DOOH Programmatic Primer: Learn about How Programmatic Trading is influencing DOOH and how to think about growth as a publisher

Tim Rowe:
If I saw you last night in New York City, it was a five year birthday. OOH Insider turned five years old last night. I didn't realize it actually until I was in a conversation with someone. I looked down at my phone and I thought, oh my gosh, today's the 14th. Today's now the 15th. That's the day you're listening to this episode, but happy birthday, happy anniversary. If you've been here since the beginning, incredible. You have endured a lot of learning, a lot of evolution. Thank you. If you're new here, thank you. Thank you for being open-minded to new conversations, new dialogue. Appreciate having you. Having you be here as a part of it. Tonight? Tonight. Today's gonna be a little bit of a different episode. because I promised you a 2025 everything you need to know episode. And I started working on that and I realized this is going to be really comprehensive. This is going to be maybe one of the biggest pieces, single bodies of work that I've created to this point. So as I was going through that process, I started to think about, you know what, this could be even more useful, even more helpful as stepping stones. What if we put this together over a series of episodes and build into that final crescendo? So that's what we're going to do. That's what we're going to do today. We're going to go through what I'm calling the programmatic primer. This is a breakdown of some of the numbers that you've heard me reference before. If you listened to last week's rebroadcast of my appearance on Markitecture, you might've heard me use a $1.2 billion figure referring to programmatic DOOH. And you would have thought, well, what the heck? I've never heard that number anywhere from anyone ever before. And that's true because you haven't. So what I want to do today is I want to walk you through the numbers. I want to walk you through open source data that I think paints a pretty clear picture of where the puck is going so that you can prepare as a publisher, as a brand, so that you understand what are the dynamics changing in OOH and how can you be prepared. So today is going to be that primer today. We're going to talk about the spend and how the money's being broken up. I think that it's probably going to surprise you. I think that a lot of what you'll see in here today is going to surprise you because you haven't seen or heard it anywhere else. So that's the goal. Next week we're going to be talking with Ravi Patel. He is the founder of a company called Swim AI. Swim AI is solving supply path optimization for DSPs and SSPs with, you guessed it, AI. So we'll talk to Ravi about that continued conversation of supply path optimization, which is going to be really important as we ladder into that final programmatic deep dive, the prospectus. That's what I've got it called. Yeah. My hard drive here. The prospectus. So today is the primer. in advance in preparation of Prospectus. So without further ado, if you're listening to this, you may want to jump over to YouTube and watch this because there's going to be an associated slide deck. If you want to get those slides, I will have it linked in the show notes below. I'd tell you what that link is right now. I'd create some sort of vanity URL, but I didn't think that far ahead. So you're going to have to check the show notes or If you're seeing this on socials, maybe you're just going to have to look around for a link somewhere nearby. Worst case scenario, you have to send me a DM, but I promise that I'll make it easy to find. You'll probably see this deck hosted in lots of places on social media. So don't panic. There's going to be a, there's going to be an easy way for you to retrieve this document. So let me share my screen here again. If you're not, you're not viewing this on YouTube. You're just going to have to listen along. But let's go through who we got the data from. So you're going to hear about some different figures today. We pulled data from Group M, from eMarketer, and Place Exchange. And each of the data sets is unique to itself, but we needed to find some sort of unified source of truth, if you will. So that's what we're looking at. Group M, eMarketer, and Place Exchange. So the first number that we pulled is the global spend number. And we pulled this from Group M's mid-year forecast. Realizing that this year is going to probably be the last year in advertising that we're not talking in the trillions of dollars, but this year, 2024, $989.8 billion will be spent globally on advertising. So how does that actually break down for OOH? How does that break down in terms of programmatic trading? Well, Overall, .home channel spend as a relative share of ad budgets is projected to decline from 2.4% share of wallet down to 2%, which is pretty significant. Four basis points there, but as a percentage of spend, that's a lot. It's like 16, 17%. So this means that allocation is going to fall from one in every $40 going to .home in 2023 to one in $50 over the next four years. So the pie for .home is going to get smaller. That could mean that your slice is going to get smaller too. Currently 72.5% of all .home spending goes to large format billboards, which actually make up about 38% of programmatic DOOH .. We're going to talk in a few minutes, we'll talk about the distinctions between different types of deals when trading programmatically. Because I think the word programmatic as associated with DOOH has kind of evolved into this negative term that admittedly in my own naivete early on, this is how I thought of it too is, oh, it's remnant. It's remnant inventory. And you've