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Don't have a handle on programmatic advertising just yet? It's time to take a crash course. Programmatic, which mechanizes the buying and selling of ads, is growing up fast. And it's not going anywhere.
"We're really talking about simple automation and audience targeting, and those can be applied to every media channel in the world," says Matt Prohaska, CEO and principal of Prohaska Consulting, which specializes in programmatic. "Ultimately, we think programmatic buying and selling is just going to be part of what buyers and sellers do."
A large chunk of ad spending is already being done programmatically. eMarketer predicts programmatic will make up 67% of total digital display ad spending, or $21.55 billion, in 2016. That's up from 2015, when it accounted for 59% of spending, or $15.43 billion, according to the researchers. The figures include programmatic buying for banners, rich media, video, sponsorship, and additional ad units showing on desktops, tablets, mobile, and other internet-connected devices. Programmatic advertising is creeping into more forms of media too, including television and radio.
Delivering Targeted Audiences at Scale
Many people equate programmatic to real-time bidding (RTB) on an open exchange. It's not the sole transactional method for programmatic, but it's a popular one. Publishers invite media buyers to bid for the opportunity to show an ad to a specific visitor who comes to a page. Making bids on behalf of buyers are ad networks or systems called demand-side platforms (DSPs). When someone shows up on a publisher's website, its ad exchange tells a group of bidders that a recognized user has arrived and asks if they want to bid on a particular ad space. The machines make decisions in milliseconds on whether to bid and, if so, how much, based on data about the visitor and the rules set by the client.
DSPs and ad networks consider factors such as, "Do I know anything about where this user has been in the past? Do I know which segments they belong to?" explains Kevin Reilly, SVP of platform services at the data intelligence company Dstillery, which operates a DSP. "All those things go in at a very fine-grain basis on a single impression opportunity to say, ‘At this time, for this user, on this content, how much am I willing to pay for this opportunity?'" The auction winner's ad gets served.
This kind of buy enables folks such as Christopher Penn, VP of marketing technology at the public relations firm SHIFT Communications, to find and reach targets wherever they are in the digital ecosystem. These might be people who read a series of online publications or those in the market for a new car, for instance. His clients' ads may turn up in a variety of properties, including Candy Crush, cnn.com, or in-app. "The software is very good at intelligently saying, ‘We know who these people are, and we want to go bid on them and try to get their attention,'" Penn says.
Sometimes, Penn wants to have ads show up for readers who are in a designated physical location on certain days, such as those at a trade show, and he can do that programmatically too.
Bidding on the open exchange is particularly useful for marketers who want to send mobile ads that specific visitors will see when they are near a client's store or a competitor's location. "To do location-based media at scale, whether it's geofencing or audience targeting based on location, you really do need to do it programmatically in some form," says Adam Meshekow, EVP of strategy and national sales at SITO Mobile, a mobile ad tech company that ?operates a location-based DSP.
Media buyers often take a mixed approach with campaigns for a client. For example, Brittany Bayer, a digital media strategist at the marketing agency DDCworks, might buy ad space on a local newspaper site to reach people in the Philadelphia designated market area (DMA). She might complement that direct buy with a programmatic element to find local targets who, based on their online behaviors, are likely to go to her client's website and convert.
Programmatic Has Other Flavors
There are three other types of programmatic transactions beyond RTB on open auctions. The Interactive Advertising Bureau (IAB) defines these as automated guaranteed, unreserved fixed rate, and invitation-only auction. The latter two may be offered through what's known as a private marketplace (PMP).
Automated guaranteed, which is also commonly referred to as "programmatic direct," uses automated means to carry out a direct buy. eMarketer predicts programmatic direct is actually growing more quickly than RTB and accounted for 52% of all programmatic spending in 2015.
Unreserved fixed rate, or "preferred deals," exists within an exchange environment but has pre-negotiated, fixed pricing, according to IAB.
Meanwhile, publishers who use an invitation-only auction invite a limited number of advertisers to bid on inventory, often before it hits the open auction.
IAB notes that publishers using programmatic means can offer buyers different levels of transparency about inventory, from fully blinded to fully transparent URLs. However, bidders with low transparency can generally set limits to reduce the chances that an ad will appear on websites that could hurt a brand.
Data Fuels the Machine
Programmatic offers the potential to reach the right person at the right time for both branding and direct response objectives, but none of that can happen without data. Data is so integral to programmatic that not having a solid chunk of it can be an impediment. It's something Ana Villegas, marketing director of Dell's North America commercial business, discovered after an initial programmatic pilot more than 2 years ago didn't produce a change in the engagement of customers coming to Dell's site.
"I needed to expand my data," she says. "I had to grow my internal data through time-the more time passes, the more data we are gathering about how customers are interacting with our site. And I also needed to get data externally from third parties."
