• by Skip Brand , January 7, 2014

John Battelle, founder/CEO of Federated Media, saw the rise of programmatic coming from a mile away. Back in 2010, he realized that the number of people directly involved in selling largely undifferentiated display media was going to decline dramatically. At the same time, data about publishers’ inventory was increasingly in the hands of the buyers, but not the sales force. In fact, that data was more likely than not owned by middlemen, leaving the publisher with no control.

Given this situation, Battelle reasoned, publishers needed an automated platform to give them back control of their data.

It turns out, that’s exactly what happened, in particular with smaller publishers.

Federated Media realized that it was going to be much harder to sell inventory to a buyer based on traditional publishing sales tactics. “It was clear to me that the only way that you could truly differentiate advertising inventory was if you had the data to prove it was actually uniquely differentiated,” explains Battelle.

With the rise of DSPs in 2010, Federated Media decided to acquire its own supply-side platform and exchange, Lijit Networks. “It mitigated the downside risks of the business we were in, which was selling direct-sold media that was increasingly being valued by data we did not have control over,” explains Battelle. “I knew those trends were coming, and Lijit Networks was the obvious candidate for us. It was also a match in terms of the kinds of publishers that they were working with because they were, and still are, mainly small sites with less than 100,000 page views a month. So we’re talking about the long tail. It was a sort of a programmatic version of the independent Web.”

The independent Web, as Battelle explains it, has very high order engagement, but to get to the point where that value is understood, appreciated and leveraged requires a technology stack capable of fighting back the natural arbitrage in a programmatic environment.

Battelle says the online publishing landscape is made up of three tiers: 1)Google, Facebook, Twitter, LinkedIn and Amazon -- companies that have a massive amount of first-party data differentiation; 2) well-known publishers, like the New York Times, with the resources to stand up their own technology operations to understand their audience data; and 3) smaller niche sites with fewer resources, which are undercapitalized, said Battelle.

Federated Media is banking on the third tier of publishers. “Marketers who may end up on those smaller sites are not fully aware of what kind of branding they might execute there, because they don’t have all the data they’d like to have,” explains Battelle. “I see an enormous opportunity… to liberate that data in such a way that the publishers -- and marketers -- gain value from it.”

Battelle says that buy-side clients are starting to embrace programmatic and automated marketing tools. In 2010, Federated Media believed that programmatic would take over, but that idea was hard to prove. Now there are widespread examples. For instance, Target and Proctor & Gamble are adopting programmatic buying. Additionally, IPG recently declared a goal of allocating at least 40% of its media-buying budget to automated media by 2015.

2014 is going to be the year that brands start to demand better tools, which allow them to reach their audience across multiple channels in the programmatic environment, including those channels that aren’t always easy to reach. “I think 2014 is the year when brands say, ‘Look, we know there’s a lot more value than just direct conversion out there. We demand tools that make it possible for us to do this at scale,’” concludes Battelle. Battelle and Federated Media are unlocking more value for publishers and the independent Web with the power of data for the programmatic world.