What’s programmatic costing you?

Earlier this week Goodway Group published a survey which tipped programmatic display ad prices to jump by as much as 20% over the next 12 months in a report entitled What’s Programmatic Costing You?

The report looked at some of the dynamics likely to alter the cost of display ads bought in such a way, with report authors noting that “it’s time to reset your pricing expectations”.

Report authors at Goodway Group have forecast that North American publishers taking advantage of improved yield optimization technologies such as the continued adoption of header bidding, plus a generic shift from fixed CPMs to more dynamic pricing models (or dCPMs) will fuel this trend. The Drum caught up with Jay Friedman, Goodway Group, chief operations officer (pictured below), to further explore his views on the market dynamics that will cause prices to increase so sharply in 2017.

Jay Friedman, Goodway Group, COO, believes header bidding is at the core of of the predicted 20% price increase in 2017
In a Q&A session, he shares his opinions on why this cost increase is not necessarily a negative trend for media buyers, measures necessary to limit fraud in the industry, as well as some of the buy-side’s fears over yield optimization technologies.

The report says that 67% of display ads will be traded programmatically over the next year, with that in mind, it’s also worth noting that adtech has historically been seen as a tool of the buy-side of the industry (i.e. to drive down rate cards, etc). Bearing all this in mind, can you provide comment on the dynamics at play which are going to cause the forecasted 20% increase in the price of display ads in 2017? 

It’s 80% header bidding. Now that ‘the stack’ is flattened and all inventory is up for auction, buyers are finding very good quality inventory and bidding on it. Yet, because the ecosystem has moved to a first-price auction rather than second-price, buyers are still over-bidding, which drives up clearing prices.

In most market places, a 20% increase in the price of anything over a 12 month period would likely lead to some sort of reaction from those see-to-be adversely affected by such a market dynamic. This can take place in the form of advertisers tightening their belts (or making some other kind of expenditure sacrifice). Would you care to comment on what kind of reaction we might expect from the buy-side? 

This assumes that advertisers are buying an impression because …