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Is Programmatic Selling Problematic?

June 18, 2015

There has been a recent explosion of conversations regarding programmatic selling for the transaction of radio advertising. Recently at the Radio Ink ConVergence conference, we saw a demonstration of Marketron’s prototype for programmatic selling.

One school of thought is that this will be beneficial for radio, because that is how digital is presently sold. I’ll address that later. But first let’s discuss the main issue; what is programmatic selling and how will it impact the radio industry?

In its ultimate state, programmatic buying is the concept of a radio operator making their open inventory available to the advertiser’s (or its agency’s) computer. The advertiser’s computer decides what it wishes to buy, and the operator’s computer decides if it wishes to accept that rate. The entire transaction takes place between two computers. Some station owners like this because it eliminates (or reduces) the cost of sales people and human buyers.

This is very different than the Marketron demonstration. In this one, there was a human on the station side setting rates, and a human on the buying side evaluating the station. In its present state, the Marketron example made the transaction easier, but humans still influenced the decision on both the buying and selling side. We at Research Director, Inc. believe that a system at this level has merit, and can make effective radio schedules easier to buy.

However, a system without human influence is detrimental to both radio operators and advertisers. There are several reasons for this:

  1. It will cause a negative auction. A race to the pricing bottom will occur and the cheapest inventory will be bought. While price should be an issue in all sales, cheapest does not mean most valuable.
  2. Programmatic selling does not take into account the environment that the radio station is offering. Only through human communication – sales – can a potential advertiser understand the on-air environment that their ad is being placed in. How important is the station’s spot load, or the value of a live and local morning drive show?
  3. Added value has no value. To many, added value is a dirty word in sales. However, it can help differentiate the advertiser from their competition. From live reads to street team appearances, radio’s ability to relate to the listener is added value. How does the computer value a sponsorship?
  4. How does it differentiate listeners? While internet advertising can look at your digital footprint to help advertisers make decisions, radio listeners are measured very differently. It is not a one-on-one delivery, but a broadcast. Does programmatic buying take into account a station’s in-depth qualitative profile, and its listeners’ tendencies to buy certain products?

Should radio adopt programmatic buying just because that is how most digital advertising is bought? What is right for digital may not be right for broadcast radio. A few generations ago, radio buying evolved to GRPs and CPP to help compare it to TV. Many believe, including me, that it has not been beneficial to the radio industry. Evolving again to a programmatic sales model is putting a square peg in a round hole, and the advertiser loses.

Here is the dilemma facing radio operators. Some major advertisers say they are going to allocate a large portion of their ad budget to programmatic buying. Broadcasters have two options. They can either participate and potentially sell their valuable inventory at a significant discount, or they can choose not to participate and potentially miss out on revenue opportunities.

If the goal of radio advertising is to move products and services, then the human interaction of seller and buyer remains necessary. Just because it is cheaper to implement does not make it better. There are obvious risks to both participating and not participating.

We invite you to share your thoughts with us by commenting below.

-Charlie Sislen, Partner