“I think programmatic buying in all its forms is necessary for the future of online advertising. It will underpin growth in all message formats – native or otherwise. As ignorable inventory grows in scale and forces content producers to find new ways to monetize audiences, programmatic methodologies will have to proliferate to allow both buy-side and sell-side to efficiently utilize new messaging channels.”
– Vikram Somaya, VP of global operations and audience, Thomson Reuters
Once upon a time in advertising, when the world was in the wake of printing banners, online media buying looked like an easy feat. Why not? All it needed was the two functioning elements – a publisher (supply-side) and an advertiser (demand-side). No printing. No transportation. No whatnot.
But, more elements started to embed their roots in the advertising soil as the industry shifted towards a programmatic environment. To make the automated and most efficient media buying process see the light of the day, both supply and demand sides came up with their specialized entities – SSP and DSP. Today, we can’t ignore but agree on how crucial these elements have become in the real-time bidding scenario of programmatic.
Real-time bidding (RTB) and how does it work?
Real-time bidding is a typical mode of transacting online inventories on a per-impression basis. The transaction takes place between multiple media buyers through a programmatic mechanism. I know, understanding RTB can be a real headache but stay with me as it gets easier when you read more. So here’s what happens at the backend when you visit a website and it starts to load:
In RTB, whenever a user lands on a website, its ad servers inform the SSP (supply-side platform) to create a bid request and set a floor or reserve (minimum) price for the ad slot. This bid request, carrying a floor price and other user-centric information such as cookies, IP, tags, etc, is then shared with all the Ad Exchanges. Each ad exchange shares the acquired information with all the DSPs (Demand-side platforms) it works with.
DSPs respond to this “bid request” with a “bid response” in real-time. The entire bidding takes place at an online ad auction. The DSP offering the highest amount for the ad impression wins and gets its ad served in front of the user.
Fun fact: 130 milliseconds are what the RTB process takes to execute the entire process mentioned above.
The need for a programmatic environment:
Around 200 years ago, Adam Smith stated the theory of an “Invisible Hand”. As per Smith, it is an unobservable market force that helps the demand and supply of goods, in a free market, reach equilibrium.
Since the marginal cost of producing supply (more inventories/more webpages) is very low in the publishing world, the advertising market sits at the peak of its supply curve. But, this isn’t the case with demand.
The demand is limited and seeks quality. Advertisers want an inventory that reaches their targeted cohorts. An inventory that is in the first fold and could help an ad get maximum impressions. They expect the media buying process to be fast and to be efficient. A platform had to be introduced that could help them compare the options available and decide which one to bid more for by giving away some user-centric information. None could’ve done it better than programmatic.
Programmatic was essentially a must-to-have element to help the demand match the supply. To put those remnant inventories to use. To make publishers earn the most out of their websites and, simultaneously, help advertisers buy those ad impressions at cheaper rates. And, all that within a fraction of a second.
Push notification advertising:
Push notification advertising is a newly introduced ad format that allows you to serve an ad on a web push notification. Push notification ads are clickable alerts with native ads mounted on it instead of content updates. As this marketing channel allows you to segment your audience, it becomes easier to target the audience cohort you’re most interested in, with contextual ads. Here’s what a full-fledged push notification, with an ad embedded on it, would look like:
The ads get delivered in real-time, hence, allow the publishers to distribute their content and engage their target audience – whenever they want. Programmatic in advertising makes so much sense. But, why the new ad format?
Why should push notifications ads go programmatic?
Like I mentioned, invisible hand or the “market equilibrium” is a point in time where everything sells, where the amount of supply matches demand. In online media, the invisible hand price or the market-clearing price is known as the average CPM.
We have seen that the industry has sufficient supply as creating new webpages/ad slots cost nothing. Also, with most of the media transaction gone programmatic, more and more ad dollars have started to dance to the programmatic beats. According to the report from the recent market analysis by Zenith, advertisers’ programmatic spend is expected to reach $98bn by the end of 2020. It’s 68% of the total digital ad spend.
Now, if the supply is going up and so is the demand, why is average CPM still sailing the same boat?
Because the results driven by the current ad formats make you hold your horses – because the industry struggles with everlasting infirmities like ad blockers and banner blindness – because it’s difficult to draw a line between spamming a user while retargeting and engaging the same with limited contextual ads – because the users have become obnoxious to being bombarded with 5000+ ads every day – because there’s nothing new that stands out and might engage their brain for a moment.
Ads mounted on push notifications drive a 5X higher CTR when compared to the conventional ad formats. Unlike other ad formats, it offers a chance of monetizing the traffic along with building a reliable audience for the website.
The leverage window:
Every marketing channel ever introduced has enjoyed a “leverage window” in its initial days of being. Since push notifications are nascent (4 years old), they are a part of this window right now. The compounding returns make it obvious that the ad format is getting used and abused at the same time by the marketers.
