The Programmatic Path

to Profit for Publishers

The Boston Consulting Group (BCG) is a global

management consulting firm and the worlds
leading advisor on business strategy. We partner
with clients from the private, public, and not-forprofit sectors in all regions to identify their
highest-value opportunities, address their most
critical challenges, and transform their enterprises.
Our customized approach combines deep insight
into the dynamics of companies and markets with
close collaboration at all levels of the client
organization. This ensures that our clients achieve
sustainable competitive advantage, build more
capable organizations, and secure lasting results.
Founded in 1963, BCG is a private company with
82 offices in 46 countries. For more information,
please visit bcg.com.

The Programmatic Path

to Profit for Publishers

commissioned by

Dominic Field, Paul Zwillenberg, Jacob Rosenzweig, Neal Zuckerman,

and Melissa Ruseler
July 2015

AT A GLANCE
As programmatic advertising gains a growing share of the digital market, publishers that fully embrace this fast-rising opportunity benefit from revenue gains and a
stronger long-term market position.
Using Traditional Direct and Programmatic Sales Strategically
The most successful digital publishers base their strategies on traditional direct
and programmatic sales, but many others still treat programmatic as a lower
priority.
Increases Sales and Margins
Best-in-class publishers outperform the market, achieving a high share of programmatic sales while increasing overall CPMs. They deploy technology effectively to
operate more efficiently and to increase revenues and margins.
and Points to a New Model for Success
As the line between direct and programmatic sales blurs, publishers can harmonize both strategies and leverage technology and data to boost revenue and
profitability. Those that embrace this model outperform the market today and
establish a solid foundation for long-term competitive advantage.

2

The Programmatic Path to Profit for Publishers

ore revenue now. Faster growth in the future. A stronger position in the
marketplace. How can more digital publishers seize these opportunities?

Programmatic, or automated, spending on display advertising (desktop and mobile)

is a $9 billion market that is expanding at almost 30 percent a year. Spending is expected to exceed $30 billion in 2019. Growth in programmatic revenue for all types
of publishersfrom print to e-commerce companiesis outpacing traditional direct sales of desktop and mobile advertising across display and video, and market
forecasts point to programmatic overtaking direct sales globally between 2017 and
2019. The development of programmatic guaranteed is further blurring the line
between direct and programmatic channels. (See the sidebar The Evolving Definitions of Direct and Programmatic Sales; for definitions of terms used in this report,
see the glossary in the Appendix.)

THE EVOLVING DEFINITIONS OF DIRECT AND

PROGRAMMATIC SALES
In direct or traditional sales, agencies and advertisers buy an
agreed-upon volume of impressions,
or ad views, for an agreed-upon price
directly from the publisher, and the
publisher then manually sets up the
delivery of these impressions. In line
with the terminology used by most
publishers, we refer to such transactions as direct sales throughout this
report. But as traditional direct and
programmatic channels converge,
how will the industrys definition of
direct evolve?
Programmatic sales use technology
to automate the selling and delivery
process. They can involve auctions or
fixed prices. The sales model can be
entirely automated, with buyer never

The Boston Consulting Group

communicating directly with seller, or

buyers and sellers can have an
ongoing business relationship and
negotiate deals that are then executed automatically.
Currently, the vast majority of
programmatic sales outside of social
media are bought on an impression-by-impression basis. However,
many predict the further rise of
programmatic guaranteed, with buyer
and seller agreeing on a certain
volume of impressionsmuch like
direct sales todaybut with the sale
and delivery processes more automated. This will further blur the distinction between direct and programmatic sales, and a new nomenclature may
become necessary.

Publishers that lack

an aggressive
cross-channel strategy, including a strong
programmatic capability, leave money on
the table.

Yet new research by The Boston Consulting Group shows that many publishers are
failing to capture this opportunity. One reason is that they do not approach it strategically. They treat programmatic advertising as an incremental rather than a core
source of sales, and they leave increasing amounts of revenue on the table as a result. Another reason is that they do not organize themselves to realize the maximum value from their programmatic efforts. Our study found that less than 25 percent of the programmatic teams time is spent on value-creating activities and that
publishers use nowhere near the full range of technology tools that can increase
programmatic sales and profit margins.
As the marketplace evolves and outmoded distinctions lose meaning, best-in-class
publishers increasingly view programmatic advertising as core to their businesses.
These companies continue to increase traditional direct sales and total CPMs. They
also leverage programmatic technology to outperform the market and improve
overall profitability. One publisher in our study has built programmatic revenue to
more than 50 percent of its digital revenue while increasing direct sales and total
CPMs. These outperforming companies employ increasingly well-defined approaches to achieve their success. Much more than others, they do so by taking the following measures:

