Programmatic Advertising: Is This Its Year?

Programmatic media buying is no longer a foreign term in marketing. eMarketer reports US programmatic digital display ad spending will reach $39.10 billion and comprise over 81% of digital ad spending by the end of 2018, and increase from there. That’s a significant increase from its $9.9 billion reach in 2014. 2017 was widely referred to as “the year of programmatic,” but as digital spend continues to increase annually, we may find ourselves continuing to ask: is this its year?

If you’re reading this, you already know that programmatic media buying uses AI and other technology to automate the purchase and placement of advertising. Not only does the technology replace time-consuming manual ad buying activities, it results in a better return on investment over time as the AI learns which audiences and publishers deliver the best results for your brand. But what you may not realize is programmatic isn’t limited to just display advertising on websites—it’s increasingly used for cross-channel marketing campaigns, in-email ads, mobile advertising, and video as well. In fact, nearly 80% of mobile display ads in the U.S. are purchased through programmatic, which will increase to around 85% by 2019.

Programmatic has become the data-driven marketer’s not-so-secret weapon in the fight for consumers’ attention. By tailoring the ad it serves up to the individual receiving it—rather than one static ad shown to all visitors—it puts your customer data to use to increase your ability to convert customers with the right message at the right time. Best of all, through the process of optimizing your ad spend, your campaigns are able to evolve and course-correct over time as they collect real-time metrics and conversion insights.

A Brief History of Programmatic Media Buying

 1994, shortly after the Internet had its first graphical interface, the first banner ad appeared on the Hotwired website. By 1996 digital ads were commonplace on any website with even a modest amount of traffic. Brands quickly found themselves overwhelmed with tracking their digital ad placements and spend. Enter the era of Doubleclick and other ad platforms that intended to make the experience more streamlined for the brand ad buyer. Now, brands could manage their entire digital advertising portfolio in one dashboard.

Ad networks remained the primary tool for digital ad buyers until the launch of Google AdWords in 2000, followed by the launch of the iPhone in 2007. Suddenly, the web-centric ad networks were just one of several tools brands had to use to manage their digital ad spending. 2005 saw the launch of several ad exchanges, which then led to the creation of demand-side platforms (DSPs) to manage the inevitable multiple ad exchange and data exchange accounts.

In 2014, Google Doubleclick research found 65% of marketers considered programmatic when planning their marketing campaigns. At that time, Google also found that transparency was a primary unresolved issue the industry needed to address for programmatic to take off. Specifically, 73% of marketers/agencies would purchase more if there were greater transparency in the buying process. And that desire for transparency went both ways, with 70% of publishers willing to sell more if they could see who’s buying from them. Further, 80% of marketers would buy more if there were greater emphasis on quality of viewable impressions. This demand was addressed in the programmatic sphere largely through the widespread adoption of private exchanges.

The Current State of Programmatic

No technology is without its challenges, and programmatic media buying is no exception. The industry continues to be plagued with complaints of bots and other ad fraud. Then there’s the loss of control over where your ads may end up—such as on YouTube videos that aren’t aligned with your brand message. Programmatic exchanges are working to address these and other issues, keeping them from derailing the growth of programmatic. Additionally, a number of new tools and vendors have emerged to address this and related brand safety issues.

Brands need to ensure good brand/publisher fit, and must ensure tight control over their data, especially with GDPR on the horizon. Few marketers—other than the biggest brands—have the budget to build their own digital agency in-house to manage their programmatic buying. Instead, most marketers work with their digital agency to identify trusted vendors and exchanges that can provide the level of transparency and the breadth of publishers that meet the brand’s objectives.

These challenges have been outweighed by the results programmatic is driving for marketers. Consider these recent data points on how marketers are currently growing their use of programmatic:

  • 74.5%, or $24.25 billion, of US digital display ad dollars transacted programmatically is spent through private exchanges and programmatic direct relationships.
  • 65% of B2B marketers planned to buy or sell advertising with programmatic in 2017, up from 54% using it in 2016.

With growth metrics like these, programmatic has finally hit the tipping point—2018 can indeed be called the “Year of Programmatic,” after years of hype over its potential.

Today’s Big Players in Programmatic

Programmatic media buying has become commonplace for major retail and CPG players, driving increased advertising effectiveness and revenue. Some of the standouts include:

  • Kellogg Company has a strong internal programmatic team and both partners directly with select publishers and uses the Google Doubleclick network. Through the latter, they reported increased viewability rates to over 70% and improved targeting by 2-3X.
  • KLM not only has decreased cost-per-booking by 40%, their smart use of their data management platform, Relay42, has helped increase both revenue and customer engagement.
  • L’oreal, the third largest advertiser in the world, started working with programmatic in 2014. Taking a hybrid approach, working both with Google DoubleClick and specific publishers, they’ve found combining display with their first-party data has increased engagement and conversion rates.
  • Netflix is notoriously obsessive about testing its marketing, which makes programmatic a natural fit. They brought their programmatic ad buying in-house in 2013, and according to Index Exchange, Netflix was the top in-house spender on that exchange in 2016.
  • Procter & Gamble, the world’s largest advertiser, set a goal in 2014 to spend 70% of its digital budget programmatically. More recently, Mark Pritchard, P&G’s chief brand officer, has called for publishers, ad networks, and brands to work together to develop the next generation of ads, taking a “mass one-to-one marketing” approach.

While many of these big programmatic spenders have internal teams and agencies managing a complex web of one-to-one publisher relationships, most are also using one or more demand-side platforms.

