Programmatic advertising is creating quite a buzz at the moment, but what is it? And how can it benefit your business? Our Regional Director, Brian Prescott, investigates.
TV adverts were, and still are, shown at the time of the day your brand’s target demographic is likely to be watching. That’s why you find adverts for payday loans and accident compensation offerings in the middle of the day, while beer commercials are generally reserved for post-watershed.
Programmatic advertising (PA) uses the vast amount of data available online to take this targeting the next level.
PA is set of precision technologies that have been developed to identify and track specific groups of people across vast media networks and serve them personalised marketing messages at the optimum time and place when they are likely to respond.
Usually this means web page ad display, although PA is rapidly moving into other media sectors such as TV channels, video platforms, outdoor and more.
Google’s Adwords is a similar system: business advertisers can set budgets and bid in a semi-automated fashion. In that respect it operates with a good deal of human intervention, although some features do work on a wholly-automated underlying process.
Ultimately, Adwords targets search activity rather than aiming at individual user groups based on a more complex analysis of their behaviour, and the ads are generally branded display ads rather than text.
For Adwords, quality score and relevance also tend to have an impact on ad position, whereas this is not a relevant factor in programmatic advertising as it is more focused on targeting the right people at the right time, rather than locating a relevant search display space. In that respect, PA is more like hunting a specific type of quarry than setting traps and seeing what walks in.
Admittedly, it looks similar, although everything leading up to the point of the ad being served is very different from traditional banner advertising. Space-wise, it is replacing the banner approach: traditional banner advertising has become very inefficient as clickthrough rates have typically plummeted to fractions of 1%.
The main enablers for PA have been the tools developed to manage and interpret trends and relationships through analysis of “big data”. Ad buying decisions are made through algorithmic interpretations of relationships based on the behaviours, actions and interests of audiences across millions of datapoints. Because of this capability marrying up the right ad with the right space is getting more and more accurate.
Google’s ad-serving technology and algorithms were very much the forerunner of programmatic approaches. Extensions of the same technology enable auctions to be held, the successful bid to be determined and the appropriate ad to be served during the time it takes to load a web page into a browser (a fraction of a second).
Google’s Adwords and DoubleClick’s display adservers are the immediate ancestors of modern PA systems. WPP’s Xaxis has taken audience targeting to new levels in evolving towards PA systems.
In essence, programmatic advertising needs two components: vast target audience data; and the software and algorithms to interpret that data and buy space based on a predetermined budget. All PA approaches involve automated buying such as real-time bidding (RTB).
Imagine you have a robot that can buy everything you need really quickly on eBay at the cheapest price possible and have it delivered only when you are in. The robot can only do that if it has the data to interpret all those factors. All PA approaches boil down to the same things: the technology available now affords greater speed, efficiency and accuracy than is humanly possible.
Cheeky! - that’s two questions. Theoretically, programmatic approaches should save money through better targeting (less wasted effort) and removing much of the paid human effort thereby producing more efficient transactions and lowering the cost of customer acquisition.
Saving money: Programmatic advertising should save money
In reality, the time freed up will probably switch to creative execution and campaign planning as marketers are freed from the tedious low value, heavy lifting activities associated with traditional ad space booking. Up until recently it has been incredibly expensive to practice PA, but all that is beginning to change very quickly.
Quite a bit, I’m afraid. Business owners and marketers will need to become more technically savvy in order to have meaningful conversations around data, technology and inventory strategies with suppliers. When many smaller businesses struggle with a basic understanding of Google Analytics, there may be some way to go in educational terms which means opportunities for trusted advisors to step in and help to fill the gap. So here’s a short bluffer’s guide:
Ad exchanges enable auction-style transactions in media inventory. Considerations here might involve bid price, network reach and type of individual and the optimisation of each.
Real-time bidding is one method used here, whilst some buyers and sellers might interact through a private marketplace - a closed exchange environment specifically for premium media inventory.
Demand-side platforms (DSP) act as central hubs that can give an overview of multiple data sources and media inventory to help with management, reporting and optimisation. So to get into this you need access to a DSP though an agency or other access provider.
For many larger corporations this is a practical payback for the massive punts they have made on big data technologies over the past decade. That investment can now be focused on removing waste in ad spending as a result of the step change in targeting capabilities that the technology provides.
For some, it promises huge efficiencies (and potentially heralds the end of agency relationships) as customer knowledge is held increasingly in the business. For businesses prepared to engage with the learning curve, the effects will probably be similar to those experienced by the early adopters of Adwords.
The market is still in its infancy, although estimates indicate that in the US it accounted for around 20% of the overall digital advertising market in 2014, or roughly $10bn (Advertising Age) and is predicted to exceed $14bn this year - so it is growing rapidly.
It accounted for almost half (47%) of UK display ads in 2014 according to the IAB. Whilst this sounds like a lot, it is estimated (Forrester) that whilst most marketers are currently aware of the term, only about a quarter of them actually understand what it means and are actively executing campaigns using the technology.
Whilst some of the larger global brands have already set up their own trading desks for programmatic advertising, smaller businesses entering the programmatic space will probably be reliant on agencies for access to programmatic ad buying.
For most businesses it really isn’t going to make economic sense to handle all aspects of the process internally. Demand-side platforms give buyers direct bidding access to multiple sources of inventory. All the major DSPs including Rocketfuel, Criteo, Turn, MediaMath, Invite Media and Appnexus buy from the OpenX ad exchange. Opening up this market to small businesses is the next frontier.
Step forward the Self-Serve DSP. Businesses such as SiteScout are emerging, enabling RTB access for small business users starting with an initial investment of only $500. Small businesses may well need to tap into third-party data sources to improve targeting and this puts an increasing onus on marketers to understand audiences in depth. The more you know about your target audience, the more you can leverage the power of these systems to stretch budgets and realise the benefits.
Transparency is difficult to achieve due to the complexity inherent in the process. This has led to agencies, in particular, coming under fire for not passing on the benefits, often as a result of being tied into their holding company systems and therefore unable to shop around for the best deal for clients.
A clear view: Transparency can be difficult to achieve
With estimates of anywhere between 17% and 29% of all paid clicks being fraudulent being bandied about, detection is improving, and with better targeting the theory is that fraud rates should decrease. There doesn’t seem to be any reason to think that fraud will worsen due to PA.
Of course, programmatic advertising is one part of a larger marketing strategy. To assess your current marketing performance, why not take our free Marketing 360 Healthcheck? For regular news and updates, follow us on Twitter and LinkedIn.
