The concept of Programmatic Direct advertising (a.k.a. “Automated Guaranteed” and “Programmatic Premium”) buying holds the promise of streamlining and increasing sales of premium inventory through API-driven automation. The benefits of Programmatic Direct advertising, particularly the elimination of transaction costs and low-value grunt work, are very well documented here and I won’t bore you by extolling the wonders of Programmatic Direct for the nth time.
Instead, I am going to give some “tough love” and advice to advertising technology providers who are poisoning the Programmatic Direct advertising ecosystem and preventing it from achieving its potential.
Unfortunately, as a result of bad business decisions and bad design decisions, there’s not yet much interest from buyers and their technology partners to connect to Programmatic Direct advertising APIs. As a consequence of these decisions, media buyers have no good reasons to use Programmatic Direct and a lot of good reasons to avoid it. As a result, there’s only a trickle of revenue flowing through these shiny new pipes.
To unlock the potential of Programmatic Direct, we need to fix the problems of the business arrangements and the design of the API protocols. Here are 27 tips to build a healthy Programmatic Direct advertising API ecosystem.
The first 18 tips come from Rob Leathern
The first 18 tips come from Rob Leathern and his recent article “Building an Ads API Ecosystem: 18 Tips for the Next Company to Do It.” Rob’s advice comes from his experience while earning an advanced degree in advertising APIs from the School of Hard Knocks. He’s integrated with a number of advertising APIs including Facebook, Twitter, AdWords, Right Media, and others. Rob built a significant business on top of these API connections and has filled the pockets of his trading partners. If you are building an advertising API of any type, you should read Rob’s article carefully once a week. Ignore at your peril.
Pay special attention to Rob’s #1 tip: Consider not building your own advertising interface at all. Last year, I wrote about this topic myself in “Ad Tech Investors Are Wasting Millions on Buyer Interfaces.” Despite a 100% failure rate, one company after another continues making this same dumb mistake. When will the madness end?
My additions to Rob’s tips are specific to those creating an API for Programmatic Direct advertising. They come from my own experience and frustration in trying to realize the potential of Programmatic Direct.
19. Do understand that you are the main beneficiary of API integration
Many advertising sellers believe they are doing media buyers a huge favor by giving them access to their Programmatic Direct API. The fact is your API alone doesn’t provide a lot of value to media buyers. Keep in mind that we are talking about advertising inventory that is already available to buyers through a direct sales process.
Media buyers can already buy your advertising inventory with a button click that sends you a “paper” insertion order (it’s actually an email attachment, but effectively paper from your perspective). After integrating with your API, the buyer still just clicks a single button, but this new button sends you an electronic order. From a buyer’s perspective, there’s not much difference between the old button and the new button. Either way, it’s just a button click. The buyer doesn’t care as long as you get the order one way or another because it’s your problem to implement it. But you are hoping they click the new button because when the order comes through your API, you can process the order more profitably.
Furthermore, buyers don’t see a lot of value in having access to your catalog of products, prices, and inventory levels. An advertising seller thinking that catalog access has big value to buyers is like LL Bean thinking they are doing you a big favor by delivering a catalog to your mailbox. Clearly LL Bean is the main beneficiary of the sales that result from their catalog. Likewise, you should know that you are the beneficiary when a media buyer is using your catalog to discover and buy your advertising inventory.
20. Don’t expect technology providers to add extra fees to make money
Don’t expect technology providers to make money by adding “tech fees” on top of the media cost on direct sold inventory. Given that buyers can already purchase this inventory with a button click that sends a “paper” insertion order, why would a media buyer pay $105,000 (including an extra 5% fee) for advertising inventory purchased through an API when they can buy the same inventory for $100,000 through a paper insertion order? This makes no sense for anyone involved. In fact, I’d recommend that advertising tech providers should be contractually prohibited from adding extra fees to guard against this situation and to maximize buying through the API.
Without a markup, how are technology providers supposed to make any money in return for their significant technology investment? See Rob’s Tip #2: Share revenue directly, with tiers and rewards. Basically, the seller should reward the technology providers who are enabling and driving orders through their API.