Deploying a cross-channel data-driven sales strategy that encompasses both

traditional direct and programmatic sales and is tailored to the publishers
market position and market dynamics

Understanding how and why advertisers value different inventory and audiences, and leveraging technology and data to match audiences to buyers and
achieve higher prices

Assembling the right technology, both as an efficient way to access demand and
as a decision engine to maximize revenue

Developing the right capabilities (particularly in sales and yield management)

and realigning their organizations and incentives to support a cross-channel
strategy and programmatic sales goals

BCGs study of profitability in programmatic advertising involved 25 digital publishers, including print and digital-only publishers, broadcasters, e-commerce companies, and Web portals, based in Europe, North America, and the Middle East. We
examined opportunities to increase digital revenue as well as improve profit margins through more value-oriented and efficient operations. (See the sidebar About
This Report.)
Our research clearly indicates that publishers that lack an aggressive cross-channel
strategy, including a strong programmatic capability, leave money on the table today and risk loss of revenue, commoditization of inventory, and lower market share
in the future. On the other hand, those that position themselves to deliver value to
their advertisers in the programmatic market will both increase revenues in the
near term and have a significant and growing advantage over their competitors as
the digital market expands and evolves.

4

The Programmatic Path to Profit for Publishers

ABOUT THIS REPORT

The programmatic trading of advertising inventory is a fast-growing market,
but some digital publishers decline to
play, and others do not play to win.
Two previous BCG reports investigated whether programmatic improves
operational efficiency and campaign
effectiveness and performance on the
buy side of the advertising equationthat is, how advertisers and
their agencies are navigating the
brave new technology-driven world of
ad targeting and placement. (See
Improving Engagement and Performance
in Digital Advertising, BCG Focus,
September 2014, and Efficiency and
Effectiveness in Digital Advertising, BCG
Focus, May 2013.)
This report examines similar questions on the sell side, in particular,
why publishers are not doing more to
embrace the substantial opportunity
that programmatic sales represent.
The report was commissioned by
Google and the findings outlined
herein were discussed with Google
executives, but BCG is responsible for
the analysis and conclusions.

In our study, BCG worked with more

than 25 digital publishers (which
participated anonymously) spanning
multiple segments (content publishers, broadcasters, e-commerce, and
portals) and focusing on both broad
content (such as news and entertainment) and specialist content (such as
travel or technology). The study
involved in-depth operational workshops to understand the details of
programmatic sales and operations
and where these create value. We
used the lean-management method
of value stream mapping to visualize
and measure both sales and operations processes and conducted
interviews and analyses around the
key drivers of revenue. Our research
also included interviews with senior
decision makers and operational staff
to identify best practices and key
means of generating revenue. We
used data analysis to quantify the
latter.
Our source for market size and
growth rate figures was Magna Global
Intelligence.

The Programmatic Opportunity

A big opportunity is getting biggerfast. Advertisers value the ability of digital

marketplaces to deliver their ads to relevant consumers, at opportune times and
alongside pertinent content, much more precisely than was possible in the offline
world.
Programmatic buying is no longer just for desktop display; it is fast gaining traction
in mobile and video. Some sell-side platforms (SSPs) report that about a quarter of
all programmatic transactions now involve ads served on mobile devices.
Large advertisers are already allocating significant portions of their overall budgets to programmatic. American Express, for example, has indicated an aspiration
to be 100 percent programmatic within 18 months. Brand-marketing campaigns
are also shifting to programmatic buying as more premium inventory becomes
available and marketers gain confidence in the benefits of programmatic trading.

The Boston Consulting Group

Many in the industry

are predicting the
rapid growth of
programmatic guaranteed, which means
that the line between
direct and programmatic sales will blur.

