Programmatic 101

September 25, 2014

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What is programmatic?

Since AT&T put the first banner ad into market in the fall of 1994, the digital landscape has been continuously evolving – from banners to video, mobile, social media, content integration and native advertising. One of the latest shifts in the marketplace isn’t a new type of ad, but a technology providing a new way to buy media – programmatic. Programmatic refers to the automated buying and selling of media, often times with the transaction happening in an auction format, in less than the time it takes to snap your fingers. This auction-based solution is a subset of the greater programmatic realm more commonly referred to as real-time bidding (RTB).

How is it different?

RTB and the vendors that specialize in this type of media selling have been able to achieve growth in an already crowded industry as the technology has presented the opportunity for advertisers to reach their target audience in new ways. Companies using RTB are able to reach consumers at the exact moment online, regardless of their location, and at a more efficient price point when compared to purchasing placements with a publisher directly. Additionally, data tracking allows the partners to refine their target audience, based on the users completing the desired conversion activity, effectively making the campaign perform better over time. The benefits have helped advertisers stretch their budgets to extend the reach of their campaigns, finding new consumers who they may have missed in the past using more traditional digital efforts.

Some of the drawbacks:

While some advertisers have been quick to embrace the technology, there are a few barriers that have kept some advertisers on the sidelines, continuing to use more traditional digital tactics while the early adopters work out the initial kinks. Transparency (or lack thereof) has been a huge issue in the RTB space, spanning how the technology works, where the ads are going to appear, and what the advertiser is paying for. RTB vendors are unwilling (and sometimes unable) to explain what is behind the ‘algorithms’ that have made their product offerings successful, leaving advertisers in the dark on how their audience is being reached. Additionally, exchange-based inventory has typically been associated with being remnant, or of a lesser quality, than the premium placements offered by publishers directly.

As the industry has grown those, inventory sources have become more reliable and of a higher quality, with third party software platforms – such as AdXpose and Integral Ad Science – being introduced as a safeguard against running alongside unsavory content and fraudulent sites. As an auction-based solution, there is also very little information shared back on what is being spent on media, data (either proprietary or from the vendor directly), technology platforms (DSPs), service fees and lastly, margins for the vendor. Larger agencies have in-house divisions – developing trading desks – as a way to gain back control over what is actually being spent, although this still remains an unreachable solution for the small to mid-sized agencies.

Even with its current shortcomings, programmatic media buying looks like it is here to stay. RTB spending has been increasing by the billions annually, quality inventory sources and ad placements are being added what seems to be almost daily, and there is a renewed and vested interest in brand safety for advertisers. Even traditional ad networks have started building out and offering RTB solutions to their clients, recognizing a shift in the marketplace and wanting to keep their place at the ever-changing landscape that is digital advertising.

– Nate