Major DSP Players

  • The Trade Desk
  • Amobee
  • MediaMath
  • DoubleClick Bid Manager

DSPs are vital partners for advertisers in the quest to spend their budgets effectively. They provide necessary insights about impressions and conversions—allowing advertisers to make decisions in real time about how to target users across multiple channels (including mobile, social, search and video advertising). According to G2 Crowd, the “best” DSPs are determined by taking into account a platform’s customer satisfaction ratings and scale—something to keep in mind for those who are looking to make them a part of their strategy. But market leadership (based on scale and ratings) may not be the only thing to look for when selecting a platform; up-and-coming solutions may lack the reach of the more established DSPs yet provide the kind of service that works for certain advertisers. To get a feel for the right DSP for your organization and goals, ask your peers for their perspectives on the DSPs they’ve worked with before you sign a contract.

Choosing the Right Programmatic Partner and Buying Options

With dozens of ad tech platforms in the industry specializing in different programmatic offerings, it can feel overwhelming to kick off a programmatic media buying program from scratch. If you’re just beginning your foray into the world of programmatic and are looking for help with your decision-making process, here are a few things to consider:

  • Can you find talent in-house to manage programmatic, or do you need a third-party to manage most of the day-to-day? If your internal marketing resources are already stretched across your deliverables, a higher-priced all-inclusive service can be more cost-effective than hiring an additional employee to manage programmatic.
  • If you’re using multiple platforms to buy your media, are you using an ad server to centralize all your performance data? Programmatic results are only as good as the data that goes into making the buying decisions. If you aren’t using a centralized ad server, you may need to assign additional resources to normalizing and analyzing data manually.
  • Are the partners you are currently considering working with transparent about the cost of the media versus their management fee? Beware the all-inclusive rate. If it’s not clear how your partner is making their money, it’s likely you are paying based upon your advertising budget‚—not on the value they’re providing. Make sure you understand service providers’ pricing from the ad rates themselves to the management fees.

With the answers to these questions in-hand, it should become apparent which type of programmatic approach is best suited for your brand and budget.

Five Places to Spend Your Programmatic Dollars Today

Once you have the right programmatic resources in place, here’s where to focus your programmatic spending:

  • Data-driven creative. With the bulk of programmatic spending being targeted to display ads, it’s clear that they should be part of your mix. But it’s a better use of your budget to take them further than static creative. Through dynamic creative optimization (DCO), you can optimize your message and creative to significantly increase engagement. When combined with your rich proprietary data, you can serve up—and test—automated personalization that reflects recent browsing history or even geolocation. These tactics will help ensure you’re not one of the marketers Forrester estimated will waste $10.9 billion on low-quality display ads between 2016 and 2021.
  • Mobile. 50% of marketers use programmatic for buying smartphone inventory. With the average consumer using their mobile devices five hours per day, it’s a good fit for the targeted advertising programmatic enables.
  • In-stream or out-of-stream video. In 2016, more than half of all U.S. digital video ad dollars were spent through automation. By the end of this year, that number is expected to grow to almost three-quarters of all video ad dollars coming from programmatic spend. With the ability to buy audience and not just time or platform, programmatic can have a significantly less expensive CPM than other direct video advertising placements.
  • Native ads. In an increasingly mobile world, advertising needs to be relevant to the content with which the consumer is voluntarily engaging. When served up through programmatic and taking into account the viewer’s online activity and location, native ads are often seen as related content, not as an intrusive advertisement. This is especially true on social platforms. Some New York Times native ads have seen click-through rates increased 6X compared to equivalent banner ads.
  • Programmatic guaranteed deals: Much like traditional reservations, guaranteed deals help advertisers execute higher value and premium campaigns on a negotiated (fixed) price. The true benefit comes from giving marketers greater levels of control: over how to customize messaging, and over which segments of their list do (or do not) see their ads—as well as the frequency at which those ads appear. It’s not difficult to see why in 2016 one of every two dollars spent on programmatic advertising was running through a direct deal—and that number just keeps growing.

These proven programmatic media buys should make up the core of your programmatic program.

The Two Next Big Things in Programmatic

Next Big Thing in ProgrammaticAlthough the possibilities with programmatic are endless with the rise of virtual home assistants and IOT-enabled devices, there are two programmatic trends that seem poised to be the next big thing:

  • Connected TV. 168 million people watched connected TV in 2017, and that number is only expected to grow. Programmatic allows advertisers to reach “cord-cutters” (those who have totally gotten rid of cable–or who never signed up in the first place) in a much more targeted and effective way than traditional television advertising, due to its ability to layer audience data and measure audience engagement.
  • Digital out-of-home. Only a small portion of the $2.7 billion digital out-of-home spend comes from programmatic today. But out-of-home is projected to grow almost 12% in spend by 2020–faster than other traditional media channels—with programmatic expected to be a primary driver of this surge.

Don’t Miss Out on the Programmatic Future of Advertising

If you’re not using programmatic to manage your advertising buys, chances are you’re paying more than you need to, and potentially not targeting as effectively as you could be.

One way to get your innovative ideas flowing and hear first-hand how other marketers like you are evolving their programmatic programs is to connect with other local digital marketers. Don’t get left behind—start your programmatic journey today.

What's Next?

Want to know more about how our clients have benefitted from Point It’s programmatic expertise? Check out our case study about the work we did with AT&T, “Programmatic Bridges the Data Gap.”

Priya Kapoor About the author
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