After years of promise, is 2015 finally the year that programmatic makes its big move and becomes the de facto method of buying advertising?
The last few years have been pretty disruptive for the advertising industry; the explosion in digital advertising technology players has lead to traditional marketing departments being unable to continue to manage their digital presence in the same manner. A drive towards simplified, frictionless inventory management has led to an increase in the use of automated systems offering to programmatically purchase advertising with minimal human intervention bar initial set up.
“Programmatic” as a buzzword is nothing new. Using systems to buy advertising automatically based upon audience segments in a real-time bidding environment has been available to media buyers for a long time. However, adoption has been slower than perhaps would have been expected. Despite 24% of the 600 agencies surveyed as part of the IAB’s report into progammatic advertising identifying “targeting” as the most important factor to the success of a digital marketing campaign, the same report states that only 48% of publishers and only 22% of marketers are currently using programmatic advertising.
Why the disconnect?
There is clearly a disconnect between marketers and their agencies when it comes to use of programmatic advertising; the question therefore becomes how can this be resolved? The IAB report notes that whilst 77% of media buying agencies have a “deep understanding” of how progammatic works and how to most effectively deploy programmatic strategies, 1 in 4 (25%) marketers had never previously heard of programmatic advertising.
The issue may therefore be one of strategy design and education. A good internal strategy which clearly identifies areas where programmatic advertising should be deployed (or at least considered) combined with a robust training programme for all marketers as to the benefits of programmatic may help to close the gap. Although it may be argued that marketers do not need to understand programmatic advertising provided that their agency is up to speed, in reality it is difficult to see how a successful campaign strategy can be developed without a level of understanding of the tools available.
In the words of the IAB:
Programmatic is more than a media buying tool – only when marketers recognise the benefits it can bring will the advertising industry be ready to capitalise on its full potential.
Looking into 2015
“2014 has proven a pivotal year, and with the majority of infrastructure now laid and testing well in progress, we’ll see programmatic ad spending explode from 2015 into 2016.” – Lauren Fisher, eMarketer analyst
The future is looking bright for programmatic advertising in 2015. Advertisers which traditionally have been reluctant to engage have generally accepted the benefits of programmatic advertising; this has led to the fundamental infrastructure for widespread adoption of programmatic advertising now having been established. This is already bearing fruits, with eMarketer reporting that in the US alone, programmatic buying has exploded in 2014, with spend up by 137.1%, accounting for 45% of the overall US digital display market.
eMarketer expects programmatic spend to further grow by 47.9% in 2015, taking total spend to $14.88bn. In addition, buying channels are expected to shift significantly in favour of private marketplaces rather than open exchanges, which will remain flat. By 2016, eMarketer estimates that total spending on private marketplaces will reach $3.31bn.
The final trend identified by eMarketer relates to advertising other than the traditional programmatic advertising staple of banner advertising. Video advertising and other similar rich media channels still remain being traded traditionally via direct sales. However, expect this to change rapidly as in 2016 programmatic video advertising is estimated to reach $3.84bn and is forecasted to account for 40% of US digital ad spending.
Look out for our future posts considering the above figures from a global perspective to see whether global trends are reflective of the US market or whether they tell a different story.
Programmatic trends: 2015
Pure economic growth does not tell the full story, however, and 2015 is also likely to see the growth of programmatic into areas historically out of bounds. Below are three key areas of development that we believe will drive forward throughout 2015:
1. Online meets offline
Advertisers sit on a wealth of data collected from multiple channels. Currently much of this data either goes unused or forms part of specific, segregated marketing campaigns aimed at offline consumers. With increased sophistication of big data providers allowing real-time analysis and integration of offline data, look for programmatic to use these data assets to produce better targeted, more successful advertising. A spate of large-scale acquisitions this year (such as Acxiom’s $310m purchase of LiveRamp) shows the significance of this growing area.
2. Mobile behaviour
One area which has traditionally been difficult (not for want of attention) is that of behavioural advertising on mobile devices. With usual tracking methods proving difficult in this space and consumer journeys now often flowing across multiple devices, a new breed of company has been spawned, aimed at solving this problem. With success being reported throughout 2014 and consolidation within this sector also having occurred (example, AppNexus buys MediaGlu) cross-device profiling appears to be well on its way to being available to mainstream advertising. As consumers move to multi-device journeys, the digital landscape will undoubtedly become more complex and marketers and brands need to adapt to stay relevant, embracing these new technologies as they evolve over the coming years.
3. Industry collaboration to combat click fraud
As more marketing moves away from traditional channels and into programmatic, a larger percentage of advertising budgets will be charged on a consumption basis (more clicks = higher cost). Although such techniques for charging are well established, there currently remains a (justifiable) concern that click fraud results in advertisers budgets being burned for no benefit. In 2014, it is estimated that fraudulent clicks by bots will result in $11.6bn of advertiser revenue being wasted. The problem is that click fraud is not a simple issue to fix as those responsible are often across borders and operating sophisticated systems. As programmatic grows, we expect in 2015 the key industry players together with industry regulators to create a collaborative, centralised system to attempt to eliminate click fraud and trace those responsible. However, whether these efforts will be successful remains to be seen – certainly a concerted effort from the market will at least raise the profile of the issue and allow focus to be placed firmly on those responsible.