Lessons from the FT: Transitioning from programmatic ads to direct

In May 2018, the Financial Times (FT) took the decision to turn off open marketplace programmatic advertising (OMP). For those who don’t know, the “open marketplace” is where advertising is automatically bought (by brands looking to market their products) and sold by companies (website owners looking to make money from their content) via open auctions.

Turning off open marketplace programmatic in 2018 appeared a crazy decision - programmatic had just become the main method for trading digital media globally (70% of all ad spend) and it was a fast growing revenue line for the FT’s ad business (Campaign Live, 2018). However, five years on, it appears that decision has paid off. Since 2019 the FT has doubled its digital ads revenue and surpassed one million digital subscribers. Meanwhile, Joe Root (digital advertising expert) notes that open marketplace “no longer serves its purpose… publishers OMP revenue is in free fall, and brands are losing market share… Publishers are experiencing this trend with 25% year-on-year drop in OMP revenue in Q4 2022” (AdExchanger, 2023).

In this blog post, we will explore the FT’s decision to move from OMP to direct and the macro factors that are now forcing media organisations into a similar transition. If you’d like to learn more - make sure to sign up for our free webinar on November 2nd.

At FT Strategies, we know that this transition is difficult - how can you transition away from an important revenue source? If you would like to talk to us about this challenge - get in touch - [email protected].

There are a number of interrelated reasons why the FT took the decision to turn off open marketplace in 2018:

1. Privacy concerns - with GDPR coming into effect in Europe the FT were concerned about potential subscriber data leakage via ad exchanges. Given that FT are a reader-first organisation, it was non-negotiable that they mitigate this risk in the strongest terms.
2. Commercial resilience - FT felt that switching off open marketplace programmatic allowed the business to focus its efforts on direct, private marketplace, programmatic guaranteed and automated guaranteed deals. Within a year of making the change, FT managed to see private programmatic guaranteed deals rise from 5% to 70% of programmatic ad revenue.
3. The “long tail” - after analysing their ad buyers on the open marketplace, it became obvious that FT had a few valuable clients (who would need to transition to other buying methods) and a vast long tail (who would not be worth the effort). This client segmentation allowed FT to transition the most important clients to other buying methods while minimising the pressure put on sales teams.
4. Scarcity - although the open marketplace is a helpful place to sell leftover ad inventory (at relatively little cost), it also has the unintended consequence of devaluing your proposition in the minds of a media buyer. If media buyers know that they can get cheaper CPMs on the open exchange, they are less likely to come direct. It is worth noting that the FT, whilst on the open exchange held the same prices regardless of buy type to mitigate this risk.
5. Product agnosticism - programmatic typically works best for display advertising. FT are moving to a model that is product agnostic, believing that campaigns involving display, content, events (and others) have the biggest impact. Inventory sold programmatically is at odds with this.
6. Fake inventory - FT were hearing from clients that they were buying FT inventory for significantly below the floor price (which turned out to be fraudulent impressions). By turning off the open exchange FT helped reduce the likelihood of this happening.

Open marketplace programmatic revenue is in freefall as the availability of addressable audiences (those with data that can be targeted) has dropped to 30%. This is likely to drop much further as Google deprecates third-party cookies in its Chrome browser by Q4 2024 (AdExchanger, 2023).

This breakup of the existing ad supply chain plays into the hands of quality media organisations. In fact, it represents a major opportunity for media organisations to own their audiences' data, create direct and valuable relationships with advertising clients and take home 100% of what media buyers pay for advertising (rather than ad tech). That leaves many thinking that the open marketplace transition is not simply a revenue-saving activity, but an opportunity to grow revenue.

Another benefit of turning off open marketplace programmatic is that it gives media organisations additional control. Specifically it allows you to police:

• Your user experience - if organisations are serious about being “audience first” or having a successful subscription model, they cannot have large, slow, or disruptive ads which are at odds with subscriber expectations.
• Who is buying your inventory - if you have a policy on this (e.g. we will not accept advertising from gambling companies) then it ensures that you can adhere to it.
• The creatives that you accept - if you are concerned that misleading ad creatives could impact your audience in a negative way (e.g. greenwashing) then turning off the open exchange allows you to assess creatives before they appear on your site. This is becoming more important as the ASA cracks down on publishers.

There are plenty of actions that media organisations can take now to create a more resilient (and potentially growing) advertising business. That includes:

• Defining your ideal revenue mix (within and outside of advertising) and aligning your organisation to achieve that mix (e.g. objectives, incentives, team structure, investments).
• Building consented relationships with your anonymous users (by collecting email address or other identifiers) by creating a meaningful value exchange for their data.
• Working with media buyers to support them in achieving their goals - i.e. creating a relationship rather than facilitating transactions.
• Making bold calls that have your audience experience at the centre.

We will cover these topics in more detail during our webinar and in the coming months. If you want to learn more about how we can help optimise your advertising strategy to maximise revenue, please contact us here to arrange a call.

George is Head of Insights and Senior Manager at FT Strategies. Before this, he has spent the last four years guiding the FT’s data strategy as it balances revenue and risk. Most recently, he founded and continues to lead a cross-departmental FT team focused on the future of marketing & advertising in the context of restrictions on online tracking.