom line, there’s no reason to be advertising. I think you’re going to start seeing video being presented as part of the overall performance pitch, because it’s no longer just about brand and performance. Those goals can be combined.”