Programmatic advertising: Digital marketing's saviour or real-time headache?

Programmatic ad buying was supposed to bring clarity and efficiency to the process of planning and booking online display ad campaigns. So where did it all go wrong?

The term ‘programmatic’ applies to the automated buying of specific page impressions through real-time bidding (RTB). Advertisers nominate their budget and the attributes of the audience they are seeking to reach, and then enter into an automated auction service.

Programmatic online ad buying is part of the broader world of programmatic marketing, which includes a range of automated activities, such as the generation of targeted email in response to abandoned online shopping carts. Some implementations also include the dynamic optimisation of creative content to deliver more targeted offers.

For programmatic ad buying specifically, the benefit for advertisers is they have a better chance of reaching their preferred audiences, rather than wasting ads on non-target audience members. Publishers gain the benefit of a fair valuation for their inventory based on the quality and attributes of the audience they are attracting.

The downside, however, is that advertisers may lose control over where their ads are placed, which could potentially compromise brand safety. The level of transparency varies among programmatic offerings.

Publishers have also expressed fears that the use of real-time bidding – something traditionally associated with remnant inventory – will lead to a race to the bottom in terms of their ability to maintain the value of their inventory.

Older real-time bidding services have been quick to latch on to programmatic, to the point where the terms programmatic and real-time bidding are now being used interchangeably. Various specific forms of programmatic have also emerged, further clouding understanding of the practice.

The net result is that rather than delivering clarity and efficiency, programmatic has generated fear and confusion among several parties.

Seeking clarity

It is a problem that has been recognised by the Interactive Advertising Bureau (IAB) Australia, which is seeking to bring clarity to the debate on programmatic, and has called for greater transparency of inventory to reduce the risk to brand safety. According to IAB Australia chief executive officer, Alice Manners, it is important marketers see programmatic as something that is a long term and important addition to their online advertising capabilities.

“The challenge we have as an industry is we have these new and growing areas of digital, but they are viewed only as a silo, and they need to be viewed holistically as part of a client’s overall digital strategy,” she says.

When used appropriately, Manners says programmatic has the ability to overcome one of the greatest bugbears of digital advertising – the complexity of planning and buying a comprehensive campaign.

“In the early days, to run a digital campaign it took six to eight times more time than it would to run a television campaign, in terms of planning and booking,” Manners says. “And as CPMs come down and margins fall, you need to create efficiencies. And so one of the ways efficiencies can be found is through automation.”

While the IAB is not yet tracking the percentage of online ad spending being purchased through programmatic, Manners is sceptical of some of the measures touted within the industry.

“But it is growing,” she says. “There is acceptance, and as more of these initiatives come into play, you can see that growth continue. But for it to continue to grow there needs to be greater transparency.”

Programmatic has actually been available longer than you might think. Google unveiled its DoubleClick AdExchange in Australia in December 2010 and has been offering programmatic buying of display advertising since the launch of its demand-side platform, DoubleClick Bid Manager, in March 2012.

According to Google’s director of media buying solutions for APAC, Guy Gibbs, programmatic makes a complex and fragmented ecosystem manageable.

"The use of technology to automate media buying is a simple, efficient and effective marketing practice which enables a better return on investment.....that's why everyone is talking about it,” he claims. "Australia is very much at the cutting edge of the advancement in programmatic and we are seeing significant interest from agencies and advertisers across all categories."

Facebook has also offered programmatic through Facebook Exchange since June 2012, allowing advertisers to buy Facebook ad inventory that retargets users based on their online browsing history.

Programmatic has also spawned a variety of new services and providers. RadiumOne recently launched in Australia, signing ninemsn as its first official local publishing partner. Asia-Pacific managing director, Kerry McCabe, says his firm brings added value to programmatic through the data it collects on the sharing activity of web users, where it collects 60 billion actions each month. He says this is essential in finding audiences that are much further into the sales funnel.

“We are essentially an antenna for what content is shared and what people are interested in,” McCabe says. “What our ethos is about is using our own proprietary data and the client’s data to go and find audiences who are much higher in the funnel, and bring them further into the funnel using the data on content sharing and how they are interacting, rather than just being a retargeting supplier.”

Salesforce.com is also offering programmatic solutions through its ExactTarget Marketing Cloud service, which offers programmatic buying across Twitter and Facebook, with other publishers to be added later.

