In a nutshell, programmatic trading allows for the automated buying of ad inventory via ad exchanges. Publishers load their inventory into one side of the exchange and buyers, be they clients or their agencies, buy that ad inventory at the other end. The transactions between buyers and sellers occur automatically depending on the parameters set by both parties.
The beauty of programmatic trading is that it’s both efficient and effective for advertisers. It’s efficient in that advertisers are buying audiences rather than space. Those audiences can be based on their own data, such as the behaviour of the visitors to their site, on 3rd party data provided by the ad exchange (such as geodemographics or interests derived from browsing behaviour) or, more usually, a combination of the 2. Hence, the advertiser can avoid the wastage of irrelevant impressions associated with the traditional approach – a particular problem for premium brands. Efficiencies have also resulted from the explosion in online ad inventory that programmatic trading has driven, forcing down the overall price of online ad inventory.
The effectiveness derives from its performance based nature. Advertisers can measure the actions their activity is creating and bids for inventory can be changed in real time (known as Real Time Bidding or RTB). Also, creative can be tested on the fly and optimised to that which is delivering the best results.
At its best, programmatic buying can deliver the marketing nirvana of the right ad, with the right message, delivered to the right consumer, in the right context and bought at the right price.
Programmatic trading’s heartland is the world of remarketing and retargeting – targeting existing customers or prospects with relevant ads designed to move them through the final stages of the purchase funnel. But more premium inventory is coming available which is tempting advertisers to divert brand,rather than just direct response, budgets to programmatic activity. And with closed premium networks becoming available, and ‘brand safe’ technology negating the risk of online ads appearing in inappropriate environments, luxury brands are increasingly investing in programmatic too.
So programmatic trading has been a boon for advertisers. Its no wonder that, according to IDC research, it’s forecast to grow from 17% of UK display ad sales to 30% in 2016. At Cream, we’ve found the programmatic activity can outperform generic PPC in some instances. So wouldn’t it be a natural progression for advertisers to want to buy their offline media programmatically? Of course, and it looks like that’s the way things are heading.
Vistar Media has already launched an ad exchange for buying and selling digital outdoor space in the US. Advertisers can logon to a website and select where they want their ads to run and for how long, then set their maximum bid and the space is bought automatically. Of course, some of the aspects of programmatic trading online are missing from this model – such as the performance-based nature and the audience targeting but that will come too. With the advent of Route in the UK, it’s quite possible for advertisers to buy outdoor space based on very specific audience requirements. And with facial recognition increasingly being built into digital outdoor, advertisers will be able to understand the basic demographics of those viewing their ads and their dwell time so there can be a performance metric too.
Programmatic buying has also been introduced to radio in the US. Los Angeles-based Triton Digital has recently built an ad exchange that allows advertisers to automate the buying of online and mobile-audio radio ads. It has sold some inventory for media companies such as CBS Radio, which streams content on the web from many of their local stations.
But the big questions is, will programmatic buying ever come to TV? With the budgets spent in this arena and the ‘blunt cudgel’ like targeting on offer, programmatic buying seems to offer an opportunty to drive real efficiencies for advertisers. And with initiatives such as Sky AdSmart, which allows targeting to individual households based on their demographics (a process called addressable TV advertising), specific programmatic audience targeting becomes a real possibility. Of course, TV stations will need to ‘play ball’, but if the pressure comes from advertisers, they’ll have to.
Our view is that it’s inevitable that programmatic buying will extend to all aspects of offline media because advertisers will demand it, although it won’t completely replace the traditional segmented approach. Advertisers will still want the re-assurance of ads that appear in the places and at the times they’ve specified and many brands will still see the appeal of targeting broad audiences.
But as programmatic buying spreads, so the onus shifts more to the brand marketer who will need to become literate in both its pros and its cons. On the latter front, take its performance based nature – an advantage only if you’re measuring the right actions. And programmatic needs to be continually benchmarked against other techniques to keep it ‘honest’. If marketers fail to grasp these realities, then this new form of buying will fail to deliver on its promise.