probably heard that before, even said it yourself. It's not. How we sell it can create the appearance of some inventory being remnant because in fact it is. But the majority of the DOOH that is being transacted programmatically is being sold direct. It's really, really going to be important as we go through this conversation. So despite the decline in relative share of overall ad budget, the channel is expected to continue growing three to 5% annually during that same period. So again, spend is going up. the share of the pie is going to get smaller. Why is that? It could mean that there's more long tail advertisers participating. It could be representative of cannibalization. It can mean a lot of things, but the reality is it means you're going to have to work a lot harder or just get better inventory and be thinking about these things every single day as you're setting up your playbook and kind of wargaming through scenarios. So what does it mean in terms of share spend? How does it break down? This number is from E-Marketer. So we saw the $989.8 billion in global ad spend. That's from GroupM. This next breakdown is from E-Marketer. So E-Marketer tells us that this year OOH we'll do 9.19 billion. And I'll point out why I use E-Marketer as the source of truth for this, because they're actually also the only ones that give us some indication of how the money's being transacted. So. It's all relative. It's all directionally up and to the right. But I realized this number may sound different than your number. So eMarketer tells us this year $9.19 billion on all of OOH. That's OOH traditional, DOOH. That's all things OOH. If we break that down on the relative percentages, the basis of spend, which is actually, so we're using Statista for the breakdown, the distribution. Statista was the only one that showed us kind of how that money gets broken up in a really consistent way. So that's why we use that as relative percentages, but we didn't use their number. So 45.25% of all spend goes to traditional OOH. which means that 54.75% of all channel spend goes to DOOH. Out of home accounting for 4.16 billion, DOOH, 5.03 billion. So you can see that the pendulum has swung. It's probably not coming back. So what does it mean in terms of programmatic distribution? How's the money actually getting spent? This again from eMarketer showing that 26.7% of all DOOH is being transacted programmatically. That does not mean. It's being bought on the open exchange. I just really want to clarify that does not mean 26.7% of 5 billion is being bought on the open exchange. It just means that it's being traded programmatically. And a really important footnote that I'll call out because it'll come back up here in a second. When we're looking at the actual numbers from eMarketer, you can see in the footnotes there on the methodology, DOOH. ads transacted or fulfilled via automation. That's how they're classifying programmatic for the sake of this chart. Why I point that out is, programmatic could be more. It could be even more than that if we're not talking about automation. We know the term program manual, you've probably heard that. So it's everything that is not automated as well. So I point that out, but 26.7%, that's the number to remember. 26.7% of DOOH being transacted via programmatic pipes. So while overall .home is going to continue to grow, right, ad spend for .home will grow, share of wallet will decline, and simultaneous to that, programmatic DOOH. is expected to capture a larger portion of DOOH. ad budgets. So a couple of stats for you. Out-of-home and DOOH. channel spend will increase from $8.73 billion in 2023 to $10.58 billion by 2028. Channel share of total media spend is going to drop from, you heard that number before, 2.4, 2.5% in 2023 to 2%. So think about that. That's a 20% drop. If you had a slice of pizza, would you be okay giving up 20% of that slice, 20% of the pepperoni? I don't know. I probably wouldn't be. Programmatic DOOH is set to grow. 1.1 billion is set to grow to 1.1 billion by 2025, accounting for 31% of all spending. So that's why I point these percentages out. 26.7% is the number that we're talking about here today. 31% is the number that eMarketer is using for, for end of 2025. It's around a billion dollars. It's around a billion dollars. So how does the number actually kind of come out in the wash? So if we look at the total channel spent 9.19 billion, that's the number that we started with 4.1 going to OOH 5.03 going to DOOH. If we take 26.7% of $5,031,525,000, if you take 26.7% of that, that number is actually $1.3 billion. eMarketer shows us that 26.7% on fully automated fulfillment is about 890, $900 billion. And they're telling us that that number will be 1.1 next year. Again, that's a fully automated programmatic transaction. That third number is going to go from 900 million to 1.1 billion over the next year. I think that that number is actually a little bit higher. Do I think it's the full 1.3 billion? Not quite. I don't think it's quite that much money that's being transacted programmatically, but let's break it down a little bit from there. So then what we did was we looked at the 2023 H2 report from Place Exchange that broke down how all the money is being spent. I realize that this is just one SSP and it might look different on Vistar, it might look different on Broadside and Hivestack, but I suspect based on the research and what's publicly available, it all looks about the same. North of 50% of all programmatic is being traded on PMP. That is the trend. That's the trend for larger programmatic. That's not exclusive to OOH. It's not because we're old fashioned and catching up. Programmatic is direct sales. I just really want to emphasize that because we'll talk in a few more minutes, we'll talk about the challenges with that and how you have to think about compensation structures and how you think about take rates as a publisher. So let's go further through the numbers here. 9.1 billion going to the channel, 4.1 billion going to traditional OOH, $5 billion to DOOH, somewhere between $900 million and $1.3 billion of that being traded programmatically. 