Here’s Why The Programmatic Open Market Is Petering Out

Enthusiasm for the programmatic open market is waning.

By Doug Huntington, CEO, FatTail

Premium publishers are increasingly following Bloomberg’s lead and ditching the open market in favor of direct sales. Privacy regulations are killing retargeting and MFA sites. And agencies and direct marketers are increasingly interested in an easy button for planning and executing direct deals across publishers at scale.

While for many this transition from the open market to direct may seem daunting, it is inevitable, and by leaning into it instead of resisting it, publishers, advertisers, and consumers will reap the rewards of higher-quality paid and unpaid content, greater control and transparency, and less waste.

But how did we get here? For more than a decade, premium publishers have turned to the open market to fill remnant inventory, while less premium publishers have relied on it for their very existence. Media buyers leaned into the open market to avoid the complications of fragmented sales channels and disconnected processes.

But these problems are now solvable by means other than the open market. As the industry sets up the infrastructure to allow direct media transactions at scale, direct advertising will become more efficient, accessible, and pervasive. And as this infrastructure gets coupled with AI, supply and demand matching will become fluid, making it conceivable there may not even be a meaningful level of remnant inventory left to monetize through the open market.

Here’s how publishers, media buyers, and even audiences will benefit from more direct deals in lieu of open market transactions.

Publishers are moving away from the open market

Premium publishers would obviously benefit from a shift to more direct deals and are vocal about the downsides of the open market. They no longer look at SSPs as strategic business partners and increasingly view the incremental gain in revenue they receive from them as coming at a substantial cost in terms of loss of product differentiation, pricing power, and overall quality of advertisers and advertisements. This not only hurts them in their wallets but in terms of brand integrity and audience loyalty.

Publishers should also be wary of the data used to place ads from the open market onto their sites. Amid the deprecation of cookies and heightening data privacy concerns, being tangled up in opaque third-party data is not only ethically dubious but is also becoming increasingly costly, as new laws levy fines against publishers for mishandling personal data.

To have more control over who can advertise on their sites and what data is being used to serve those ads, publishers need to pursue direct deals, which are becoming increasingly possible to execute at scale.

As direct deals become more efficient for publishers to offer and buyers to discover, publishers may find they can sell their inventory through direct deals entirely, leaving no purpose for the open market at all.

DSPs and agencies are leaning into direct deals

For DSPs and agencies, the coming years will serve as a test of adaptation. As the open market becomes increasingly less relevant, media buying partners will face pressure to pursue more direct deal types to secure the premium inventory their clients want.

There are also financial benefits of more direct deals for buyers, as we’ve seen with the SPO trend. Intermediaries like The Trade Desk and Magnite have released their own responses to this desire with platforms like OpenPath and ClearLine, which aim to connect buyers more directly with premium publisher supply.

But empowering advertisers to be successful with direct deals will require automation across deal types, not just in programmatic. All direct deals can become easier to execute with the automation of media planning in programmatic direct, as well as with the end-to-end automation of traditional direct deals. Improving efficiency starts with giving buyers access to controlled portions of the publishers’ order management system, where all of their product details live, to drive transparent media planning and shoppability.

In the shift to more direct deals, media buyers must contend with a new way of discovering inventory. As we move beyond the open market’s sole currency of cookie-based audiences and its ability to track and retarget across sites, how can buyers find the audiences they want through direct deals? AI-powered tools are helping advertising teams by suggesting products that have performed well for similar brands, essentially becoming a recommendation engine that lives inside of buying platforms to simplify the shopping process.

As more adtech platforms make moves to provide advertisers with a central place to efficiently discover and pursue direct deals across publishers, small and midsize advertisers will see that direct deals are possible, even without a pre-existing relationship with the publisher or direct buying teams.

The shift to direct will benefit audiences, too

Moving toward more direct deals will empower publishers to control who can advertise on their sites, provide media buyers with much needed product clarity, and help both sides of the equation save money by sidestepping unnecessary intermediaries.

But the industry’s move away from the open market will also benefit audiences. As the open market’s deprecation cuts the legs off of clickbait farms who rely on programmatic advertising to bankroll shady operations, audiences will enjoy a higher-quality open web with more trustworthy information and transparency.

It’s all powered by new automation and AI tools that are enabling scale in direct deals by helping publishers and buyers easily manage more direct transactions and direct media relationships without adding people to their teams, letting them affordably explore the benefits of moving away from open market deals.

For adtech companies, it’s a question of who can adjust soonest to be the pioneer who powers the shift from the open market to direct. And for publishers and audiences, this shift will provide a long-awaited fix to revenue erosion and the proliferation of low-quality ads and media sites.