One of the most prominent programmatic services in Australia is offered by AppNexus, which was founded in the US in 2007 as a provider of real-time advertising solutions. AppNexus has been working with Mi9 for the past two-and-a-half years and has signed more recent partnerships with the specialist programmatic media agency, Xaxis (part of WPP’s Group M media buying and planning group) and Fairfax Media.

AppNexus’vice-president for Asia-Pacific sales, David Osborn, says all of the major agencies in Australia are already connected to the AppNexus platform, either directly through Xaxis or through their own technology partner.

One of the challenges for programmatic providers is that the term itself has become a catch-all phrase, but urges both sides to focus on the underlying benefits.

“If you are a marketer, the way that marketers think about programmatic is driving more efficiency on behalf of their clients, and being able to buy audiences at scale and drive better ROI,” Osborn says. “On the publisher’s side, publishers think of programmatic as a way to sell more efficiently, drive the fair value for the inventory by creating competition for different impressions, but equally to automate much of the transactional component so selling.”

His hope is that programmatic will free up the human side of planning and buying by getting both sides thinking creatively about getting the best results, rather than spending their time studying spreadsheets.

“I think the promise of programmatic is freeing up people – both marketers and media sellers – to be more strategic partners and have more strategic conversations,” Osborn says.

Mi9’s director of programmatic trading, Patrick Darcy, estimates between 15 to 20 per cent of his group’s inventory is now purchased programmatically, and says all major media buying groups are connected into his company’s trading desk. The decision to invest in a programmatic capability early has paid dividends.

“We certainly didn’t pretend to know it in depth at the time, but it was clear that this technology was very sophisticated and had immediate benefits for us from an operational efficiency perspective to be gained immediately,” he says. “It allows advertisers to make better use of their digital marketing budget through more informed buying decisions, because they can leverage their own data to inform the buying decisions, and in minimising wastage.

“Programmatic trading is relatively simple in a sense, because it is all about automation and just executing better. Now we want to move very quickly into automating more of our business, and having programmatic trading underpins everything we do.”

Darcy says achieving the current levels of programmatic buying has meant overcoming advertiser fear and confusion, particularly relating to brand safety. While Mi9 was initially able to offer only limited transparency as to where ads would appear, Darcy says the goal is to eventually achieve 100 per cent transparency across all inventory.

One advertiser that has embraced programmatic wholeheartedly is Telstra. Omnicom Media Group agency, OMD, has implemented a dedicated trading desk for Telstra. Additionally a team of six people from DDB, Telstra’s creative agency, sit within OMD to perform creative optimisation and copywriting changes in the ads based on the results as they are coming in.

The chief executive officer of Omnicom Media Group for Australia and New Zealand, Leigh Terry, says automated buying is only part of the solution.

“It is all very well and good having real-time optimisation of media, but if all you are doing is optimising four messages there it is only giving you a percentage of the benefit, as opposed to being able to create new messages right then and,” Terry says.

The experience with Telstra leads him to believe that publishers’ fears of diminished value for inventory are unlikely to manifest.

“The value of programmatic is better, deeper targeting that therefore allows you to reach your audience with less wastage,” Terry says. “Where a lot of the attention has been around making it cheaper – and therefore media owners are scared that it is a race to the bottom – the reality is that for stuff that works, you end up paying more, because you know it works.”

He expects the only publishers to be negatively impacted will be those offering poor quality inventory. “For those audiences that are of genuine value, and therefore of benefit to the client then what we have seen is the CPMs against those can go up quite considerably,” Terry says.

Omnicon has worked closely with clients and publishers to set stringent terms and conditions to ensure brand safety. But he doubts some of the issues that currently existing regarding programmatic buying will ever entirely go away.

“When ads are being planned and bought in milliseconds across thousands of different websites there is always going to be come element of risk, but the reward is significantly outweighing that risk for advertisers,” Terry adds.

There are an additional 70 clients buying programmatically through Omnicon’s wider agency trading desk, and Terry estimates between 10 and 20 per cent of ads are now bought programmatically. He expects that to rise above 20 per cent by the end of this year.

“Some are dipping their toe in the water, some are making it a much bigger proportion of their digital spend,” Terry says. “A lot of the more advanced ones are seeing it as a precursor to when a lot more of the offline media pie becomes digitised.”

Terry’s long-term vision is for programmatic to apply to a much wider variety of media, especially IP television.

“There is no reason to think that TV couldn’t be sold programmatically,” he adds.

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