Automated media trading 101

Media trading 101

What is automated media trading? How does it work and how will it ultimately affect the industry? In a feature that first appeared in EncoreNic Christensen investigates.

The automation of media buying might sound complicated but according to one media agency boss, it isn’t rocket science.

Henry Tajer, executive chairman at IPG Mediabrands, says: “We have an opportunity to leverage technology into our business operation and of course there are benefits to doing this. It’s many things but it’s not really rocket science.”

So what exactly is automated media buying? Put simply, automated buying is a computerised system for bidding on adspace, think eBay for ads. Media buyers log in to a system that allows them to set parameters such as the age bracket they wish to target, let’s say for arguments sake men aged 25 to 45. The buyer can then say they’d like to hit men interested in running or sporting equipment. In the case of online ads, they tell the system how many page impressions they would like to serve – as in the number of times the ads will be seen – and how much they are willing to pay per impression.

As the president of industry body the Media Federation of Australia in 2010, Tajer made automation a key priority. Three years on, the first industry wide transactional platform for television buying is expected to launch next year with other media such as outdoor advertising and radio expected to follow. Online display, video and mobile advertising is already heavily automated and continues to expand rapidly into the space.

Tajer says: “As the industry grows the pressure point is not just between seller and the buyer anymore. There are supplementary elements to that process. When we transact for a client, that is just step one in the process. Step two is taking that transaction right through to invoicing, receiving payment from a client, and then confirming and checking the spot. Technology can handle all that stuff.” Tajer gives the example of banks that have automated most transactions and says the enormous scale of the banking industry suggests the media business should be able to adopt the strategy. He says: “An industry like the media industry, which is comparatively small, can get a lot of benefits.”

Chris Walton, former boss of media agency Mindshare and principal of data consultancy Quantium before its sale in August this year, says automation has the potential to reinvent media buying and media sales. He says the move towards it should be viewed as an opportunity to do just that. “Agencies are dying under the weight of transactions that they don’t need to do,” says Walton. “Automation, at its heart, is about matching inventory to its most valuable audience. Any one brand can have hundreds of audiences. Marketers and some agencies focus on grocery buyers or people 25 to 54 which in 2013 is ridiculous. What you want is small car buyers who intend to buy in the next three months, or target people who buy family size shampoo. And so automation needs to be a system of bringing together inventory and data that recognises the individual value of each of these spots to micro-audiences and then matches them in a way that delivers best value to the end advertiser.”


James Collier, head of digital at media agency Bohemia, agrees that data is key to maximising the opportunity presented by the automation revolution. “We use a system of attribution modelling where we take intelligence or data and buy as relevant and valuable media as possible and ensure that it delivers value for our clients,” he says.

Bohemia is considered one of the most data-focused media agencies in Australia. Collier says: “We are heavily invested in driving programmatic buying through our business because we see it as being the future of investment. As a workplace solution it allows us to drive operational efficiencies, it allows us to deliver more nimble, flexible and controlled campaigns to market and do so 24/7.”

And the benefits of the system don’t stop there. Collier says: “In 2013, we don’t need insertion orders anymore but it wasn’t that long ago that we were still faxing them to Google. The system was antiquated. From the publishers side, one of the key benefits is that they get to write revenue 24/7. If my campaign comes in on the weekend and I want to put it live, I don’t have to wait to get an insertion order signed.”

According to Sophie Madden, CEO of the Media Federation of Australia (MFA), the process to get media owners on board has been an interesting one. One of the MFA’s current projects is establishing the Electronic Transactions Hub, a transactional platform for placing TV advertisements. “A lot of that happened before I arrived at the
MFA, but getting everyone on board was tough. Getting agreement on what we all want was also difficult,” says Madden.

Madden says the industry-wide transaction system was created because it wasn’t practical to have systems for every TV network.

Madden says: “A media agency can’t have a different system for dealing with MCN, Ten and Seven etc. No one wants to have 50 million systems.”

Madden says the MFA is keen to automate the transaction element of media buying in the TV space as this is where the bulk of time is spent. The industry platform differs from the trading system in place for other media such as online ads as it does not allow for price trading.

While the industry is body is keen to avoid a plethora of trading platforms some networks have already jumped into the space. Last week, Multi Channel Network (MCN), the sales house responsible for the bulk of Foxtel’s advertising, launched Australia’s first automated trading system for television buying. Like the MFA platform, MCN’s system automates the booking process for agencies and clients. The changes give MCN a temporary competitive advantage, in a sector of the market still dominated by spreadsheets. It also allows clients to monitor performance of their spots electronically.


TV may be in the first stages of adopting automation but the most established sector currently being automated is online where transactional platforms have been operating for many years. Online ad sales can be dominated by confusing acronyms but the key to understanding the space is that a large amount of automated buying occurs through what are known as demand side platforms (DSPs). These are systems that allow buyers of digital advertising to purchase ads across a number of ad networks.

