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TL;DR

MarTechExec Takeaway

“Programmatic buying has only taken baby steps so far and yet it has revolutionized the advertising industry. As it matures it’s set to do even more.” — Lana Moore, Executive Editor at MarTechExec (@martechexec)

Definition:

Programmatic advertising is the buying of digital ad space using software. It uses machines to buy ads to make the process more efficient and to reach larger audiences.

Guiding principles:

Programmatic advertising is like gardening.

With a garden, you don't simply throw flowers on the ground and expect them to take care of themselves. You plant them, water them, nurture them. You decide on a good place in your yard where they have the best chance at thriving.

The same goes for your programmatic ads. They need attention and care, and to be placed in the right areas for them to flourish. And like gardening, it's important to note that for marketers and programmatic advertising:

  • There is  no middle ground  — you either love it or hate it.
  • Data is good, but not that good — don’t rely too heavily on it.
  • Maintenance is key — or else you’re risking brand safety.
  • Know where to appear or not appear — use a whitelist/blacklist system.

Terms you should know if you're doing or thinking about programmatic

Programmatic has a lot of moving parts. Before we can dive in deep, let's start with a refresher on some key programmatic terms.

  • Ad blocking — the use of software by users to block ads from appearing on domains.
  • Ad exchange — a virtual marketplace that facilitates the selling and buying of advertising inventory, typically through real-time auctions.  
  • Ad server — technology that helps publishers, networks and advertisers with ad management, campaign management and ad trafficking.
  • Blacklist — list of domains that advertisers do not want their advertisements placed on.
  • Demand-side platform (DSP) — an automated buying platform that allows advertisers to place a bid on and purchase display ad inventory through a single interface.
  • Header-bidding — sometimes called pre-bidding, this refers to a technique where a publisher offers inventory to multiple ad exchanges at the same time before placing calls to their ad servers
  • Over-the-top content (OTT) — this refers to the delivery of TV and film content through the internet (streaming) rather than through a cable or satellite TV service.
  • Programmatic direct — a guaranteed buy that has a fixed rate that was negotiated with directly with the publisher.
  • Private marketplace (PMP) — an invitation-only auction that uses programmatic advertising. Select publishers in the private marketplace sell their ad space and the price is dynamic - based on the auctions that happen in real-time.
  • Real-time bidding (RTB) — an open auction where the ad space is unreserved. The price is determined through the open auction using technology that involves SSP and ad exchange.
  • Supply-side platform (SSP) — technology that allows publishers to manage their display ad inventory through an automated platform — filling inventory with ads and receiving the revenue from ads.
  • Viewability — viewable impression measurement of ads.
  • Whitelist — domains that advertisers permit their ads to be placed on.

Back in the day, when ads were hot(wired)

Let’s go back to 1994. The internet was unexplored terrain. Marketers and advertisers had yet to discover the potential to reach an audience online. That is, until October 27 of that year when AT&T ran the digital world’s first banner ad on HotWired.

Back then, banner ads were so new that it had a click-through rate (CTR) of 44 percent.

Including this awesomeness:

That CTR is an unheard of number today. In fact, a recent study shows that in 2017 the average display advertising fetches a CTR of 0.05 percent across all platforms. You could say things have changed.

When ad programs became automatic, it turned programmatic

(I wonder if anyone else besides me wants to yell "Why it could be Greased lightning!" whenever they see or hear the term programmatic?)

In the days of AT&T’s first banner ad, ad buying was as excruciatingly slow as your internet connection. The traditional media buying method involved written insertion orders, phone calls, and manual targeting. This was a painfully slow process. And the need to create a more efficient system is exactly why programmatic advertising came about.

Programmatic is an automated system that takes the information you give it — data points — and makes your media buying decisions for you, rather than you doing it manually.

The most impressive part about all of this is that it happens in the fractions of a second it takes to load a webpage.

Why marketers and brands love programmatic advertising

When you look back at the way media buying for online spaces used to work, it’s easy to see why programmatic display ad spending is predicted to reach nearly $33 billion dollars in 2017. But programmatic advertising has brought more to the table than just the removal of paperwork and manual media buying.

It's more efficient

Rather than going from site to site, determining if it fits with your campaign and sending out insertion orders, programmatic gives marketers a single platform for buying ad inventory. The marketers get access to a complete ad inventory from that single platform thanks to the fact that the platform is connected to several ad exchanges.

More than just making the process faster, however, programmatic allows advertisers to spend more time focusing on the strategy of their ad campaign and the actual creation of the ad. It also makes it easier to optimize the campaign in real-time.

It has an expansive reach

Using this platform that has access to several ad exchanges provides advertisers with a much greater reach potential than they had with traditional advertising. And once that advertisement is being delivered to all those sites you are able to track the reach instantly. You can see how many people have looked at it, where they were when they looked at it, what time it was, etc.

