Programmatic buying platforms such as demand-side platforms (DSPs) have become the most powerful tools for marketing in a digital world. While programmatic buying was proven on ad exchanges using real-time bidding, advertisers are now expanding the tools and techniques to a much bigger part of the media plan: guaranteed buys on premium publishers.
Traditionally, the industry used website demographics for targeting broad segments, but this technique seems like a blunt instrument given the capabilities of DSPs. Today, marketers can improve the relevance and personalization of ads through sophisticated algorithms that find the right demographic across the web, gauge consumer behaviors, and target ads with laser focus to the right audiences.
This sounds like nirvana for marketers, yet the reality is that only about 20 percent of the media plan is invested through programmatic buying platforms. So, what is holding us back? Why don't marketers invest 100 percent of the media plan in a way that is capable of presenting exactly the right message to the right person?
The reality is that advertisers today continue to spend roughly 80 percent of their budgets on guaranteed buys on premium and endemic sites because they value media context that aligns with their brand. A bank, for instance, might prefer to speak to its target audience on a financial news site with professional editorial content, rather than in a stream of social media. Based purely on the data, this might be rational (the right context usually improves performance), or it might just be a normative preference that is important to the bank's CEO. The bottom line: for some marketers, audience buying is not enough; they want to speak to that audience across the media plan on sites whose content and brand they value.
One response to this industry need is private exchanges, which have pros and cons. Most private exchanges are DSP-powered, making them more efficient. But some advertisers have started to question the quality and cost of the inventory offered up to date. There are also challenges with scale. An advertiser might struggle to hit their desired reach and frequency of a custom audience drawn only from this inventory.
So what's a marketer to do? There is another, brand-new and compelling alternative. It's a fast-rising trend called "programmatic premium." I recently participated in a panel at the Digital Media Summit on the topic, and it generated a lot of buzz in the room.
Programmatic premium combines the branding, audience alignment, and effectiveness of guaranteed premium ad placements with the proven efficiency and effectiveness of programmatic buying. This upper-funnel strategy optimizes guaranteed buys using programmatic, impression-level decisioning across campaigns. The personalization and relevance of the ads, including the behavioral data, location, context, and timing of their delivery, prompts consumers to respond with a marked improvement in engagement. In practice, we've seen it result in double-digit increases in consumer action rate and effectiveness when compared to traditional campaigns.
Programmatic premium is good for both advertisers and publishers. Marketers can serve the right message to the right consumer, reducing waste and improving returns on their guaranteed media investments. For instance, suppose I'm interested in luxury sedans and my wife is interested in electric cars. As it stands today, we'd both be surfing the car section of a portal, and we would both be presented with the same truck ad. That's because most guaranteed buys serve the same message by the thousands to very different people who happen to be on the same website. With programmatic premium, I would see a luxury sedan ad with an offer to build a model, and my wife would get the electric car ad with an offer for a test drive.
Programmatic premium has the potential to produce tremendous results for brands in virtually any industry. Publishers benefit, too, because they can gain better performance and value from their premium inventories, thereby protecting their price and building the strength of direct relationships with advertisers.
I think this is the future of marketing in the digital world. I'd love to hear your thoughts.
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Mike Baker is president and CEO of DataXu. He has been pioneering digital media platforms for 20 years and is a widely recognized thought leader in interactive advertising. Before cofounding DataXu, he was vice president at Nokia, where he created and ran Nokia Interactive. Baker came to Nokia through its acquisition of mobile advertising leader Enpocket in 2007, where he was the founding investor and CEO. Baker was previously a partner at venture capital firm GrandBanks Capital. He has also been executive vice president at CMGI and Engage Technologies, an innovator in online advertising and behavioral targeting. Baker holds degrees in law and telecommunications management.
March 19, 2014