CTRs driven by push notification ads are high as we see a comparatively lower demand at the moment. The same would sit at rock bottom if the demand goes out of control. Locating the invisible hand here is imperative to save the channel. Taking it programmatic can help the industry players reach there faster.
Revenue scope of push ads in programmatic:
Programmatic ad spend for display ads has hiked from $49.2Bn (2018) to $59.4Bn (2019) in the US. However, a report published by eMarketer on US Programmatic Ad Spending Forecast 2019 has revealed a setback. Although the overall ad spending increased for display in programmatic, the % growth has fallen miserably in the year 2019.
Ad spending in programmatic that was growing at the rate of 37.5% in 2018, now rests at 20.7% and is only expected to drop in the coming years. Does that imply programmatic advertising is simply losing out on performance? Programmatic advertising, so far, has been regarded as the most efficient way to serve ads in real-time. If not the channel, one must get convinced to check out the other ad formats in a programmatic environment. Push ads are delivering astonishing CTRs to the advertisers, hence, gives publishers a strong motive to vouch for the ad format. But, before that happens, let’s have a brief look at how does it yield the ad revenue for a publisher receiving a 100K Unique Monthly Visitors:
From the 45B+ notifications we’ve sent, we saw that the:
- Avg Opt-in Rate: 4%
- Subscriber Churn: 20%*
*(most websites receive 35% churn in their first month and 20% (average) in the subsequent months)
Let’s assume: Traffic is coming in largely from the US
- iOS Traffic: 30%
- Desktop Traffic: 40%
- Android Traffic: 30%
With 4% average subscription rate and 20% average churn, this traffic would yield 15,236 subscribers, i.e. your push notification audience after 6 months.
Now, if the publisher pushes 2 notifications every day:
We know that:
- Average CTR: 2%*
*(is 5% but decreases by 10% for initial few months and settles at 2%(average) for the subsequent months)
- Total no. of notifications sent in the first month:
= (2 notif.)*(30 days)*(15,236 subsc.) = 914,160 notifications
- Total additional sessions generated in 1st month:
= (914,160/100)*2 = 18,283 clicks
Your total website traffic will become 118,283 ( increased by 18%)
Additionally, if 2 push notification ads are sent:
We know that:
- Clicks received : 18,283
Let’s assume:
- CPC rate: 10 cents
Revenue generated from 2 notifications ads will be:
=18,283*10 cents = $1,828 increase in the first month
Challenges involved and what can be done to surpass those challenges:
Although it has become evident that push notification ads are capable of driving great CTRs, there are challenges that doubt this ad format’s ability to enter programmatic. In the current programmatic scenario, CPM or the impression of an ad is what a publisher gets paid for. An impression is something that advertisers or ad exchanges use to track and analyze the performance of an ad campaign.
Generating a bid-request: Things also get rough as push notification advertising is a push-based medium. The information here travels from the server to the client. Also, since showing an ad doesn’t require the user to visit the website, it’s not possible to generate a bid-request in real-time. In order to make the push notification inventory enter programmatic, a mechanism that can generate a real-time bid request needs to get standardized.
Tracking a push notification ad impression: Since push notifications advertising, unlike banners, follow an off-page ad delivery, no push ad can hit the ad servers of a website. This makes it difficult to integrate the 3rd party tracking pixels and fire them on delivery of notifications. Only the inventory holders get to collect the data pertaining to the no. of ads received. Therefore, ad clicks get counted instead of the ad impressions because tracking of a click is possible at DSPs end by embedding a landing page URL on the website.
Here are more challenges that obstruct the push notification channel from entering a programmatic environment. IAB (The Interactive Advertising Bureau) hasn’t defined standards for advertising on notifications. Also, the current RTB ecosystem does not recognize push notifications as a potential inventory.
Workarounds to surpass the challenges:
It’s impossible for a marketing channel, or for a fact, any channel, to not have any limitations. But, challenges that are a must-solve for industries, like push notifications, find their way back in, one way or the other. A few solution providers are trying their best to remove these roadblocks as soon as their voice, concern, and influence allow them. So far, they have experimented with the workarounds including but not limited to:
- Generating a bid request:
- Simulating a bid request
- Real-time fetch from the service worker
- Server-side bidding
- Track a push notification ad impression:
- An impression can be tracked as the image loads on a notification.
Final words
The stakeholders of the advertising ecosystem, such as DSPs and exchanges, are expected to back the cause. This is a major setback as these leaders operate in a very archaic way. The stakes are high and they need some precedence to follow before stepping into any change. And as of now, there’s not much precedence to follow.
Such a process also has to comply with the open RTB protocols in order to receive bids from multiple SSPs and then serve the winning bid as a programmatic ad. Advertisers along with the DSPs are also required to be open to working with such SSPs which can only be solved once IAB recognizes and standardizes push notification as an ad format. So, when will the ad format go programmatic? Looking at the obstructions and the needs stated above – one can agree that it must but the answer to “the when” couldn’t be black or white. It’s just blurry grey.