This ability to see your reach instantly makes narrowing down who your audience is an easier process and allows you to further optimize how and where you reach them.

Real-time metrics means faster insights

You’re gathering a lot more data than just who is viewing your advertisement. It’s viewability, CTR, etc. are all in front of you in real-time. This allows you to draw insight on your campaigns much faster.

Based on the conversion you’re looking for, you can see how successful the ad is and tweak it accordingly.

Getting your budget in check

Increased efficiency, a better reach, and access to real-time data and insights all result in higher quality leads. The higher quality leads and the optimized ads, in turn, will push down the cost-per-click (CPC) of your advertisements. This means an increased ROI for your ad campaigns.

“Display and video programmatic advertising will be more accountable and campaigns will become specific KPI-driven. Brands will want to understand what the ROI is from the campaign, and move away from impression metrics.” — Boaz Cohen, Chief Product Officer at Clinch

Why marketers and brands hate programmatic advertising

Programmatic is still a fairly new technology. And new technology always has bugs that need to be worked out. For some, these hiccups are enough to make them back away from programmatic buying.

Ad fraud is still plaguing the industry

Some advertisers view programmatic as money lost due to ad fraud. The issue with ad fraud has been a growing concern for marketers and not without reason. A recent study showed that 35 percent of U.S. programmatic ad impressions were fraudulent in the first quarter of 2017.

Bot traffic, ad stacking and pixel stuffing are the main culprits behind ad fraud, and the industry doesn’t yet have a consistently effective way to combat them. So for those who feel the effects of ad fraud outweigh the benefits of programmatic, it just doesn’t seem worth it.

Might AI be the answer? Check out The Impact of AI on Modern Marketing.

It's a risky business

Ad fraud isn’t the only thing giving programmatic a bad name. The lack of transparency and accountability means many marketers view programmatic as a risky tactic.

Where did they come from, where did they go?

Transparency might be the biggest issue with programmatic buying. According to eMarketer, over 60 percent of U.S. ad agency professionals are not satisfied with the quality and transparency of their inventory sources.

Many programmatic deals are non-disclosed. A recent report has shown that many marketers are now calling for more transparency. If the demand is met, this may resolve the issue.

Hold yourself accountable

Only 41 percent of marketers fully understand the ins and outs of programmatic advertising. When you look at that number, it’s easy to see why marketers have anxiety about the use of programmatic.

Part of the problem is the gap in knowledge. In order to alleviate some of the anxieties around programmatic, marketers need to expand their knowledge and take greater accountability for their part in the process.

How do you use programmatic the right way?

A common error many marketers make with programmatic is jumping in without knowing what exactly they’re doing. In fact, a recent study illuminated just how little most advertisers know about what they’re buying and the ROI on their programmatic buys.

Programmatic needs to be handled in just the right way in order for you to see a real benefit from it.  

Give your ads some TLC

It’s easy to think of programmatic advertising as a machine that’s simply running its processes and getting everything done for you. And, in a sense, that is what programmatic advertising does. But it’s much more complex than asking Google to calculate 2+2.

You need to know what sites your ads are being listed on. There’s a couple of ways to accomplish this.

  • Whitelist — pick the best places for your ad to be displayed.
  • Blacklist — if you have sites out there that you absolutely don’t want your ads running on, such as a fake news site, you can let the system know with the help of your handy blacklist.

It’s this careful nurturing of your programmatic placements that will benefit you the most, not programmatic alone.

Watch them like a hawk

You can’t just send an ad out into the great wide web and let that be that. You need to keep a constant eye on how they’re performing. Not only will this help you ensure your ads are running on websites you feel are appropriate for your brand, but it should also help cut down on ad fraud.

Ad fraud can be tricky to identify, but monitoring your ads makes it a lot easier. Know the metrics of your sales funnel at each stage and monitor your ads against those metrics. This helps you notice when impressions, clicks, and CPC are fraudulent.

Use data and AI as a lens

Data is amazing, but you shouldn’t blindly follow the numbers. Relying heavily on data and AI is a common theme in the digital advertising industry. Bots do a lot for us, so it can be easy to just want to leave them to it. However, bots can’t answer the important questions:

  • Is this a fake news site?
  • Are these fraudulent ad clicks?

The bot doesn’t ask or answer these questions. It just collects the data and does what it’s programmed to do. You need a system in place that checks the data and the work that the bots are doing. Put in the due diligence to monitor and nurture (remember those points?) what your programmatic advertising process is working on.

To get the best results out of programmatic advertising you need to combine your knowledge and experience with the tools available.

The evolution of programmatic in 3-5 years

Programmatic is still going through the growing pains of a new technology. In the next 3-5 years, it will have matured, that’s a guarantee. The question is — how will it mature?

