June 2016 Market Review: In-House’s Push and Header Tag Impression Dominance

The fact that Index Exchange is a living, breathing, ad marketplace is a huge part of why it’s so interesting to work here. Our view of the exchange between publishers and advertisers is pure – we see which advertisers rely on programmatic month over month and how the programmatic market values the inventory the publishers we represent list for sale. Many of us are regularly in the weeds, charged to evaluate the day-to-day intricacies of a digital ad marketplace, while this forum is a place to study what happened during any given time period. Today, we’re taking a look at the dynamics of the exchange during Q2 2016.

June’s Top Spenders  

We typically see a dip in exchange wide spend during the summer, before the steady climb upwards to Q4 and the holiday season. The trend is most apparent when you examine month-over-month spend from the heavyweights. For many of these heavyweights, or the top ten brand spenders, a slight pull-back occurred in June.

However, there are some interesting stories within the top ten. Not all brands budgets are so seasonally locked – while a Best Buy likely operates under very set budget restrictions that align with the calendar year, some brands have major periods during which spend shoots through the roof. In June, that brand was Netflix. Take a look.

TOP spenders

June was a massive month for Netflix. The company increased spend 17x in June, compared to May, and 20x compared to April. This was no coincidence – the company has historically made major programmatic investments that align with the release of top performing shows. In June, Orange is the New Black was released and the company launched on a programmatic offense.

What interests me about this programmatic offense is how the company approached the market. Of the top ten brand spenders in June, Netflix bought the fewest impressions by a large margin. The relationship between the number of impressions bought and the price paid can help one infer the value of the impressions – Netflix bought the most valuable, or sought-after impressions, of all the top ten buyers. Of the top ten buyers in June, Netflix had the highest average CPM.

My heart is warmed when I see brands approaching programmatic in such a way. It confirms that a handful of savvy brands identify programmatic as a valuable source of inventory, not just a place to blow some extra allowance. Netflix’s high CPMs and low impression count, despite an influx of spend during June, suggests the brand is operating with programmatic savvy. The tables below show the top ten brand spenders spend, impressions, and average CPMs all indexed.

Table1

table2

When you look at how Netflix secured these impressions, the story gets even more interesting. In 2014, the company was poster child of a trend on bringing programmatic in-house (great article on the topic here). The in-house team runs all programmatic campaigns for the brand and is a bona fide trust of subject matter experts. According to Kathy O’Dowd, senior manager of programmatic buying at Netflix, buying in-house allows the brand to “quickly act on information it wouldn’t be comfortable sharing with an agency.” Information, perhaps, that helps the brand understand the true value of a programmatic impression.

We took a look at top in-house buyers during the month of June and were not surprised to see Netflix at the top of the list, followed closely by its other in-house sister-in-arms, Kimberly-Clark.

marketers

Demand By Seat Type

Though the in-house trend attracted a lot of lip service a couple of years back, we’ve actually seen the trend declining over the year. It clearly works for some marketers (see above), but it seems most brands currently direct a considerable amount of ad budget to their agencies or managed service partners to actually make the programmatic buy. We looked at what proportion of spend came from each “seat-type” during the month of June.

seat type1

As you can see above, managed services or network buyers account for more than a third of programmatic spend within Index Exchange. Though they account for a third of spend, they account for even more impression volume, which speaks to the value of the inventory they procure. See below.

impressions

The managed services/network distinction isn’t always completely clear (we do work in the programmatic industry, after all, where things are notoriously unclear) and it’s helpful to see exactly who is accounting for a lot of this managed services/network spend. See below for a breakdown of the top spenders in this category.

managed

Q2 Marketplace Dynamics

We’ve watched header tag spend and impression volume grow month over month and June was no exception. Header tag revenue grew 2% from May and 21% from April. In June 2016, header tag revenue was 142% higher than tag-based, or waterfall, revenue.

ht spend

 

Though header tag spend has been a freight train barreling forward, impression volume has been slower to catch up. This is due to a few key reasons: the legacy of our tag-based accounts and the predilection of such publishers to erect more spaces for ads on a page and the economics of header auctions to name a few. In June this changed – we saw more impressions sold in header tag accounts than in tag-based accounts. Spend is spend and value changes, but impressions are tangible. With more header tag impressions sold, that means more header tag served ads have made their way into the digital ecosystem.

imps1

 

 

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