Ad inventory in these systems is then sold by CPM, or cost per impression, or number of views.

New research by marketing services company Magna Global predicts as much as half of Australian display, video and mobile advertising could be bought through automated trading by 2016.

Victor Corones, Magna Global’s Australian managing director, says: “Programmatic trading had a relatively slow start in Australia because it took time for the technology infrastructure from the US to be set up. Now we expect in 2013 it will account for 28 per cent of spend, up from 19 per cent in 2012.”

Matt Von der Muhll, APAC managing director of online video platform SpotXchange, has seen the growth first hand. He says: “When we first set up in Australia two years ago there was a good six to 12 months of education but now we are proactively being sought out. Agency trading desks now gear to this space and there are even some major brands, who are putting together trading teams through their agencies.”

Automation has already changed the way agencies do business however one of the biggest hurdles for further implementation of the technology is the reluctance by media owners who fear it could commoditise much of their advertising inventory and reduce its value. SpotXchange’s Von der Muhll says this perception is changing. “In the last six months, we have seen a lot of the resistance from media owners evaporate,” he says. “When they realise that the tools haven’t put a downwards pressure on pricing and instead create efficiencies and in some case even drive price up they are much more open to it.”

This has been the experience for Nine Entertainment Co’s Mi9, which set up the Microsoft ad exchange in 2011. Marc Barnett, commercial director for Mi9, says: “We have seen yields increasing two to three times from what they were pre-exchange. It has become a significant focus for our business to the point where we now have a director of programmatic trading and traders in that team who are trading our inventory and buying and selling third party inventory.”

Barnett believes many of the publishers dragging their feet are doing so due to a lack of knowledge around inventory management. “There is a certain amount of fear around issues like yield erosion and a race to the bottom,” says Barnett. “Agencies are doing everything they can to train up their staff and bolster their trading desks but the issue now is access to more inventory. I don’t see any race to the bottom but the fear is really something that comes from not understanding the technology, your own inventory, its value, and how to manage that.”


Walton says automation offers the industry a potential “utopia” where everyone benefits but it requires media owners to learn how to better manage their inventory. He says: “There is a utopian outcome whereby media owners improve the yield on their businesses, advertisers see advertising costs go down and most importantly effectiveness goes up for clients. But that scenario requires media owners to ensure certain inventory is in the automated system and certain parts retained are kept out and sold as part of a broader package.” He gives the example of television networks retaining event TV, sports and key shows to sell as part of broader packages.

As automation moves in to all areas of media buying, the way agencies do business can’t help but change and with that, the skillsets of people will also shift.

Walton says: “There will be job losses because there are a lot of people who currently work in media agencies who won’t have the right skillset for what media agencies will need in the future.”

“Will there by net losses? That’s a debatable point.”

Madden believes automation will help eliminate the industry’s vacancy rate, currently around six percent, and free up a lot of existing entry-level data checking roles for more data driven work. MFA chairman Tajer agrees. “I don’t think there will be job losses,” he says. “Automation will grow our marketplace because it allows the human IP in our business to shift from operating efficiently to thinking effectively.”

However, others such as Mi9’s Barnett or GroupM media buyer Danny Bass warn there will also be repercussions for media sales.

“Sales people will still have a role but it will be a different one,” says Barnett. “The definition of selling will change from going in selling and doing everything to just convincing the client to buy something. Then at that point the transaction itself happens online and the focus moves more to educating.”

Group M’s Bass says: “There will be a reduction in the number of face to face sales people, because that way of selling is not efficient in the new media age. Some traditional roles will disappear and will be replaced by new roles and new skill sets.”

Bass says that while there will never be a time when sales people are completely redundant, but smart media owners are already rethinking their sales model and teams. He says: “You will have specialist teams within media owners and also specialist teams within media agencies who focus on high yielding, cross platform integration brand building opportunities.”

“The other teams will focus exclusively on building audience at scale, they will have an agreed outcome on a metric.”

Walton says such steps are good but agencies need to be focused on demonstrating the value of this structure and their thinking to clients.

He says: “Agencies will say this will free up people to do more strategic thinking and that is fine but they need to get in more strategic thinkers to do that thinking and convince the client that they can do it better than the client themselves can.”

Walton argues there are some media agencies who face very real dangers in doing this and moving away from a pure media buying focus.

“Agencies are also very conscious of not shooting themselves in the foot,” he says. “The vast majority of what they do, at the moment, can be automated and they haven’t yet fully moved into the area they need to be in for the future.”

“That future is just around the corner,” he warns.


Encore issue 36This piece first appeared in EncoreDownload it now on iPad, iPhone and Android tablet devices.



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