By David Burrick, Intersection, Chief Strategy Officer
Over a decade ago, I worked at AOL, which at the time had a digital advertising business larger than Facebook and Amazon. If advertisers wanted to reach a premium audience at scale, they had to work with AOL.
Around 2010, programmatic advertising emerged, enabling real-time bidding on unsold inventory. For publishers like AOL, it was an exciting complement to direct sales, opening the door to new types of buyers. In its early years, it lived up to the promise – programmatic advertising steadily grew from a small portion of our revenue into a major contributor.
But by the time I left AOL for Intersection in 2017, the optimism around programmatic had begun to fade. Virtually every website and app had joined programmatic exchanges, creating limitless supply that outpaced ad demand. This led to falling CPMs and reduced revenue for individual publishers. AOL’s premium inventory became commoditized, listed alongside low-quality, often objectionable sites, leaving advertisers with little ability to differentiate. Moreover, what started as supplemental revenue began cannibalizing our direct sales—with lower margins once ad tech fees were factored in.
Advertisers and agencies grew disillusioned. Algorithms placed their brands next to hateful content, and too much of their budgets disappeared into layers of fees rather than actual media.
Over the last eight years, I’ve experienced a similar arc with programmatic advertising in the out-of-home (OOH) ecosystem. I watched platforms like PlaceExchange (originally incubated at Intersection) and Vistar evolve into major revenue drivers for OOH publishers. But now, as programmatic OOH matures, we’re approaching the same crossroads the digital ad world hit a decade ago: will we repeat those mistakes or learn from them?
While the OOH industry isn’t a perfect parallel to digital, we have a chance to avoid similar pitfalls. To ensure a healthy, sustainable ecosystem, there are critical issues we must address immediately:
Cleaning up the taxonomy: As emerging forms of digital out-of-home advertising have come online, our programmatic platforms have struggled to keep up with how we organize and label different types of media—a system often referred to as “taxonomy”. As a result, as new types of screens are added to these programmatic marketplaces, they are shoehorned into existing categories. Take Urban Panels for example. Historically in our industry, Urban Panels have been outdoor screens deployed on a sidewalk or transit infrastructure that face oncoming vehicular and pedestrian traffic. However, if you buy Urban Panels on most programmatic platforms today, you’ll see all sorts of other types of screens. For example, digital screens inside windows at retail locations are categorized as Urban Panels on out-of-home supply side platforms (SSPs). These screens are neither outdoor, nor do they face oncoming traffic, but because the programmatic taxonomy has not updated to account for these new types of screens, they are simply categorized as Urban Panels. Much like digital advertisers expressing frustration when they learned their ads were running on websites they didn’t want, most buyers also don’t realize that this is what they are buying when they purchase Urban Panels on programmatic platforms. To note, there is nothing inherently wrong with window digital screens (in fact, some marketers may prefer these formats), but it is crucial for buyers and sellers to understand what they are and are not buying if we want there to be trust in programmatic out of home.
Standardizing measurement: Last month, I wrote about the fact that our industry is extremely fractured when it comes to impression measurement. This is particularly bad for the programmatic OOH ecosystem. Given differences in measurement methodologies such as (i) likelihood to see vs. opportunity to see and (ii) viewshed designs, the same exact ad frame can have wildly different impressions. Yet on programmatic platforms, all of these impressions are treated the same. Buyers do not have the opportunity to, nor should they have to, parse whether an impression on one screen is really the same as an impression on another. There should be a common language that all buyers and sellers are speaking to build trust in the medium.
Fees: Programmatic platforms provide a service of connecting buyers and sellers and, as such, need to be paid fees to support themselves. However, when fees are 20-30% (or more) on average when taking into account DSP and SSP fees, it is imperative that the overwhelming amount of ad spend in this channel are net new dollars to the OOH ecosystem. What we saw in the digital ecosystem was a substantial amount of traditional buyers simply shifting the way they executed buys from direct sales to programmatic, leading to declines in overall net revenue. There have been some early signs of this sort of shift in the OOH space as well, which is ultimately not good for marketers or media owners, as a large percentage of total ad spend ends up going towards fees and not towards media. And to the extent there are fees, the DSPs and SSPs need to be adding real value in terms of data, packaging, and performance rather than taking a toll for automation.
To be clear, programmatic advertising should be a net positive for the OOH industry. In fact, it’s the best way to get omnichannel buyers, who have much larger budgets, into the out-of-home channel. However, as an industry, we need to be organized and prepared to maximize the advantages of programmatic. If not, we risk having some of the same regrets that our digital colleagues have experienced over the past decade.
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