We asked experts to share their predictions with us and noted four commons points among their responses:

  • Improved transparency
  • A more customized experience
  • Changes in ad spend
  • Over-the-top content (OTT)

Seeing clearly for the first time

“The issues of transparency that plague advertisers today will eventually be a thing of the past. Innovations, ad networks practices and publisher disclosure will open the data flow through the supply chain. This will also uncover the middle-man ad networks that offer little to no value in the industry. As a result, the market will consolidate to a smaller number of ad networks.” — Kean Graham, CEO at MonetizeMore

“We’ll see greater transparency, a shrinking of the middleman market, wide adoption of header bidding, and emergence of blockchain tech.” — Kristoffer Nelson, COO at SRAX

“Programmatic buying platforms will evolve to better service the buyers of new formats and to aggregate digital video supply from multiple platforms (Web, OTT, DOOH, etc). Demand side players will also insist on supply chain optimization/transparency and inventory authenticity (no fraud) and quality/viewability guarantees.” — Michael Nevins, CMO at Smart Adserver

"Transparency will shift from a nice-to-have to a need-to-have. Marketers have hundreds — even thousands — of partners that touch their ads before they actually are displayed on a website or device. The challenge is adding transparency to the process: making sure your partners are legitimate actors and that you’re avoiding fraudulent traffic." — Anudit Vikram, Senior Vice President, Audience Solutions at Dun & Bradstreet

"Things are already moving in this direction, but in 3-5 years’ time, we should be in a much more transparent world, where buyers know what they’re buying and whom they’re buying it from." — Rick Abell, VP of Global Publisher Development at Exponential

Pick your fighter

“As AI and predictive analytics become more robust and accessible across the marketing stack of applications (CMS, CRM, Email, Paid Ad Management, SEO, Video, Content Creation and Distribution, Social Media, Listening and Analytics), display advertising will evolve into a more dynamic and highly customizable web experience — automatically serving unique ads with variable content at every level based on user data and behavior.” — Matt Garrepy, Chief Digital Officer at Solodev

“Over the next few years, as the tools to create them become more accessible and easier to use, programmatic will become a more user-friendly platform that will allow for brands to access and do it all on their own.” — Darren Easton, VP and Creative Director at The Cyphers Agency

“We will continue to see a tightening connection between the CRM/Point of Sale data and the DSP. This stronger connection will allow marketers and DSPs to optimize towards a deeper metric that represents the true value of the customer.” — Chris Paquette, CEO and Co-Founder at DeepIntent

“Programmatic advertising offerings are becoming less one size fits all and better built specifically for the customers they serve. For instance, programmatic advertising for B2B marketers is moving away from a reliance on limited or out-of-date cookies in favor of more inclusive and up-to-date IP targeting.” — Greg Wasserstrom, Digital Media Strategist at MRP

Check those spending records

“We will see a continued shift with publishers directly integrating to programmatic platforms in order for them to capture the shift in ad spend.” — Jeff Chi, COO and Co-Founder at Krush Media

“Once a shared and trusted record of ad consumption capability becomes broadly available, media buyers will come to demand that level of accountability be factored into their pricing models.” — Areiel Wolanow, Managing Director at Finserv Experts

Going over-the-top content (OTT)

“Cord cutters will become the norm, and younger "cord nevers" will start to drive more consumer spending. This means publishers need to invest in quality OTT experiences and advertisers will need to understand how it fits into their buys." — Christiana Cacciapuoti, Director of Client Success at MadHive

"The big forcing function here will be the growth of OTT and other forms of advanced TV that operate a lot like digital from an advertising perspective (audience-based vs. contextual buys, precision targeting vs. broad demos).” — David Wiesenfeld, Chief Strategist at Tru Optik

“[Programmatic] is just the technology allowing for the real-time purchasing of advertising.This is already affecting the world of TV where more and more money is flowing into online video where advertising can be bought in real time with a data layer over the top.” — Robert Weatherhead, Digital Marketing and Advertising Consultant

“What we will see is the spread of programmatic buying and selling to emerging channels like digital out of home, connected TV, and ultimately, broadcast TV. Essentially, any media that can be digitized will be available programmatically.” — Neil Shapiro, Vice President of Digital Sales at Captivate

When programmatic is all grown up...

Programmatic has made digital advertising more efficient/easier for marketers to gather data and optimize. In the future, experts believe it will continue to help them customize ads for their target audience and with the improved transparency, they will be able to eliminate the pesky ad fraud and viewability issues that hang around.

If this vision is brought to fruition, advertisers have the opportunity to discover an entirely new niche that they weren’t already leveraging, making programmatic even more valuable than it is today.

"Programmatic will be more about outcomes as opposed to simply audience and scale." — Jed Lambert, Senior Vice President of Programmatic at AdColony