As Procter & Gambles chief marketing officer put it, programmatic creates value
for the consumers, and therefore creates value for the publisher and for the advertisers/brands. Participating in programmatic marketplaces also enables publishers
to tap into new demand pools, often including advertisers that do not buy through
direct sales. In its first year of programmatic sales, Cond Nast UK discovered that
60 percent of its top 50 advertisers that buy programmatically were entirely new
customers.
The most successful digital publishers already embrace both traditional direct and
programmatic models. As an advertising sales executive of a major North American
publisher said, Were here to maximize revenue, not to protect any specific channel: both direct and programmatic are important revenue streams. Our strategy is
based on how we can best add value for our buyers via each channel, while making
sure that we offer consistent propositions and pricing across our channels.
A comprehensive strategy that encompasses both direct and programmatic channels will become an imperative as sales models evolve, as programmatic continues
to rise in importance, and as traditional direct sales are increasingly limited to highend, high-touch relationships where publishers can add significant value, such as
those involving creative, publisher-written native content or the use of complex
proprietary data to optimize performance.
We see programmatic as an opportunity, said a senior executive at eBay Advertising Deutschland. We can sell targeted audiences either directly or through a programmatic private deal at a higher yield, and free up inventory which can be sold
to thousands of new buyers on the open market.
Moreover, many in the industry are predicting the rapid growth of programmatic
guaranteed, which means that the line between direct and programmatic sales will
blur. It wont be direct versus programmatic soon, said one publishing executive.
Well need our sales team to understand when bespoke [as opposed to] standard is
right and guaranteed versus nonguaranteed. Said another, Programmatic guaranteed is the next big thingthe technology is in early days, but it promises the efficiency of programmatic with the volume guarantees many brand campaigns seek.
Programmatic models also extend beyond digital publishing to offline properties.
Time Inc. uses programmatic sales for its print publications. Programmatic sales occur for on-demand TV services, and the advent of targeted ads via cable, satellite,
and Internet TV will open traditional TV ads to programmatic sales as well.
Growing pains persistThat said, our research shows that many publishers are far
from unlocking programmatics full potential. They continue to approach it in a reactive manner, often delegating programmatic decisions to operational teams that
previously managed leftover or remnant inventory. Programmatic teams spend
too little time on activities that actually drive revenue and too much time on lowor no-value pursuits. Inverted priorities are all too common, with administrative
chores taking precedence over revenue-generating endeavors such as building demand, analyzing pricing, and improving the offering. Ineffective processes are
fraught with pain points. (See Exhibit 1.)

6

The Programmatic Path to Profit for Publishers

Exhibit 1 | Publishers Experience Many Inefficiencies and Pain Points Along the Programmatic
Value Chain
Constantly
shiing roles of
agency staff
Low level of
understanding
of programmatic
Reluctance
to share
performance
KPIs

Takes time to
identify agency
decision makers

Difficulties
generating
leads

Miscommunication
between direct
and programmatic
sales teams

Trading
desks
Sales

Deal setup

Tech
providers
Direct-sales
teams

No single system
for forecasting
inventory availability
Lack of visibility of
product roadmaps

Mixed quality of
customer support
See programmatic
as a threat/
need education
Stakeholders

Need to set up
new client
domains in system

Process

Unclear process
and criteria
for blacklisting
advertisers

Setup
troubleshooting

Buyer targeting
rejecting
publisher
impressions

Multiple deal
IDs confuse buyers

Little rigorous
optimization
testing

Timing of finance
processes different
from tech provider
payment timing

Monitoring
and
optimization

High rate
of failed
setups

No solution to
optimize/run
auctions across
exchanges

Significant proportion of
impressions lost because
of system discrepancies

Some traditional advertiser

categories blocked by
technology partners

Billing

Lack of clear
criteria for
bad ads

Reporting

Need to reconcile
figures in different
systems

Manual rekey
into finance
systems

Creative
review

Difficult to identify
and remove bad
ads quickly
Separate
reporting across
different platforms

Manual pulling of
performance reports
Lengthy manual pulling
of billing data

Tools/solutions

Source: BCG publisher workshops and interviews.

In our study, publishers in a typical month spent an average 11 hours (19 percent
of the total staff hours spent on regular programmatic tasks) on value-creating
activities, such as generating leads by analyzing bidding data, and 48 hours a
month (81 percent of the total) on such purely administrative tasks as monitoring,
billing, and reporting. And this does not include the time it takes to make the sale
and set up the deal, only about 20 percent of which is spent creating value. (See
Exhibit 2.)
but solutions are available. Publishers leave money on the table by not focusing
more on value creation and by not using the full range of optimization techniques

The Boston Consulting Group

Performance
reporting metrics
not redesigned
to include
programmatic

Little to no
visibility of
buyer KPIs

Lengthy
troubleshooting
with buyers
and tech
providers

Setup
approved
multiple
times

Multiple
meetings
with clients

Agencies

Poor quality
assurance/error
management

Exhibit 2 | Only about 20 Percent of Publishers Time Is Spent Creating Value

Typical setup (per deal)
Sales

Typical month
Setup
troubleshooting

Deal setup

Monitoring
and
optimization

11

16

27
hours

Wait for rework

to be fixed
12

Reporting
Wait for
detailed followup

Set up deal

Wait for price

negotiations/
final confirmation

5 days

Sales meeting
to agree on deal

2 days

Billing

10

Creative
review

10

1 day

Rework

Internal checks (e.g.,

inventory forecast,
sales, technical,
audience segment)