1.2 is my number, that's the Tim Rowe estimate based on everything that I've seen. So let's break it down from there. 38% of all programmatic money goes to large format billboards. That means $510 million. It's going to billboards. 21% of all programmatic goes to video formats. That's $107 million. So billboards plus video are counting account for 59% of the overall, uh, of the overall programmatic spend here. I'm catching a catching an error in my chart for fortunately, it's not the, uh, the percentage is right. The total number is wrong. So, I'm going to update that chart, but you can see here if you're not selling billboards, if you're not selling a video format, and if you're not selling PMP, you're kind of beat. You're going to get left behind. And then the top 10 OpenRTB pubs. So these are the top 10 publishers capturing demand from open auctions. They account for 92% of all of the open auction demand, 10 publishers, 10 networks captured 92% of all of the open auction demand. And that's coming from 70% CTV pipes. So something to think about. If you don't have a billboard, you don't have a video. Might be time to go back to the drawing table and you got to sell it direct. This is a call out. If you're, if you're watching on YouTube, this is a call out to that, uh, kind of measurement methodology. Just really want to highlight that. how eMarketer is classifying the actual fulfillment number is with the automation being a requirement. So does it include everything? I don't think so. That's why I think 1.2 is the number. We'll agree to disagree if you don't think that's the number. Somewhere close to that. So budget breakdowns by formats. You can see a little bit there at the top. We've talked about some of the breakdowns. But really want you to keep in mind throughout this, there's clear trends. Large format, right? Why large format? It's premium. It's premium format. Video formats gives me more space to traffic video creative. And obviously some of that is going to be premium as well. And they're selling it direct. Programmatic is a way of facilitating trading. It's not necessarily a way of buying. Buying on open auction is a way of buying. Transacting programmatically is distinctly different. So a couple of, uh, PMP 101 best practices here. So what is a PMP? PMP is a group of curated ads that are being offered by publishers on SSPs to selected advertisers. How did they get selected? Because they talked to them because at some point someone had a conversation with another human being. All right. It's more controlled than an open auction and it is used to target specific demographics, content categories, inventory type, performance goals, et cetera. PMPs are bought programmatically through DSPs using a unique deal ID. So I'm a publisher, I'm working with a brand, agree that they want to buy our stuff. They are going to buy my stuff through a PMP deal on the DSP of their choice. Alright, so types of PMP deals that are recognized by the IAB. You have an unreserved fix rate, a UFR. It's the most common PMP deal type. A publisher sets a fixed price for the curated ad inventory. DSPs test the data against that inventory and then can choose to buy the impressions that match or pass them along. You have an invite-only auction, which is a real-time bidding environment exclusive to selected advertisers. This can be set up between one publisher and one advertiser, or involve multiple publishers and advertisers. Ultimately allows publishers to offer high-performance inventory, premium stuff, typically organized by content or context, audience demo, and ultimately, that P-word, performance. And lastly, there's programmatic guaranteed. It's the least common PMP deal, but coming, becoming more popular. It's very similar to traditional media buying. An advertiser agrees to pay a fixed rate and must take all impressions passed through the deal ID, providing a guaranteed purchase of impressions, something that I'll call out on that. And it will be part of the pub, uh, the publisher prospectus later this year. I was talking with a brand the other day, 80% of their television upfronts is a global CPG brand spends more than $500 million on advertising. 80% of their television upfronts are being trafficked programmatically. That's incredible by 2030, 70, 70, 70% of all digital media will be trafficked programmatically. So if you're not thinking about these things, you will 100% get smoked. So are you remnant inventory? Yes or no? Well, open auction is often associated with that remnant inventory term, because it typically means that we're selling unsold or leftover space that we weren't able to sell directly through PMP deals. It means there's less control over quality because in an open auction, advertisers are bidding in real time for available impressions, right? So think about this in the context of a digital screen, not even a website or mobile experience, a digital screen. Close your eyes. You can think about it. So in an open auction environment, advertisers are bidding in real time for impressions or in our case plays, but there's typically less control over the quality or context where those ads actually appear. Sure, I can pick the screen placement. I can pick, you know, spots and dots on a map. But I don't really know if the screen's