Death of the Travelling Salesman?
The growth of programmatic ad sales has the potential to displace, but not obliterate, sales organizations. Adapting to the new reality is the key to thriving.
A decade ago, selling digital advertising was an anachronistic affair. A salesperson would enter a room and tout a network of websites, often highlighting certain publishers and their presumed audience. The parties would negotiate a custom insertion order and then pass it on to ad ops for trafficking. Despite the Internet’s established self-serve efficiency, ad sales remained high-touch and hands-on.
Fast forward to today and witness how much digital ad sales have changed. “Programmatic” ads — whereby automated platforms match ad buyers with ad sellers in real-time — currently serve over 70% of the $65B U.S. digital media market (including search, social, display, video). Programmatic now accounts for roughly 60% of display and 40% of digital video sales. In search and social, the proportion is closer to 100%1. Even programmatic ad spending outside search (the early pioneer) has boomed; from almost zero in 2010 it has grown to $22B, with forecasts predicting continued growth to 2020.
How much of the total U.S. advertising market will ultimately be sold programmatically? We’ll gain greater insight over the next few years as programmatic ad sales continue to grow share due to increased adoption within digital media, particularly as traffic migrates to mobile platforms. Longer term, however, such sales are poised to absorb a significant portion of the total $200B+ U.S. ad market because of the continued share shift into digital media, and eventually, penetration into the $70B+ television, radio, and outdoor markets.2 Based on these trends, we predict that more than 50% of the entire U.S. ad market will be sold programmatically by 2024.
How will this dramatic shift impact sales organizations? While we do not foresee the end of hands-on, human selling, we do expect that the size of sales teams will decline, and that selling skills will evolve. Rather than generating revenue merely on volume metrics such as sellout and CPM, the sales force of the future will build revenue based on solution-based sales that deliver targeted audiences based on evolving ad products, in many cases across a portfolio of media that includes both traditional and digital. This will require live sales people to define and position premium inventory, to engineer integrated media bundles, to structure upfront commitments and to customize on-demand options.
According to FTI Consulting's advertising forecast, programmatic ad sales will account for over half of total U.S. advertising sales by 2024 with approximately 85% of digital ad dollars sold programmatically.
Growth will be driven by video, which will comprise “most of what people consume online… within five years,” as Mark Zuckerberg commented in his Q1 2016 earnings call.
The Impact on the Sales Organization
Programmatic ad sales will certainly change the ad sales organization — but not obliterate it. While the organization will no longer require the same number of bodies, it will still need to create and grow relationships with ad accounts using real, live salespeople. The sales organization will still need to define ad products, including premium offerings, and communicate benefits to buyers. It will also need to support ad buyers in navigating complex options and in using self-serve tools (as well as prioritizing how such tools evolve).
A prime example of change in the selling process is how sales teams define premium ad inventory. The term premium implies differentiation and scarcity. Traditionally, when creating such inventory, media companies have considered three tactics: 1) brand environment, 2) placement (for example, ads run in primetime), and 3) content association (for example, ads run during the Super Bowl). Now, however, programmatic has introduced a fourth tactic: data targeting.
When applied to digital ad campaigns today, data targeting typically produces a 50–100% uplift in CPM. Furthermore, recent FTI research indicates that over 80% of digital advertisers now demand data-driven audience targeting while less than 50% demand specific brand, placement, or content. Preferences for data imply a shift in the relative value of data versus more traditional media assets such as content and brand. Data-driven ad sales also require salespeople who can develop and interpret analytics (a “science”) in addition to communicating brand and content value (an “art”).
With new opportunities and tools also come new burdens. Advertisers now expect customized solutions, which increases the time and complexity of the sale as well as the reporting of the results. The sheer breadth of options can be daunting. For example, private marketplaces can enable volume commitments versus unrestricted access; guaranteed price versus real-time bidding; supplier consortia versus single-supplier environments. The sales team risks losing scalability in a sea of custom deals. Custom audience targeting also requires new inventory management and trafficking systems, which often report differently and do not integrate with legacy systems. Additionally, sales teams may struggle to maintain campaign size once they give ad buyers a taste of targeting and efficiency. These challenges will require salespeople who can understand and help evolve ad products.
Over time, we foresee a transition to smaller, more highly-skilled, solutions-based sales organizations. While the transition will likely incur short run costs, we believe that in the long term it will result in efficiencies that reduce costs. In particular, we foresee reductions in the large fleets of salespeople trained merely to sell volume on traditional reach metrics. We foresee an array of carefully managed ad products that combine scalability with some degree of customization. Eventually, we believe the net impact will be higher sales productivity and increased span of control within the sales organization.
So where will this leave the traveling salesperson? Alive and well, with an advanced degree and a metaphorical suitcase packed with sophisticated tools.
1 FTI Programmatic Market Size Model (2016), with data inputs from IAB, Front Row Advisory, BIA/Kelsey, eMarketer and others
2 FTI Programmatic Market Size Model (2016)
Senior Managing Director