Price
negotiation

No activity on this campaign/deal

7.7 days

Value creation activities

23%

38 minutes

Nonvalue creation activities

77%

128 minutes

10

20

30

Process time
(hours per month)

Value creation activities

19%

11 hours

Nonvalue creation activities

81%

48 hours

Sources: BCG publisher workshops; BCG analysis.

available. By analyzing the performance of different segments of inventory

specifically, which ones are attracting the most active bidding and by whom
publishers can optimize their auction parameters (such as floor prices) and test the
impact of various offerings, configurations, and bidding criteria. This data can then
be used to feed leads and new propositions to the sales teams. It can also be used
to advise advertisers on their bidding strategies. All of which leads to higher yield
and additional revenue. One publisher in our study makes an average of one extra
sale per week, either as a direct sale or a programmatic deal, from analyzing
bidding data and up-selling based on the results. Another increased CPMs by 30
percent on one ad exchange by consistently monitoring bids and adapting floor
prices.
Despite the actionable benefits, fewer than 25 percent of the publishers we studied
regularly translate data analysis into sales initiatives. One reason may be that this
level of analysis requires developing (or hiring staff who can provide) sophisticated
quantitative analytical capabilities, which most publishers do not currently have inhouse. (See the section on building go-to-market and analytical capabilities, below.)
Only a quarter of the publishers we interviewed regularly test the impact of amending auction criteria, such as changing the amount of inventory available for bidding

8

The Programmatic Path to Profit for Publishers

or setting different bidding restrictions. None design new products, such as packages based on audience segments, using bidding data. Were not really equipped to
advise buyers on what level to bid at, or even to understand what is working for
them, one publishing executive said. Said another, We dont do as much optimization as we should. We do this ad hoc when we have time or if we spot something in
our regular reporting.
Making sales, initiating deals, and other value-creating activities take time. Publishers can also realize value by removing inefficiencies and freeing up staff to focus on
maximizing revenue. Best-in-class companies spend 60 percent less time on basic
programmatic activities than the average. They set up programmatic deals faster
and spend many fewer hours on ongoing tasks, such as monitoring, reporting, billing, and creative review. The steps they take include the following:

Limiting the Number of Demand Partners. Generating demand from multiple

sourcesby using several SSPs, for examplecan make publishers more
susceptible to inefficiency and wasted time, as the volume of nonvalue-creating
activities increases with the number of demand sources. We found that publishers using a single SSP spend an average of about 30 percent less time on
ongoing processes than those that use two or more.

Putting in Place Quality Assurance Measures. Publishers can implement procedures

to preempt problems that require troubleshooting later, such as prescreening of
key information from a buyer and its demand-side platform (DSP). Some major
SSPs include functionality that enables a publisher to review the ads on its site
that are purchased programmatically; an hour or two a week spent checking for,
and blocking, unwanted ads can save many more hours of fire fighting problematic ads as they appear.

Automating and Standardizing Reporting and Billing Processes Wherever Possible.

Smart publishers use readily available technology to reduce the amount of staff
timeand the associated costsspent on low-value, everyday activities.

The time these steps save can be used to create compelling sales offers and to
optimize performance through research and data analysis, ultimately driving more
revenue.

A New Model Emerges

Despite the growing pains, there is a new model emerging that enables publishers
to better capture the programmatic opportunity and use both direct and programmatic strategies to boost sales and margins. Our workshops and interviews highlighted four key practices. While many publishers pursue some of them to some extent, only three companies in our study (12 percent) fully embrace them all. The
ones that do outperform the market.
Apply a cross-channel, data-driven strategy. As publishers look to rationalize
traditional direct and programmatic sales, pricing structure and go-to-market
strategies are key considerations. Forward-looking companies take a data-driven

The Boston Consulting Group

Best-in-class companies set up programmatic deals faster and

spend many fewer
hours on ongoing
tasks, such as monitoring, reporting,
billing, and creative
review.

approach across both direct and programmatic channels. They do not get hung up
on out-of-date distinctions; instead, they probe advertiser and user data to develop
a clear view of the propositions that sell best in each channel, which then shapes
both their sales and their pricing approaches.

Publishers can
significantly enhance
the value they deliver
to buyers by matching
advertisers with the
audiences they want
to reach.

