Anyone who’s involved in digital marketing has heard the term “programmatic” thrown around for the last couple of years, even though those on the front lines of media buying are most familiar with the strategy.
While it sounds like it should be complicated (and indeed, does involve complicated algorithms), programmatic is simply a way to automate media-buying processes on the growing variety of media outlets. By using it, marketers can spend more time planning campaigns instead of looking at spreadsheets, aficionados say.
Programmatic buying eliminates RFPs, bids, insertion orders and more, instead offering a dashboard of options for bid levels, networks and so on. It’s not exactly set-it-and-forget-it, but by letting software handle the parameters of a digital campaign’s parameters and incorporating additional audience data, programmatic can help make targeting ads easy.
Bringing efficiency to an expanded market
That efficiency is increasingly important as advertisers chase audiences across platforms, devices and media properties. No human can crunch the amounts of data required, for example, to find those likely buyers who abandon their shopping carts on laptops in order to retarget them on their smartphones.
“In the digital advertising world today, marketers are faced with an overwhelming level of inventory and audience fragmentation,” Philip Smolin, senior vice president of Market Solutions of the digital advertising hub Turn, told Ad Exchanger.
“Each customer interaction happens on a different device, different media channel and at a different time during the life cycle of brand engagement. Data is generated throughout. Programmatic buying helps bring order to this fragmentation.”
And programmatic has evolved rapidly over the last two years to become another essential tool in the vast, virtual advertising world. “The best programmatic marketing recognizes the consumer as he moves between channels and touchpoints, so that each interaction informs the next,” John Nardone, former CEO of [x+1], said.
Early qualms about quality
Due to a lack of understanding or experience, programmatic was slow to win acceptance, and some marketers are still suspicious of it. First, they worry that programmatic only offers remnant inventory, due to its reliance on online ad exchanges where buys are made using real-time bidding (RTB).
More than one-third of (34%) of online display ads will be sold using RTB by 2017, according to projections from Parks & Associates. RTB auctions are not cut-rate, though, and not all programmatic buys are made using RTB. Publishers like Facebook, Google, Condé Nast and The New York Times offer “premium” programmatic directly.
A number of other factors have stifled programmatic’s growth. “Problems measuring results/ROI” was the top inhibitor to adoption named by marketers surveyed in 2014 by Chango, a provider of real-time bidding technology, and cited by eMarketer.
Other concerns include loss of control over campaigns and quality of placements. Fraud is also a problem, as automated buys are more vulnerable to automated responses from bots that skew results.
Improving transparency with analytics
But many marketers are starting to appreciate programmatic’s increasing transparency. Those facilitating RTB and other programmatic plays usually offer real-time analytics alongside, assigning a value to each impression and helping marketers adjust campaigns on the fly.
“Although ‘programmatic’ suggests little or no human intervention, algorithmic optimization can only do so much,” Andy Cocker, COO and cofounder of Infectious Media, told Ad Exchanger. “Smart, ‘macro’ optimization by analytical ‘traders’ can amplify programmatic performance significantly.”
Retailers in particular have been thrilled with the results. Nine out of 10 (91%) say that programmatic improves media buying efficiency and targeting, and almost as many (87%) say that it improves ROI and/or conversions, according to a WBR Digital study cited by eMarketer.
Making programmatic a permanent fixture
Google, Facebook, and other platforms are well on the way to making programmatic permanent by helping bring it to all advertisers. And television, cable, satellite, and streaming services aren’t far behind, offering programmatic sales in on-demand and live television broadcasts.
After experiencing triple-digit year-to-year gains in 2013 and 2014, programmatic ad spend will rise another 48.9% this year to reach $14.9 billion, eMarketer says, or 55% of all spending on digital display ads. Among retailers, programmatic spending was up 26% in the first quarter of 2015 alone over the comparable period in 2014.
Programmatic so far accounts for just a small share of marketers’ overall budgets. But two-thirds noted that they intend to modestly or significantly increase programmatic spend in the year ahead, with 33% of marketers naming mobile a top priority.
“What you’re seeing is a fundamental shift in not just how media is bought, but how advertisers can engage with consumers more effectively,” Brian Lesser, global CEO of WPP programmatic-buying unit Xaxis, told Ad Age.