Over the next six months we can expect a huge increase in programmatic advertising, including a wave of large brands launching in-house programmatic trading desks – creating big implications for the future of digital advertising.
Household Australian brands, including Foxtel and Mondelez (parent company of Kraft, Oreo), are following a global trend to take their programmatic strategies in-house. More will follow over the coming months, as Australian brands invest more into their programmatic buying strategies and look for stronger returns on investment.
Programmatic advertising is the use of technology and audience insights to automatically buy and run a campaign in real time – to target the right user with the right message.
For example, a user visits an electronics website and views a television. They then spend several minutes reviewing the television, including watching a short product video, seeing the specs, and searching for the store closest to their house. This user is then targeted with ads of that television as they visit other sites. Potentially with sequentially different messages and creative depending on their user journey. That is programmatic advertising at a basic level. Knowing the user’s interest in a specific product and then using that information to provide targeted messaging in real time.
Programmatic advertising has been on a tear over the past year. Industry research firms, such as IDC, suggest spend will increase 40 percent over the next three years. Some notable global marketers, including P&G and American Express, have expressed goals of increasing their programmatic spend to as much as 70 percent or more of their total digital advertising budget. While it has been usually discussed around display, programmatic actually includes online video, multi-screen, and even television.
It has really taken off with the rise of real-time bidding (RTB) that allows for the transaction between buyer and seller to take place within a fraction of a second of a user interacting with a site. RTB shows return on investment by being both efficient and effective. It is efficient, as it uses fewer resources (time, money) to get an ad placed, allowing the marketer to get more from less. It is also effective through the intelligence in its targeting by combining a host of data sources to gain a holistic view of the customer, and providing the right message to the user at the right time.
There are a variety of reasons why brands are choosing to manage this internally, most notably transparency and competitive advantage. In terms of transparency, there have been grumblings from marketers that agencies are charging a significant technology tax and taking advantage of the opacity of the industry to pocket high margins.
There have also been a few cases of fraud using PhantomBots and slight-of-hand tactics to drive results.
However, another critical reason is that programmatic could serve as a significant competitive advantage for a brand. For example, Mondelez has stated that they will seek to use programmatic across their brand portfolio to provide a single view of the customer – tying together purchase data, historical customer data, and loyalty data.
Clearly these data sources represent strategic assets, and the insights that can be gleaned from their relationships are even more valuable. Understandably, brands feel more comfortable housing these assets within their four walls.
Like any technology implementation, a great deal of the success will lie in people, planning, and process. Defining the role of programmatic, finding the right people with the right skill-sets, and aligning business objectives and KPIs, will be an important initial step, as will the creation of the right processes.
Especially important is considering creative optimisation and the user experience. This includes sequential targeting and the use of real-time data sources. There is also the issue around technology.
Luma Partners, an investment bank, has put together the LUMAscape (see below), a chart showing hundreds of companies, illustrating the complexity in this space. Some experts advise not to lock into any one player in a contract longer than six months as the space is changing so fast and consolidation is likely. It is a big task to build an internal trading desk, and maintain it over time, but the benefits could be substantial.
While programmatic isn’t a brand-new concept, it is still early days, and there is a lot to learn. The fact that the technology supports multi-channel real-time messaging suggests that it will act as a pre-cursor to the future. As we add more devices to the mix, including the Internet of Things (IoT), like home appliances and cars, there will be a very rich web of connections to better understand audiences, and providing even more targeted messaging. Getting involved now could put a marketer in good stead for what happens tomorrow.
As digital marketers, programmatic will have a profound impact on our industry. It provides a technology that will make us more efficient, and even provide competitive advantage. It will also change the existing marketing landscape with new entrants, consolidation, and as some brands take it in-house. Lastly, it creates a blueprint for the future as we introduce more connected devices into our lives.