For these companies, programmatic is no longer just a way to sell remnant inventoryit has become a key tool for the same types of inventory that are sold directly,
especially in more mature markets. We [price] programmatic at least the same as
direct, said a senior vice president of a major US news publisher. Its the same inventory so it should have the same value, and this avoids any channel conflict. I
dont have remnant inventory anymore; instead, I just have inventory that I sell via
different channels and models. We have seen both our revenue and CPMs grow,
and our programmatic approach has been key to that. A similar trend is at work,
albeit more slowly, in less mature markets.
The programmatic marketplace is set to accelerate as sales of programmatic-guaranteed inventory become more significant. To maximize revenue today and avoid
cannibalization and price erosion in the future, publishers need to comprehensively
think through pricing structure and go-to-market approaches across their direct and
programmatic strategies, including their guaranteed and nonguaranteed models.
One North American broadcaster aims to completely replace traditional direct sales
with programmatic guaranteed within the next two years and is already working
through the pricing and organization ramifications of the move.
As channels converge, the right direct and programmatic strategies will differ by
market and publisher. For example, publishers soliciting direct-response marketers
require a robust programmatic capability that appeals to the aggressive approach
of these advertisers. At the same time, premium websites seeking to attract highend brand-marketing campaigns need to carefully consider how they price and expose inventory to maintain their premium status and prices. In some markets,
large publishers can leverage their scale to lead the market in a direction that
aligns with their strategy. In February 2015, eBay UK held a programmatic-only
week, offering its entire inventory for sale exclusively on a programmatic basis. In
addition to raising awareness of the advantages of programmatic trading, this initiative enabled the company to better understand the current role and requirements of programmatic buying, and it has since reorganized its sales teams to reflect what it learned.
Segment and match inventory with the right buyers. Publishers can significantly
enhance the value they deliver to buyers by matching advertisers with the audiences they want to reach. Smart publishers use both dialogue and data to build a clear
understanding of which buyers prize which inventory and audiences, and they offer
advertisers a number of different ways to target the right consumers. These include
targeting based on the following:

The quality or position of an impression

An ads context (where on the site the ad appears or what the content of the
web page relates to)

10

The Programmatic Path to Profit for Publishers

First-party data (the publishers data on audience attributes and behaviors)

Preferential access (often called first look)

High-value targeting is typically offered to buyers through invitation-only auctions

or through unreserved fixed-rate, or preferred, deals, in which buyer and publisher agree on a set price for a certain type of inventory. These impressions are generally sold at premium rates, reflecting their added value. This approach is rapidly
growing in popularity. In Googles ad exchange in Europe, the Middle East, and
Africa, for example, unreserved fixed-rate programmatic transactions quadrupled
last year and invitation-only auction transactions doubled.
Best-in-class publishers go a step further and identify which segments work best for
different advertisers. Some use special-event-based offers that help keep their media
properties front of mind for buyers. Half the participants in our study regularly initiate private deals, while the rest do so only on an ad hoc basis, typically in response
to an advertisers request. One European online publisher realizes premiums of
about 40 percent for contextual advertisements, 65 percent for first-look packages,
and up to 220 percent for first-party data. A UK news publisher that uses customized
programmatic sales of inventory targeting its highest-value audience segments
achieves CPMs up to six times those for direct sales.
One brand campaign buyer told us, I want to partner with publishers who have
the right audience and quality of inventoryand the truth is, I work most with the
publishers who are proactive in presenting these opportunities to me.
In a fast-evolving market, it is also important for publishers to stay close to buyers
in order to anticipate their changing needs. For sales teams, this means keeping
track of buyer preferences with respect to budgets, access, and relationships with
trading desks. In the US, for example, trading desks at major buyers increasingly
want always on, invitation-only deals with access to all of a publishers available
inventory. Publishers that provide this access see higher revenue; those that dont,
struggle.
Assemble the right technology. Publishers must navigate a complex technology
landscape. Assembling the right layered collection of softwareor stackis
critical to revenue generation, since it is the stack that helps publishers maximize
revenue by providing essential inventory management and process controls, as well
as the gateway to advertiser demand.
Among the many technology decisions with an impact on revenue that publishers
face, the following are some of the most important:

Choosing an ad-serving technologythe key tool for delivering both direct and
programmatic sales, as it determines when to serve a direct campaign and when
to sell an impression automatically

Determining how many, and which, programmatic demand sources and tools
(such as SSPs) to use, taking into account, among other factors, access to de-

The Boston Consulting Group

11

Best-in-class publishers identify which

segments work best
for different advertisers; some use specialevent-based offers
that help keep their
media properties front
of mind for buyers.

mand and the functionality of the SSPsincluding their decisioning capabilities, which help maximize revenue from one or more demand sources

