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Programmatic Advertising: Opportunities and Challenges

Digital marketers gather in Denver to talk about the ups and downs of going programmatic

Tom Kennedy

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For the past 18 months or so, marketers have heard a lot about programmatic advertising. In fact, most marketers have tested some form of programmatic advertising in the past year. According to leading Internet marketing authorities like Marketing Land, programmatic advertising is expected to represent more than half of digital ad sales by the end of 2017.

Programmatic covers a wide range of technologies and services that automate the placement and buying of digital banner ads, allowing advertisers to buy the eyeballs (impressions) of highly qualified viewers for online desktop display, mobile and video campaigns. Benefits to advertisers include increased efficiency, reduced overall ad costs and real-time optimization made possible by machine-learning.

The cautionary side? Programmatic is challenging for brands and advertisers because of the complexity of the ecosystem, a shortage of programmatic skills, and rampant fraud related to traffic and viewability.

Marketers are also tasked with figuring out where programmatic best fits into an overall promotional plan. Is it a brand awareness play or direct response?

All of these topics were in play at Denver’s INDUSTRY during the second annual ProgrammaticNOW mini-conference in late July. Experts and panelists representing marketing and ad agencies, clients, demand-side and supply-side platforms discussed the merits and complications of programmatic from a range of viewpoints.

Some opinions and stats shared by the experts in July:

  • Most programmatic budgets are increasing
  • More than 90% of marketers are already using programmatic to purchase display ads
  • Online ad fraud has been around for the better part of a decade and will account for more than $7 billion in costs to brands this year
  • Programmatic is making inroads into TV too, as observed by ProgrammaticNOW keynote speaker Mike Shehan of SpotX
  • Advertisers should have clear campaign objectives, whether they are brand awareness or direct response
  • Continuous testing is a key!
  • Beware of S.O.S. – Shiny Object Syndrome

The opportunity is clear, according to ProgrammaticNOW speakers. Programmatic has set new standards for efficiency, precision and low-cost scale. Leveraging real-time systems and algorithms, advertisers have never been so well equipped to place ads in front of the right person, in the right place at the right time, all within the blink of eye.

Nonetheless, the road to opportunity is fraught with hidden landmines. The programmatic journey, as advised by more than one panelist, is best navigated with strong partners and best practices. They recommended:

  • Setting goals and staying true to goals by measuring the right things;
  • Viewability, traffic fraud issues are real but shouldn’t be show-stoppers.

Setting goals and staying true to goals by measuring the right things. Like most things in marketing, it’s important that advertisers intimately understand their business and customers. Advice from the top? Programmatic experts agreed that advertisers are well-served when they keep campaign objectives top of mind. For example, if the goal is to put “heads in beds,” as a conversion in the hospitality industry, focusing on CPA, or cost per acquisition, is probably a wise choice.

Client-side media planners seeking 100% viewability, unreasonably high click-through rates and conversions often find themselves in a battle of incongruence. For example, pulling levers to increase viewability may impede more important campaign KPIs such as conversions.  Although there are merits to high viewability — the Interactive Advertising Bureau defines a viewable ad as at least 50 percent in-view for at least one second — that doesn’t mean it’s going to get clicked on or that a conversion is imminent.

Panelists suggested advertisers select the right marketing partners and then trust their partners to optimize. “Optimization is really what all programmatic is about,” noted one panelist. Being in front of the right audience at the right time is core to programmatic but optimizing is where the rubber meets the road. Advertisers – and their partners – must set clear expectations up front: Do you want maximum viewability or do you want conversions such as “heads in beds?”

The takeaway? You can pay for the viewability but you may still get the same amount of conversions. Don’t get bogged down in a low CPM or a high viewability rate. Focus on your goal and build your program around the metrics that matter.

Generally, panelists agreed that programmatic advertising campaigns are most likely to be used for branding objectives as opposed to direct response. Focusing on clicks and brand awareness is generally a good fit with the quick service restaurant industry, tourism and the automotive industry, as pointed out by one expert. Effectiveness ought to be measured by foot traffic coming in the door while the ads are running.

Viewability, traffic fraud issues are real but shouldn’t be show-stoppers. Panel member Jeremy Ostermiller, founder of Altitude Digital, a supply side platform, told attendees fraud exists because “programmatic is a $27 billion industry and any time you have this type of explosive growth – growing from $20 billion last year – and this type of money and scale, you’re going to have bad actors.”

Ad fraud has been around a long time, pointed out panel moderator Rebecca Rogers. “We have been talking about this problem for 10, 15 years now,” said Rogers, holding a cover of a 2006 BusinessWeek magazine to illustrate the point. “Why have we not solved it?”

By some estimates, more than one-third of ad traffic is fraudulent, meaning the success rate stands at about 66 percent. Ostermiller suggested marketers not get preoccupied with eliminating fraud. “The industry is going to have to grow and get smarter on all levels – the publisher side, the exchange side and the buys side – to help mitigate it. However, there’s no silver bullet.”

Panelists agreed the problem has not been solved due to the high stakes — programmatic represents a rapidly growing industry — the ecosystem is fragmented, the prolific rise in bot-generated traffic, and the fact that many publishers care mostly about traffic growth at any cost.  It was noted that publishers seeking to increase traffic often use traffic brokers who promise volumes of highly qualified users. Traffic brokers, in turn, may be using legitimate traffic generation techniques, or not.

Nonetheless, programmatic technology players are held to a higher standard noted one panelist. “When you buy a radio ad, do you know how many of those ads were actually heard?” asked Andrew Fischer, CEO at Choozle. “You have to pick the right partners but there’s got to be some sort of consistency on the buying and selling.”

High viewability rates translates to higher CPMs but lower impressions. A panelist recommended buying from vendors with a great support system that blocks the fraud. But don’t take their word for it. Confirm viewability with viewability monitoring vendors such as Integral Ad Science (IAS) or Double-Verify. Doing so adds just a few pennies to your CPM instead of paying the publisher an additional $1 or $2 per CPM.

In sum, the consensus from ProgrammaticNOW experts was that industry standards on viewability ought to be improved.

Clearly, programmatic can be a breakthrough resource for marketers that want to reach highly targeted audiences. It permits us to focus squarely on specific demographic groups and serve content directly to those targets. And, despite some of the challenges with traffic fraud and visibility highlighted last week in Denver, results can be reliably tracked and measured. Just be sure to set clear goals and establish metrics that matter.

Kudos to Ad Club Denver, AdTech Meetup and BMA Colorado for supporting and facilitating the second annual ProgrammaticNOW program. As marketers, we are all better off when expertise, best practices and real-life experiences are shared in this type of forum.

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