Programmatic native: Tragedy of the commons?
The article discusses the rise of programmatic native advertising, highlighting its technical feasibility and benefits such as ease of buying and scalability, but warns that widespread adoption by brand-name publishers risks commoditizing high-CPM native ad inventory, potentially lowering prices and harming sellers in a market flooded with supply, thus likening it to a "tragedy of the commons" scenario.
An emerging new trend in native advertising combines the value of native with the easy placement of programmatic. But who is this favorable for?
Programmatic native is already technically possible. Companies like Xaxis are placing native programmatically inside Disqus’s communities. There are startups in Silicon Valley, such as AdsNative, and recently, TripleLift and PubMatic have announced their own plans to pursue programmatic native. However, the real question is not technical capability, but whether any brand name publisher should want to offer programmatic native.
It is the right idea to create the convenience of buying programmatically with native. There are concrete benefits: this will lower the friction of buying a desirable media format with very attractive response rates and will allow native to move from a niche business to a scale model. Additionally, companies like OpenX correctly point out that publishers can retain significant control over what gets sold.
However, the world is awash in ad inventory, and programmatic native will only continue this trend. This has been beneficial for middlemen and buyers who seek scale and demographic targeting at the lowest possible price. But is programmatic native good for ad sellers?
B2B and consumer brand name media companies with established audiences and limited inventory need to be wary about commoditizing what, today, is high CPM advertising. There is a herding effect coming to native advertising. What was once the purview of BuzzFeed and a small cast of players is going completely mainstream. At MediaRadar, it is observed that almost half of the largest 10,000 national advertisers have already sampled native. The ANA also reported that two-thirds of their 640 members polled will place native in 2015. Like all markets subject to supply and demand, this will lower prices.
While programmatic is valuable, knowingly commoditizing your own ad sales business can be risky. Like Garrett Hardin’s “Tragedy of the Commons,” publishers, each acting in their own best interest to automate native advertising, may in fact reduce their share of the pie and create downward pressure on price. What was once novel will no longer be.
Tim Armstrong of AOL follows a balanced “barbell strategy” when it comes to programmatic, and this approach is recommended. Publishers should have high-end, high-touch CPM units in addition to programmatic options for ad buyers. This way, both kinds of buyers are serviced. However, native advertising is quickly moving from one side of the barbell to the other, and publishers will soon need to find another solution that is unique.
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