Configuring the demand sources and tools (concurrently or sequentially), with

the aim of maximizing CPMs and fill rates

Considering whether to implement a separate data management technology or

to rely on functionality integrated into a programmatic platform

Complicating matters further, publishers must make these decisions across multiple
formats and platforms, including desktop, mobile, display, and video. While many
ad servers, and the more sophisticated SSPs, work across formats and platforms, enabling publishers to remove some complexity and gain an integrated view across
their inventory, this is not universally the case.
Determining the right stack partners and configuration, and making the most of
decision engines and algorithms, are critical. As the COO of a European Web portal told us, As a result of reassessing priorities of different demand sources, the
performance of campaigns running in programmatic is much higher than weve
seen before. Weve increased our fill rate to about 95 percent. Weve seen an uplift
in our eCPMs of more than 100 percent. (See the sidebar Technology TradeOffs for a discussion of the key considerations for a revenue-maximizing technology stack.)
As the line between direct and programmatic approaches continues to blur, technology strategy will play a crucial role in determining the best channel for different
kinds of inventory. We expect the use of solutions such as enhanced dynamic allocation (EDA), which is offered by Googles DoubleClick, to proliferate. EDA optimizes deals across guaranteed and nonguaranteed impressions, allowing publishers to
maximize revenue while ensuring that guaranteed impressions are delivered. In our
study, publishers using EDA achieved an increase in programmatic revenue of as
much as 24 percent and an average increase of 12 percent.

Publishers are integrating standalone

programmatic teams
with traditional sales
teams and increasingly expect all team
members to understand and make
programmatic deals.

Build strong go-to-market and analytic capabilities. Capabilities matterand forward-thinking publishers are already developing their teams, especially in such
critical programmatic functions as proposition development and pricing, sales, and
analytic yield management. Half the publishers in our study have already strengthened their programmatic teamsor plan to do so in the next yearby hiring programmatic sales specialists and data scientists. Publishers are integrating standalone
programmatic teams with traditional sales teams and increasingly expect all team
members to understand and make programmatic deals (although only 4 of the 25
publishers in our study have fully integrated their traditional and programmatic sales
teams to date, and even those with integrated teams have one or two programmatic
specialists who support more complex sales). Publishers that leverage their traditional sales relationships typically generate more programmatic sales from core clients
while avoiding problems with channel conflict. Over time, high-performing teams will
rely more and more on a consultative approach, supported by data analysis, with
deep knowledge of different buyers needs, including optimal targeting and an
understanding of when different sales channels and models are most appropriate.

12

The Programmatic Path to Profit for Publishers

TECHNOLOGY TRADE-OFFS
To avoid getting lost in complexity,
publishers need to think strategically
about their technology stacksthe
layers of software that make up the
ad-serving ecosystem. Many publishers elect to use a primary SSP from
which they access and manage most,
if not all, of their real-time bidding
demand, since all the major SSPs
provide a large pool of demand. While
there is considerable debate about
the amount of additional unique
demand that can be tapped by
accessing multiple SSPs, some
publishers believe that it increases
yield and that the additional revenue
generated more than offsets the
disadvantages of a more complex
stack.

In our study, we found clear benefits to

using a unified stackmeaning the ad
server and SSP are provided by the
same company and are designed to
work in concert. The more complex
the stack, the more inefficient it
almost inevitably is. Impressions can
be lost at every stage of the ad-serving
process, from ad server to SSP to DSP,
and the associated revenue is lost with
them. Our analysis found that less
than 0.5 percent of discrepancies
ad impressions that are lost as they
pass between different technology
platformsoccur with unified technology stacks, while with other technology
setups, 3 to 10 percent of impressions
are lost between the ad server and the
exchange. (See the exhibit below.)

Some Technology Setups Lose a Significant Share of Impressions

and Associated Revenues
Unified stacks discrepancy rate is
significantly lower than that of
other platforms

Up to 10% of impressions can be lost at

each stage of the ad-serving process

% discrepancies between impressions sent by

the ad server and received by the exchange

6 to 20 times

Buyers ad
server

Publishers
ad server

10

3% to 10%
6.4% mean
discrepancy

5
Exchange/
SSP
< 0.5%

0
Nonunified
DSP
= data flow

Unified

Ad server and SSP with

server-to-server integration

= technology platform

Sources: Publisher data; BCG analysis.

The Boston Consulting Group

13

TECHNOLOGY TRADE-OFFS

(continued)

Even when impressions arent lost,

data associated with them can be,
reducing the value of the impression
to buyers. In addition, a unified stack
can prioritize demand based on live
bids, which allows for real-time
decisions about how to maximize
revenue from each impression.

wins, it actually pays either the

second-highest bid price or the floor
price, whichever is higher. Publishers
can attempt to capture incremental
revenue by minimizing the spread
between advertiser bid price and
auction close price.