Being able to work with more data is contributing to what Villegas describes as "amazing" results from programmatic advertising. The tactic is bringing Dell quality customers in terms of engagement, and they cost about 40% less to obtain than they would through other traditional digital tactics such as broad-reach publications and display ads that are not bought programmatically.
Dell devoted about 30% of its spend on a recent U.S. campaign for programmatic advertising, but Villegas expects that number will rise for future efforts. "As we gather more and more data, we should be able to shift more and more [dollars] to programmatic," she says.
Customer Data Is Beneficial but Not Essential
The importance of first-party data is an impetus for enterprises to properly tag their websites to understand their visitors' behaviors, says Emily Frankel, VP of marketing at the online car resale company Vroom.
"[Tagging] is important for building your segments on your own site and understanding what additional data you have that could better inform your buying," she says.
Frankel says gathering and organizing customer data enables companies to answer questions that include the following: Are there certain signals or actions that people take on my website that make them attractive to go after and message against? Are there repeat customers versus new customers? And how do I speak to those people differently?
Nonetheless, not having a lot of first-party data doesn't have to be a barrier, says Meshekow. Marketers can still leverage second-party data-such as information exchanged with noncompetitors-and third-party data. SITO Mobile, for instance, is able to identify anonymous targets in real time by incorporating their current and previous location information, data about applications they have signed into, and contextual data such as publishers they've visited.
Optimization Is a Key Benefit of Programmatic
Data plays other important roles in programmatic. "As campaigns run, data science can interpret what signals matter most and optimize a marketer's campaign almost instantaneously," says Craig Teich, EVP of sales and business development at Connexity, which specializes in building and buying programmatic audiences.
Teich says efforts can be optimized by variables that include audience, website, ad size, and position on the page. "With programmatic, technology captures performance data and optimizes campaigns in real time, eliminating the need for time-consuming back and forth between the advertiser and publisher," he says.
Meanwhile, programmatic can also reveal information about prospects that buyers can use to enhance targeting in future efforts. For instance, campaigns aimed at information technology professionals helped Bayer learn that many of the targets like hip hop music and gaming. "Moving forward, we added specific blogs and gaming websites into our online purchase because we knew these people spent a lot of time there," she says.
Getting Started With Programmatic
There's a lot to do and learn before jumping into programmatic. Getting a handle on your data is a big requirement. Here are some others:
Identify your target audience, but start off with some slack. "You definitely want to have a very clear picture of who your audience is going into it," Bayer says. "Age, gender, location, typical buying behavior-like maybe someone's more likely to buy on a certain day of the week or a certain time. You want to have all that information."
That said, you could miss out on potential opportunities if your parameters are too narrow, she adds. "Typically, you start more broad and leave some categories open," Bayer says. "As the campaign starts going and you start seeing conversions and start making connections between different data points and people who are more likely to convert, you can narrow in that way."
Evaluate whether to work with a DSP directly or to work through an agency. "It's technical, and all the different [DSP] vendors have their own interfaces, but if you can mentally handle what it takes to run very complex Facebook campaigns or very complex AdWords campaigns, for example, you'll be fine [working directly with] a DSP," Penn says. "If you're the sort of business executive who just doesn't have enough time in the day to learn yet another system, then you want to go the agency route, and you can just give them the budget, resources, and target audience you want to reach."
Have discussions with your agency or DSP about reducing bot fraud. One complaint about programmatic exchanges is that without a human to negotiate a deal with, marketers could be buying ads on sites that only have bot traffic. Another risk is that the individual targets DSPs are bidding on may actually be bots in disguise.
Teich says one way marketers can reduce the risk of bot fraud without hiring an ad verification company is to target audiences with rich data profiles. "If there are multiple data points on an audience member from a range of online activities, then there is a lower risk that the ad will be shown to an impression bot," he says.
Build infrastructure to support the demanding creative needs of programmatic. "You don't know what inventory is available at any given time, so you have to create multiple sizes of each version of your creative to get the most out of your buy," Bayer says.
Likewise, Dell's recent campaign offered content to address interests at every part of the customer journey. "Depending on what [a visitor's] interacting with, I can show different types of content, and that's going to the core of what programmatic is, which is really offering the customer the best content at the best time and the best location," says Villegas. "But in order to do that, you have to have all the content possible [that] someone may need or want."
Given the demands of creative optimization, it's important to be agile in content production. Villegas meets with her team weekly to determine which content changes to make based on engagement metrics. "Programmatic is high-maintenance," she says. "You have to have your creative in order."
Taking these and other steps could make programmatic a valuable tool. "For us, it has proved it's absolutely worth doing," Villegas says. "It's just you have to take into account there are a lot of pieces you need to invest in to make it happen."
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