Programmatic advertising: Growing pains and what you need to know

In an era that demands automated, data-driven decision-making, programmatic advertising has revolutionized how marketers leverage data and analytics to target highly specific audiences and maximize ad spend.

As advertisers strengthened their embrace of programmatic marketing in the decade since its introduction, industry stakeholders have increasingly raised questions over key parts of the engine that drives it, specifically, the value of the cookie, real-time bidding (RTB) auction dynamics, and pricing practices.

Cookie dependency and drop-off

The cookie’s diminishing influence has brought into question the role it should continue to play in the interactions between supply-side platforms (SSPs) and demand-side platforms (DSPs). Cookies represent only one user’s activities, most often on a web browser, and has long been used as the primary method to identify and target audiences. But consumer behavior extends well beyond the web and includes other internet devices, television, email, direct mail, billboards, and more. Cookie dependency can no longer dominate in the programmatic marketing process.

Also, due to the fragmented nature of the programmatic advertising ecosystem, many browsers and platforms today don’t use cookies at all. Instead, they collect their own customer identifiers, which means their audiences are not addressable in the cookie-based programmatic market. Cookies are no longer a common ID, and brands’ increasing preference for advertising on mobile devices is another issue due to the instability of cookies on mobile browsers and apps.¹

Cookie syncing has increasingly become a problem for brands for several reasons, not least of which is “cookie drop-off” for recognized identities. This occurs most often as data flows through multiple platforms—on boarders, data management platforms (DMPs), ad servers, DSPs (where algorithm-based programmatic bidding occurs), and SSPs—requiring multiple cookie syncs. Many advertisers don’t realize that with each new platform, every time a new partner is layered into the process can lead to significant audience loss. That can be a significant issue during campaign activations because it results in less effective media buys or an inability to spend through budgets.

Additionally, large numbers of cookie-sync requests frequently occur in the background, delaying the page from loading for several seconds and costing the brand an impression. Many cookies also have unresolved identities, which are of little use to publishers in terms of yields. Finally, when each of the match partners uses different methods to match cookies back to personally identifiable information, not all match partners are equal and accuracy levels can vary drastically.

Real-time bidding

Many brands think programmatic advertising is the same as real-time bidding (RTB). However, RTB is actually only one method of programmatic ad buying, and it’s an oversimplification to believe the two are synonymous.

There are many other ways advertisers can access programmatic inventory—there are other options outside of RTB. Brands that avoid programmatic altogether could consider including guaranteed direct and private-exchange purchasing options. Buying through open auctions isn’t necessary. In fact, private actions provide more transparency and control. For example, brands buying on the open exchange or through private exchanges (PMPs) can curate their inventory sources or publications. That way, they can strategically pair contextually relevant content with their target audience.

Opaque pricing practices

Programmatic partners have frequently faced scrutiny regarding the opacity of their pricing. DSPs, in particular, will need to provide greater transparency on where and how ad dollars are being spent as brands continue to seek improved match rates and more accurate eCPMs (effective CPMs).

The good news is that many DSPs are already moving toward self-service models. These offer advertisers the ability to fully understand where their dollars are going by selecting targeting parameters, such as geography, and the frequency with which targeted consumers should see a specific ad.

Industry-standard identifiers represent the new cookie

All of this means the pressure will only grow for brands, agencies, data providers, and publishers to adjust to this rapidly changing and highly fragmented advertising ecosystem, which until now has relied heavily on third-party cookies.

What’s needed is a new standard to replace the cookie as the industry’s main identifier, especially with the rise of new cookie-less channels that present new marketing opportunities, such as the Internet of Things (IoT), TV, and, over-the-top (OTT) services. A consistent identifier that is common throughout the programmatic ecosystem and represents consumers across devices, channels, and platforms can:

• Unify people-based targeting, measurement, frequency capping, and suppression for marketers, to combine it with search, email, direct mail, and in-store visits
• Deliver more inventory and provide greater insights on customer behaviors
• Provide richer data and greater scale to deliver more effective campaigns
• Offer more relevant and satisfying experiences to the consumer

This represents the next step of the automated, data-driven decision-making our industry demands. After all, no brand wants to fall behind in innovation, and every brand wants better ways to reach consumers.

FOOTNOTE: ¹ Browsers and legislators are continuing to determine and regulate what is addressable in digital advertising. A primary example of this is Apple Safari’s Intelligent Tracking Prevention (ITP) system. This was implemented in 2017 to hamper marketers’ ability to monitor browsing behaviors when users visit other companies’ sites. The result is that its inventory is not addressable. This makes targeting on Safari much less expensive because marketers are not getting the behavioral signals, they can get from other sources such as Google Chrome.

Travis Clinger is VP of Strategic Partnerships at LiveRamp.