Publishers that use multiple programmatic demand sources recognize that

there is substantial overlap of
demand among the major SSPs, but
they believe they can leverage buyer
behavior and the way they configure
platforms to generate higher prices
and increased revenue. One technique is to compare bids for a given
impression, either live or based on
past performance, in order to sell the
impression via the highest-bidding
demand source; however, this requires
the stack to have the relevant functionality and decisioning capability.
Another method is to send an
impression to different SSPs sequentially (or to the same SSP multiple
times), starting with a high floor price
and dropping the price as the prospective sale moves through subsequent SSPs. Publishers use this tactic
because programmatic auctions are
so-called second-price auctions,
meaning that while the highest bidder

There is no single answer to what

constitutes the right technology stack
and configuration: each publisher has
its own needs, strategies, capabilities,
and supply-and-demand dynamics. In
our study, around a third of publishers
used a single programmatic demand
source and half used two or three
sources. We found many examples of
publishers that were successful at
increasing revenue with either
strategy. However, those that used
multiple SSPs successfully were
careful to assess the impact of new
sources and configurations. They also
carefully consider potential downsides, such as fragmenting demand
and the technology and process
inefficiencies associated with using
multiple SSPs.

At all points in the go-to-market process, publishers need to leverage data and technology that can help optimize ad exchange setup, analyze performance, provide insights into which segments are valuable to which advertisers, maximize yield, and
ultimately increase revenues as well as improve efficiency. Best-in-class publishers
develop sophisticated analytical capabilities in order to deliver continuous optimization and measurable revenue improvements using methods such as multivariate
and A/B testing. One big US publisher hires finance-sector analysts for their quantitative skills in yield optimization, and the company runs between five and ten A/B
tests at any one time.

14

The Programmatic Path to Profit for Publishers

hile digital markets today vary in maturity, there is no doubt that programmatic deals are central to the future of digital advertising globally as
well as across formats and platformsdisplay, video, desktop, and mobileand
that programmatic and direct channels will become less clearly delineated over
time. Publishers need to ensure that they are set up for programmatic success today
and tomorrow by reassessing their strategy, sales proposition, pricing, technology,
capabilities, and organizationacross both traditional direct and programmatic
channels. They will benefit immediately from more productive and more efficient
programmatic operations and in the future from a stronger market position.

Publishers already embracing our four recommendations are outperforming by increasing market share (both programmatic and direct), overall CPMs, and total revenue. More important, they are positioning themselves for explosive growth in the
programmatic market over the next few years, when billions of dollars of revenue
and market share will come up for grabs.

The Boston Consulting Group

15

Appendix: A Glossary of Programmatic Advertising Terminology

Ad exchange: technology platform that enables the buying and selling of advertising.
Ad server: technology solution that delivers ads to website users.
Brand marketing: the building of the reputation of a brand, often using advertising, in order to drive engagement and sales in the future.
Contextual advertisements: ads that are displayed to users according to the content of the website on which they are displayed (for example, on the sports page of
a newspaper site).
CPM (cost per mille): cost of 1,000 impressions of a certain type (or, from a publishers perspective, the price it realizes per 1,000 impressions).
Demand-side platform (DSP): technology platform that allows advertisers and
agencies to manage their purchases of advertising space on exchanges.
Demand sources: technology platforms or exchanges that connect publishers with
buyers wanting to purchase ad inventory. Demand sources can refer to supply-side
platforms (SSPs), which provide both access to demand and the tools to manage it,
and to individual buyer solutions.
Direct-response marketing: the use of advertising to influence users to take an immediate action, such as clicking on an ad or purchasing a product.
Direct sales (also known as traditional sales): buying and selling of digital advertising based on one-time agreements for a set volume of inventory and involving a
mostly manual workflow of agreements and trafficking into the ad server.
Discrepancies: ad impressions that are lost, owing to technical issues, as they are
passed between different technology platforms.
First look: sales model that gives a chosen buyer first refusal on the purchase of selected inventory before it is offered to other buyers.
First-party data: data derived by a publisher about its users, for example, log-in
data or the history of viewing a particular section of its website.
Floor price: the minimum price that a publisher will accept for a certain piece of
inventory.
Go-to-market strategy: how a business delivers its product to its target customers,
including packaging, pricing, and channels.
Guaranteed sales: sales model in which the buyer and seller agree in advance on
the volume and type of inventory purchased. (See also direct sales and programmatic guaranteed.)

