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What is programmatic advertising, and why does it matter?

What is programmatic advertising, and why does it matter?

Monday, September 07, 2015
Mike Fantis

In the beginning, there was display advertising. Then came real-time bidding (RTB), and more recently we’ve seen the arrival of programmatic. ‘Programmatic’ has been the buzz word of the online ad industry in recent years, but surprisingly, many still fail to agree on what it actually stands for. If seasoned industry experts have been unsuccessful in reaching consensus, it’s no wonder that many brands and businesses (i.e. buyers) remain a little confused. Advertise with us So, let us attempt to explain ‘programmatic’ in layman’s terms… ‘Programmatic’ advertising refers to the use of software to automate the purchasing of online advertising. Traditionally, digital ads were bought and sold by human ad buyers and salespeople, via human negotiations and manual insertion orders. With programmatic advertising, man is replaced with technology! What’s more, the process happens in real-time, meaning that when a user visits a website, the auction between advertisers happens instantly. Programmatic advertising has unquestionably transformed the face of digital ad buying, and in theory, it should make the buying of digital ads cheaper and more efficient. A recent study by the IAB, which sought to estimate the size of the programmatic market, from both a buying and selling perspective, found that programmatic revenues totalled $10.1 billion in the US in 2014 comprising approximately 20% of total internet advertising revenues ($49.5 billion). Programmatic revenues made up approximately 52% of display related advertising ($19.6 billion) in 2014, while non-programmatic display related revenues comprised the remaining 48%. Programmatic penetration of digital display ads is forecast to hit 59% in the UK by 2017 and reach 56% and 60% in France and the Netherlands, respectively. The majority of programmatic inventory (70%) was bought and sold through Open Auctions last year, which is the Wild West of auctions and refers to unreserved inventory, available to any and all buyers, sold through auction pricing. It is however predicted that other platforms, such as private marketplaces, will build in prevalence. One thing is certain, however. The programmatic ecosystem is extremely complex, made up of several technology components from the buy side and sell side. It’s no wonder that even the biggest brains in programmatic have sometimes found it a tricky space to navigate. Why does programmatic matter? Despite some differences of opinion, programmatic advertising is certainly here to stay. As businesses become increasingly comfortable with signing off programmatic marketing budgets, it’s important they have an understanding of the full potential of the technology, and are mindful of where their attention should be. The ability to deliver the right ad to the right user at the right time… Programmatic has the potential to make it easier to reach target audiences, at exactly the right time.

During the World Cup last year, Nike used programmatic, real-time buying to deliver immersive 3D display ads across sites and apps in 15 countries. After a memorable match, fans were able to interact with these moments, making them their own. This type of personalised, interactive experience earned Nike over two million engagements. Tanzil Bukhari, head of buyer relations EMEA, DoubleClick Ad Exchange, Google, says: “With real-time bidding (RTB), before you purchase the impression and deliver the ad you have a certain amount of data against that user – you understand whether that user has been to your site before, or if they have seen your ad before. So you can leverage a whole load of data and then make a decision if that user is ideal for targeting.” Dynamic optimisation and real-time analytics mean that advertisers can adjust their campaigns when big news stories hit, or add and subtract ad units on the fly based on their audience’s online viewing habits, for example. Improved efficiency… By removing humans from the equation wherever possible, programmatic advertising promises to make the ad buying system more efficient, and therefore cheaper. Another key benefit from programmatic is the ability to scale at speed. By identifying performing inventory, greater budget can be quickly allocated, making campaigns extremely reactive to market conditions. Enhanced measurement… Programmatic has the ability to measure results quickly and efficiently. Additionally programmatic brings with it a new measurement metric, the viewable impression, which gives marketers better insight into whether people actually saw their ads. Recent Google research shows that 56.1% of all served ad impressions are not seen, so with enhanced measurement brands can easily assess how engaging their creatives are. Mobile, video and more… A quarter of the time we spend on media is in the mobile environment, yet marketers spend less than 1% of their budgets on this platform; so it comes as no surprise that mobile is a growing force of programmatic. Although some would say the reach of programmatic across screens, channels, and formats is currently a bit fragmented, finding solutions will be crucial to overall market growth.   Digital Ad Sales With major players investing in programmatic video capabilities and premium inventory partnerships, along with the significant increase in video views within social sites, video programmatic is also projected to grow massively. According to a BI Intelligence report, real-time bidding sales for video ads should hit $3.9B in 2018 (up from $500M in 2014). Despite the lack of industry consensus over a definition, the potential for growth of programmatic is clear. It’s important, however, that the industry works together to demystify the landscape, and continues to evolve and consolidate the technology, so that it can reach its full potential.

Mike Fantis
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