on. Is there these quality screens? I'm losing the visibility into what the publisher's story actually is. So I think that there's marketing that can kind of overcome this. If you don't have a direct sales team, you better have a really, really good marketing team. A really good marketing team that can answer these questions around quality control, because these aren't, these aren't Tim's concerns. These are the concerns of marketers and brands that are ultimately driving the trends that we're talking about here today. So less, less quality control. It's a marketing problem to potentially solve, but I think it's a hard one to solve considering how fragmented and how many publishers there really are in DOOH. I don't love it. I don't love leaving your network to open auction dynamics as the controls of fate, but if that's your thing and you got to do it, I totally understand. Another concern is obviously that the inventory is unsold. It wasn't sold directly, so it ends up at an auction. If you don't, I don't know. We've all been to a garage sale before. What's a garage sale? It's unsold or excess inventory. It's stuff that you couldn't sell through Facebook Marketplace to a qualified buyer, and now it's available outside for a nickel. So that's the idea, right? I don't have control. I don't necessarily know there's a reason someone else didn't buy this, right? So there's perceived quality control issues. I think that leads to sometimes this remnant branding and then price sensitivity. Open auctions typically sell at lower prices because there's more competition. Publishers are just trying to sell unsold space, right? It is going to, it's a, it's going to expire if I don't sell this ad. In this next rotation, it is going to expire into the ether and I'll have never made a dollar on it. So I have to lower prices. That's good for advertisers, but it can compromise on price targeting and overall perception. So those are some things to think about with open auction dynamics, remnant inventory, kind of how we think about these things. But really what I want to emphasize is the importance of selling direct. Direct, direct, direct, direct, direct. That's the key takeaway. If you take anything away from this episode, take away that the way to win in programmatic now and in the future. We'll continue to be having a direct sales team because you're going to have to grow faster than the industry. We talked about it. The industry is not growing. Spend is growing, but share of wallet is decreasing, which means that your, your slice of the pie is getting smaller. Okay. So if you need to understand your revenue strategy relative to platform fees, relative to net take something that I get asked a lot, a lot, a lot, maybe one of the most pressing questions is how do I pay my salespeople? How do I pay my salespeople? Well, we've talked about it and hopefully you feel confident that this is the right way forward. Direct sales programmatic transactions. However, If your book of business isn't growing exponentially, it can be hard to compensate someone the same, what they've been making. When now all of a sudden you're paying lots of intermediaries fees. So those are decisions that you need to think about today. Have to have a direct sales team. In my opinion, you have to make intentional choices. You need to decide your own fate. That's the second point, direct sales, decide your own fate. You need to make intentional choices now. about the kind of network, the kind of publisher that you want to be and how you want to grow. Ask yourself questions like, am I a premium or efficiency buy? If I'm a premium buy, conversation over, you have to have a direct sales team. If I'm an efficiency by maybe not so much, maybe I can get started without a big sales team, but you better have a really good thesis. Are you DOOH? Are you CTV? Are you large format? What's your story? What's your data strategy? How do we fit into the brand's measurement framework? That's really important. How do we fit into the brand's measurement framework? All questions that if we're not answering. You are going to be left to the current of the market and you might not get what you want. Lastly, and it's kind of on that point, you've got to escape the echo chamber. We need to reach exit velocity and escape the echo echo chamber. Einstein said this, we cannot solve our problems with the same thinking we used when we created them. Talking to a whole bunch of other people that are having the same problems as us and not really sure about how to solve them. Got to be honest. Rather than be critical, I'll give you the story. I sold cars. That was kind of my come up story, selling cars. And I had a great sales manager and he'd catch us, you know, what we called smoking and joking, you know, goofing off in the back parking lot, whatever, you know, not, not doing our jobs. And, uh, he would say to it, say to us, he'd say, I don't understand why you guys are all hanging out with one another. You can't sell a car to each other. And in a lot of ways, it feels like there are times in the echo chamber where it's just a bunch of salespeople standing around talking about sales problems, but we can't sell each other. our inventory. You've got to escape the echo chamber. Got to escape the echo chamber. This conversation has hopefully been a fundamental part to that. It's been your programmatic primer. Happy birthday. Happy birthday. Happy anniversary. Tune in next week to hear from Ravi Patel, Swim AI. We'll be talking more about supply path optimization, DSP SSP side. How does it all work? And what does DOOH have to do to win? That's your programmatic primer. I'm Tim Rowe. This is OOH Insider. I'll see y'all next time.