21. Don’t expect technology providers to take on financial liability
If you are expecting the technology provider to pay you for the advertising inventory purchased through your API, don’t expect them to take full responsibility for the financial liability. When you don’t get paid for an order that comes in through the fax machine, do you go after the fax machine manufacturer? The concept of sequential liability is an industry standard in the paper insertion order world and should be part of your API agreement. If the technology provider does not get paid for the purchased advertising inventory, you should not expect the technology provider to pay you.
22. Do give programmatic buyers financial and contractual incentives
You want to drive volume thought your new Programmatic Direct pipes because it’s your most profitable way to receive orders. A surefire way to drive demand is to provide incentives. Why not have two prices – the regular price for paper orders and a discounted price for API orders? Why not have more lenient terms like a shorter out clause and a lower minimum order when ordered through your API? In other words, don’t be greedy – share the benefits of this automation with the buyer if you want to maximize adoption.
23. Do allow media buyers to name their own price
In digital advertising, only a fool pays rate card. It’s been that way since the beginning, and negotiation is a standard part of the transaction culture. It’s not uncommon to see an 80-90% discount on rate card. Yet, with most APIs I’ve seen, the rates are fixed at rate card, or require a complicated advanced setup of a fixed discount. There’s a fantasy that this price negotiation behavior will suddenly change because it’s now all electronic. Spoiler alert: it won’t. A big part of the value of using a media buying agency is their negotiating prowess. By taking away negotiating ability, you are taking away their core value to their clients and giving them a big reason to avoid using your API.
Instead of tilting at this windmill, get over it and build into your API the ability for buyers to send you orders with their own price. A typical use case is when the media buyer and the advertising sales representative negotiate a price on the phone. After the call, the buyer plugs the negotiated price into their media plan and sends you an order. You don’t have to accept every order, but I guarantee you’ll get a ton more of them if you allow the media buyer to set their own price.
24. Don’t require the creative with the order
Media buyers generally don’t have all the creative assets when placing insertion orders. Yet, most Programmatic Direct APIs expect the creative to come with the order. By expecting the creative up front, you are creating a barrier to the order. An easy way for the buyer to overcome this roadblock is to send you a paper insertion order, which of course doesn’t include the creative and is the worst way to get an order. Instead of pretending that buyers are going to change their workflow to use your API, change your API to accommodate their workflow. Allow for the creative to be uploaded after the order is placed and accepted.
25. Don’t expect the media buyer to register with you in advance of the order
With paper insertion orders, no advance registration is required. Why should advance registration be required when ordering through your API? Don’t make the buyer jump through hoops. Just take the order. If it’s a new buyer, create their account as you accept their order. If the buyer is undesirable or not creditworthy, simply reject the order.
26. Don’t add extra steps to the media buying process.
Don’t burden the media buyer by adding steps to the buying process. An automated buying solution should reduce the number of steps, not increase them. Yet, in their zeal to optimize their own sell-side workflow, myopic advertising API developers push work onto the buyer such as requiring creative with the order and advanced registrations mentioned above. When a buyer has the choice between clicking a button to send you a paper insertion order and jumping through hoops to send you an electronic insertion order, which do you think a buyer will choose? To maximize use of your API, your primary design objective should be to streamline the buying process. Secondarily, optimize your own selling process. A little empathy will go a long way in gaining API adoption – think about your API from the perspective of the media buyer. Buying through your API should be easier and have fewer steps than buying with a paper insertion order.
27. Do support industry standards
Media buyers work with hundreds of sources of advertising inventory. Many of these sources have built their own proprietary APIs and expect buyers to write special code to connect with them. This may work for a few 800 pound gorillas, but it won’t work for the other 99.9% of you. Coding an adapter to connect with your API is effectively a new product that’s expensive to build and maintain. In most cases, it won’t be feasible and your API will be a ghost town.
Instead of creating your own API, you should implement and contribute to an industry standard API. The IAB has just released version 1.0 of the OpenDirect API Standard (disclosure: I was involved with the creation of this standard. It’s not perfect, but it’s a great start.). By implementing and contributing to an industry standard API, you eliminate the buyer’s cost of connecting to you and it becomes a “no brainer” to use your API instead of sending you paper insertion orders.
Despite the trickle of orders, I’m still extremely optimistic about the promise of Programmatic Direct advertising. In a few years, I’m hoping we’ll look at paper insertion orders the same way we today look at paper order forms in catalogs – a relic of the past. But until we solve the problems mentioned above, Programmatic Direct will never realize its potential.