16

The Programmatic Path to Profit for Publishers

Invitation-only auction (also known as private auction): sales model that allows
select buyers to compete with one another in an auction for certain inventory.
Invitation-only deals (also known as private marketplaces [PMPs] or private
deals): sales model that gives select buyers access to certain inventory or certain
terms of purchase, such as price. Includes both unreserved fixed-rate and invitation-only auctions.
Native content: advertising that is integrated with the content and style of a particular website.
Nonguaranteed sales: sales model in which the buyer and seller do not agree in
advance on the volume of inventory purchased; the buyer usually makes purchasing decisions on an impression-by-impression basis using real-time bidding.
Open auction (also known as open exchange or open market): sales model that
allows all buyers to bid on ad impressions via an ad exchange.
Programmatic buying/trading/selling: the automated buying and selling of digital advertising.
Programmatic guaranteed (also known as automated guaranteed or programmatic direct): sales model in which the buyer and seller agree in advance on the
volume and type of inventory purchased, with automated technology making the
RFP and trafficking processes more efficient.
Remnant inventory: ad inventory that the publisher has not been able to sell
through its premium channels.
Sell-side platform (SSP): technology platform that provides access to demand (via
an exchange, for example) and enables publishers to manage the sale of their advertising space on ad exchanges. The publisher can establish sales parameters such
as which inventory is available for which type of purchase, set floor prices, and
block certain advertisers or creative content.
Targeting: displaying ads to certain users based on their characteristics.
Technology stack: the software that enables programmatic-advertising sales activities.
Unique demand: buyers (or budget from buyers) available only in a single demand
source.
Unreserved fixed rate (also known as preferred): sales model in which the buyer
and seller agree in advance on the price of certain inventory, but the buyer is under
no obligation to purchase impressions and can decide on an impression-by-impression basis. This model often gives a buyer (or group of buyers) preferential access to
inventory. (See also first look.)
Yield management (or yield optimization): techniques that publishers use to in-

The Boston Consulting Group

17

crease revenue from their advertising inventory, such as by adjusting floor prices
with the objective of maximizing revenue through higher CPMs or a higher volume
of sales.

18

The Programmatic Path to Profit for Publishers

About the Authors

Dominic Field is a partner and managing director in the London office of The Boston Consulting
Group and a global leader of the firms Marketing & Sales practice. You may contact him by e-mail
at [email protected].
Paul Zwillenberg is a partner and managing director in BCGs London office and the global
leader of the firms Media sector. You may contact him by e-mail at [email protected].
Jacob Rosenzweig is a partner and managing director in the firms London office. You may
contact him by e-mail at [email protected].
Neal Zuckerman is a partner and managing director in BCGs New York office. You may contact
him by e-mail at [email protected].
Melissa Ruseler is a project leader in the firms London office. You may contact her by e-mail at
[email protected].

Acknowledgments
The authors are grateful to Andrew Browning and Salvatore Cali for their assistance in the
preparation of this report. They also thank David Duffy for his help with writing and Katherine
Andrews, Gary Callahan, Kim Friedman, Abby Garland, Gina Goldstein, Amanda Provost, and Sara
Strassenreiter for editing, production, design, and distribution.

For Further Contact

If you would like to discuss this report, please contact one of the authors.

The Boston Consulting Group

19

To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com.
Follow bcg.perspectives on Facebook and Twitter.
The Boston Consulting Group, Inc. 2015. All rights reserved.
7/15

Abu Dhabi
Amsterdam
Athens
Atlanta
Auckland
Bangkok
Barcelona
Beijing
Berlin
Bogot
Boston
Brussels
Budapest
Buenos Aires
Calgary
Canberra
Casablanca

Chennai
Chicago
Cologne
Copenhagen
Dallas
Detroit
Dubai
Dsseldorf
Frankfurt
Geneva
Hamburg
Helsinki
Ho Chi Minh City
Hong Kong
Houston
Istanbul
Jakarta

Johannesburg
Kiev
Kuala Lumpur
Lisbon
London
Los Angeles
Luanda
Madrid
Melbourne
Mexico City
Miami
Milan
Minneapolis
Monterrey
Montral
Moscow
Mumbai

Munich
Nagoya
New Delhi
New Jersey
New York
Oslo
Paris
Perth
Philadelphia
Prague
Rio de Janeiro
Riyadh
Rome
San Francisco
Santiago
So Paulo
Seattle

Seoul
Shanghai
Singapore
Stockholm
Stuttgart
Sydney
Taipei
Tel Aviv
Tokyo
Toronto
Vienna
Warsaw
Washington
Zurich

bcg.com