Programmatic Buying for Dummies – The future is bright, loud and fast!

Programmatic buying

Structural technology trends behind programmatic buying and their influence on marketing operations, the media holding company model and CIOs

Completion date: 14/01/2013

Background of programmatic buying:

The future is bright, loud and fast! A growing global audience is spending more time connected to digital media, hyper-communicating their likes, dislikes leading to too much data, knowledge. Media buyers are now moving their budgets to new areas such as display, standard pre-roll etc, and are buying media in an automated fashion through digital platforms (eg. exchanges, trading desks, DSPs), replacing traditional routes of RFPs, negotiations, insertion orders.  Data associated with audience, ad delivery is vital and must be available in near real-time to enable dynamically informed buying decisions.  

Positive digital interactions with customers, prospects can propel company growth and this brings the focus on four major parameters (shown in the diagram below) that can influence the maturity of Programmatic buying (PB).

Programmatic buying

Technology advancement across platforms:

Functionality and trend

Benefits

Supply Side Platform (SSP)

–          Options across proprietary optimization algorithms (Admel) vs manual or own optimization technology (ApNexus)–          Increasing breadth across ad format acceptance( from basic banner formats to mobile)

–          New features such as private exchange, variable price floor controls, anonymous participation, advertiser-level bid reporting, audience data management

–          Better packaging, positioning of media to buyers–          Increased monetization, operational efficiencies, multi-channel optimization

–          Gives better control and protection to publishers worried about premium inventory or brand association with certain advertisers.

Ad exchanges

–          Self-service, backend platforms enables log-in, set-up, manage campaigns, run analytics and optimize without even talking to a sales person–          Verification systems validate and stop an ad loading if content is not as per advertisers preference( avoid violent, competitor content etc)

–          Some allow buyers, sellers to participate, some allow only ad networks

–           Advertisers have visibility on the site, ad unit and publishers have visibility on which advertisers are buying their inventory and what they are willing to pay

–          Some exchanges allow floor price settings, offering a risk free proposition for publishers ( ad networks don’t tend to offer this)

–          Encourages competition and drives up ad space price per impression, as each impression is valued–          Ad exchanges are different from ad networks that often sell at a lower eCPM to close high volume sales or may not be in a position to quantitatively compare different ad buy offers.

–          Visibility for publishers help them control what advertisers and creative’s they want to encourage on their sites.

–          Few intermediaries in the value chain offer ad budget savings

Demand Side Platform (DSP)

–          Advancements in expertise across algorithmic optimization, knowledge of audience management, breadth of media access, unified campaign tracking and reporting –          Leading vendors have more than 50% of the impression volume RTB enabled. –          Buyers prefer a single platform  that is operationally efficient to access, manage and report inventory supply and campaigns across display, mobile and video

Real-time bidding (RTB)

–          2009 onwards, ad exchanges and SSP’s announced RTB support bringing a surge in activity from DSP’s, ad networks, agency trading desks and other media intermediaries.–          The EU cookie directive which came into effect in May 2011 can bring some challenges to data collection, usage and in turn affect RTB growth. –          RTB’s have cut inefficiencies in the media buying process, offers de-duplicated reach and can cap the number of impressions that audiences would see in a particular campaign–          RTB is an efficient way to buy impressions in real time, having an engine that calculates real time prices can really transform results for advertisers.

Data management platform (DMP)

–          DMP creates a single view of the user by aggregating data across first, second, third party online and offline sources in a unified manner, including segmenting and tagging.–          Leading organizations are building rich user information as a differentiator in an increasingly crowded online advertising area

–          Interactive marketers now have an opportunity to leverage DMPs and run audience based marketing campaigns more effectively than ever before, however, for DMP initiatives, the time and effort required to pull various departments together, such as IT, legal, CRM cannot be underestimated.

Impact of programmatic buying on marketing operations and Media holding company model

Marketing operations will become more efficient and can build a strong foundation based on metrics, best practices for campaign optimization, funds (forecast, reconcile and reallocate), performance reporting. There is a good chance of better campaign ROI not only because of media performance or better targeting but also because of the price squeeze, man power reduction. Positive experience and results from the digital media will, overtime, influence marketing operations team to increase their expectations from traditional marketing channels.

Large media holding companies are buying-out leading digital media agencies to keep up with the trend of budgets swinging towards the digital wave. With transparencies and a shorter value chain, the media industry is set to become a high-volume, low-margin business model ( similar to supermarkets) with pricing models moving towards ROI basis instead of activity based pricing. Customers could end up expecting similar transparencies, ROI in traditional media channels.

Positives and negatives of programmatic buying for marketing organizations and CIO’s

Positives

Programmatic buying increases the effectiveness, efficiencies of marketing organizations and increases the probability of bringing the right message to the right audience at the right time.  Today’s CMOs and CIOs have a vital role to play as enablers by leveraging integrated customer information to make consistent customer interactions across channels a reality. Similar to MDM, CDI (Customer data Integration) projects, programmatic buying could trigger data integration across first, second, third party online and offline sources in a unified manner.

Negatives

Targeting precision, ad relevance can bring a creepy feeling to customers who think they are being followed and publishers are trying to keep premium inventory in private exchanges to protect margins and brand. Non-compliance of cookie legislation could attract a fine up to £500,000 and lawsuits, giving more problems for the CIOs and their legal colleagues which could in turn slowdown data integration projects. 

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About Ramesh Ramakrishnan
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