Last week, the number of Australia’s premium programmatic ad exchanges — which are essentially digital marketplaces for the buying and selling of online ads — doubled. Fairfax and Mi9 launched APEX, and the day before, News Corp launched the Multi-Brand Exchange (MBX). They join Camelot, operated by Dentsu Australia and offering ads on websites operated by six major publishers, and the Pangaea Alliance, which was created earlier this year by CNN, The Guardian, Reuters and the Financial Times. With the exception of Camelot, the other three exchanges present a development in digital ad-buying as publishers try to combat declining ad yields by taking their automated “programmatic” ad exchanges in-house. What does all the jargon mean, and can this save quality journalism? Crikey asked the experts.

What is programmatic ad buying? 

“Programmatic is what it says,” said media analyst Steve Allen of Fusion Strategy. It is the process whereby people looking to advertise online create software that connects with an online exchange or “trading platform”, which is basically a marketplace listing available digital advertising space. Advertisers then “feed a bunch of data into a trading platform. Who you want to contact, their demographics, whatever else is available on that trading platform,” Allen said. That platform then seeks out available ad space at the lowest possible price it can, “whether [the trading platform] is operated by a media agency … or a publisher, it doesn’t matter — it’s the same mechanism”.

Programmatic ad buying makes up an estimated 10-15% of the Australian digital advertising market, says Alice Manners, the CEO of industry body the Interactive Advertising Bureau.

It started as a response to the concerns of ad-buyers that launching a campaign online took too long. Manners says when she started in digital advertising, it would take up to eight times as long to get an online campaign off the ground as it would to do a TV campaign. “It was all manual. What changes to technology have enabled in the past couple of years is access to data, in real time.”

That real time is the critical aspect. While readers have for yonks been tagged and categorised by digital trackers, which then serve up appropriate ads to them over the internet, programmatic advertising takes this one step further. Advertisers can bid on readers — in real time.

Early on, publishers were using programmatic to flog off “remnant inventory”, or unsold digital ad space, at lower rates than the ads they sold ahead of time. But with the launch of ABEX and MBX, the sector has changed. ” We’re seeing the complete pie grow,” Manners said. “Programmatic has matured in its offering — we’re seeing open auctions, we’re seeing premium programmatic offerings.”

The “premium”, as used in this context, doesn’t mean quite the same thing as A-B readership means in print ads. In the online world, premium means websites that don’t host porn, or objectionable forums, or illegal content. “Premium” ad inventory gives marketers confidence their ads won’t appear in places that could tarnish their products by association.

Why have News and Fairfax launched their own exchanges?

While the prices for ad-space sold vary along with the audience, by cutting out the middle man, APEX and MBX hope they’ll make more profit off the digital audiences they sell, Allen says. And for marketers, it makes sense to buy directly from publishers, even if the rates end up being a bit more expensive.

“Up until now, programmatic has generally been criticised as cheap and cheerful. It’s a cheap, easy way to buy media … but not always in the right environment.” Last year, there were a number of instances of prominent advertisers having their ads placed in places they definitely would not want through programmatic ad exchange. Because of that, Allen says, clients are getting very wise to the fact that “cheap and cheerful” digital advertising could harm their brands. By buying in “premium” exchanges, they can avoid this.

For News and Fairfax, launching their own exchanges also helps them hold out against the competition — smaller titles, like Crikey, simply do not achieve the critical mass of audience that would allow them to set up their own exchanges. That means a whole range of niche news and media websites are forced to sell advertising manually, or use exchanges operated by others, where their advertising space may be offered alongside cheaper, “non-premium” web pages.

Will this save big media?

Asked whether the launch of APEX and MBX is a “game-changer”, Allen says it is. In the short to medium term, it could significantly improve the profitability of the online advertising News and Fairfax sell to clients, as well as allow them to maintain the direct relationships with advertisers that have been crucial to the success of newspapers and more traditional forms of media. And programmatic is growing — operating their own exchanges gives major publishers direct exposure to one of the booming parts of digital advertising.

But on the other hand, digital advertising is a tough game for anyone to play. “The whole trouble is that the medium is that’s constantly expanding,” Allen said. “That’s the nice word — perhaps a better word is fragmenting. Every day, other websites getting up with their own inventory. It’s not like the old days, where AFR would sell out. Very few areas in the digital space ever sell out. You can’t manage yield in the way you used to. Only the super-clever, niche publishers that can truly premium price.”

With so much unsold advertising space, and so many new websites popping up all the time, there’s downward pressure on advertising rates. This makes it harder and harder for publishers to stay profitable — ad rates have halved at many niche publishers in the past few years. Programmatic gives marketers better-targeted advertising, which suggests they may be willing to pay more for it, particularly in live bidding scenarios like those facilitated by programmatic trading. But in the long run, the problems faced by publishers trying to fund their operations through online advertising remain.