Programmatic: Demystifying the new kid on the block

Display advertising has entered an exciting new era, and programmatic buying—the automatic buying and selling of display ads—is the hot topic on everyone’s lips. Despite the industry buzz, new research suggests that while most brands and agencies acknowledge the importance of programmatic, it appears that very few truly understand what it is or what it could mean for the industry.

Recent research, conducted by Warc in association with the Festival of Media Asia Pacific (FOMAP), and the Mobile Marketing Association (MMA), found that the majority of brands and agencies (61 per cent) felt that programmatic buying would become more important to marketing strategies by 2019, with almost a third (30 per cent) saying it would be ‘very important.’ Despite this, the survey, which was designed to gauge the attitudes of client-side advertisers and marketing services agencies towards mobile marketing in Asia Pacific, showed that over half of all brands and agencies in the region (52 per cent) admitted to having little or no real knowledge of programmatic buying.

So what is programmatic and why is it important?

Defined as the ‘automation of the buying and selling of desktop display, video, and mobile ads most often using real-time-bidding,’ programmatic buying has been advocated by industry experts and futurists for many years.

In a 2012 Forrester Research Report on The Future of Media Buying, Joanna O’Connell and  Michael Greene claimed programmatic buying as the future of the industry, asserting that media planners and buyers who “do not start engaging in programmatic buying will be in serious jeopardy of losing their jobs by becoming obsolete.”

Since that time we can see that media buying technology and operations have undergone a dramatic transformation, seeing marketers replacing traditional marketing tactics with programmatic media buying. According to Forrester, this includes “transparent, real-time biddable media and audience targeting that gives interactive marketing professionals what they crave: improved targeting, less waste, more efficiency, and better results.”

But how does it work?

One of the key technologies underpinning programmatic buying is RTB (real-time bidding), which as the Interactive Advertising Bureau (IAB) points out, is a “buying mechanism based on data and algorithms that allows media buyers to evaluate and purchase ad inventory on an impression-by-impression basis.”

This means that rather than just buying a space on a site, RTB gives media buyers access to an audience.

The impact of this has been monumental. Programmatic buying is rewriting the way that digital ads are bought and sold across the world. IPG Mediabrands has announced its intention to automate 50 per cent of its media buying, which as CMO.com points out, signals that programmatic buying is here to stay and is not just hype. This is also demonstrated in the results of a recent report by the publication, which showed that worldwide RTB-based spending was USD$1.4 billion in 2011, a figure forecasted to rise to $13.9 billion by 2016. The report also highlighted a notable rise in worldwide programmatic buying by 20 per cent in the past six months.

How does it work in practice? What are the benefits for advertisers?

As the IAB illustrates in its Display Trading Guide, when a user visits a specific site, buying agencies receive a message asking whether they are interested in buying the ad space. A decision to buy is made according to specific parameters entered by the advertiser, including price, user demographics, size of ad, placement, success metrics and more.

An automatic real-time bid is then made via an algorithm, based on the value of the single impression. As soon as the auction closes, the ad appears in milliseconds as the page loads for the user.

During this time, the ad can be personalised and localised for the user based on their specific demographics and browsing behaviour, and engaging content such as rich media and video can be added. Programmatic buying allows marketers to reach the right person, at the right time, with the right message—in a matter of milliseconds.

More than this, the method allows buyers more control, enabling them to sit in the driving seat to make buying decisions based on their own key parameters, in effect turning raw data into usable, actionable information. This buying method also provides advertisers with greater insight into key metrics, including audience segmentation and targeting, whilst also increasing transparency and fuelling the marketer’s ability to make repeat decisions based on intelligent data. Moreover, marketers are able to run their campaigns in real-time, based on the performance analytics of every single impression, in doing so helping them to leverage audience profiles to find their ideal customer.

But what does this mean for mobile?

It’s arguable that mobile is where RTB and programmatic buying make the most difference for advertisers, allowing them to target potential customers according to their location and context in real-time. As a 2013 report by BI Intelligence illustrates, this technology can also deliver the scale and efficiency needed to match buyers and sellers, therefore helping to dramatically reduce cost per thousand impressions (CMPs). In addition, the technology also has the potential to allow advertisers to leverage consumer data and track users by demographic, location, and context—similar to the way it’s done on PCs.

Following an expansive year in Asia Pacific for programmatic on desktop and video, appreciation for the value of programmatic on mobile is quickly picking up speed, thanks to the introduction of exchanges, which make precision targeting possible. It’s plausible that as the adoption of programmatic for mobile widens, with digital ad spend in the region increasing year on year, we could quickly start to see a reshuffle of the mobile ad industry as we know it. 

To conclude, there might be a lot of talk around programmatic buying, however it would seem that the fascination is wholly deserved.

As the advertising industry continues to evolve, marketers looking to venture down this route as part of their mobile strategy may find that it offers them the answer they are looking for to more effectively and efficiently target today’s discerning, individual and increasingly mobile consumer.

Robert Woolfrey is APAC managing director with Millennial Media