The rise (…and effectiveness) of Programmatic Advertising
Programmatic advertising has revolutionised the digital advertising industry and is currently worth £6 billion according to eMarketer. It is a growing success evolving from online display ads to streaming and TV and tipped to be the future face of digital advertising.
What is programmatic?
Programmatic advertising is automating the process of buying and selling digital advertising space. It is split into two main types:
1. Real-Time Bidding
This operates as a real time auction. When a visitor clicks on a webpage, an ad exchange takes place connecting the Demand Side Platform to the Supply Side Platform. Advertisers who consider the visitor part of their target market, will bid on available ad space. The highest bidder will win the ad space by paying the highest CPM (cost per impression). When the webpage is loaded the visitor will see the advertisers’ digital display.
Figure 1: How Real-Time bidding works (Source: Sovrn Holdings)
2. Programmatic Direct
Advertisers can pay for a certain time period of advertising space or a certain number of impressions. This means that programmatic direct is a premium and is used by companies who know that there are advertisers willing to pay a high price for space on their websites.
Figure 2: How Programmatic Direct works (Source: Marketing Land)
Benefit: A targeted form of digital advertising
The benefits of programmatic advertising can be seen by looking at the O2 Tariff Refresh campaign. This involved using a previous TV advert and incorporating consumer data such as device and location. This led to 1,000 versions of the advert being launched offering consumers more personalized information about what their best upgrade deals were. This was successful as according to reports the campaign increased click-through rate by 128% compared to the generic video ad.
Challenges: Ad fraud and lack of transparency
Ad fraud can be considered the most significant issue in programmatic advertising where ‘the daily cost to companies from fraudulent impressions can be up to $1.28 million dollars,’ as noted by IAS Insider. Impression fraud is caused by a bot producing false impressions leading to advertisers spending more on ads than needed (as advertising space is bought paying the highest cost per impression). However, there have been recent developments aimed at helping to increase transparency in the ad exchange between buyers and sellers, through helping advertisers identify which inventory is legitimately sold by publishers.
Potential growth of Programmatic TV advertising?
One of the main areas for potential development is programmatic TV advertising. This market is set to boom with ‘PwC predicts that programmatic TV will represent approximately one third of global TV ad revenue by 2021,’according to EConsultancy. Through the use of connected TV’s and precision targeting this allows companies to deliver more personalised TV adverts.
Is the future in-house?
In the future more companies may decide to take programmatic in-house, as a result of firms wanting greater control over their data to minimise brand safety issues. However, looking at a survey carried about by Econsultancy only 29% of the 314 respondents are currently operating an in-house model with the majority using an agency. The main concern is whether companies can afford to recruit the talent and resources needed to ensure that it operates smoothly without agency support.
Figure 3: ‘What type of programmatic model do you use’ (Source: Econsultancy)
Conclusion
Programmatic advertising is looking to continue to thrive in the years to come with ‘88.9% of all UK digital display ad spending’ generated by programmatic in 2020, according to eMarketer. Although challenges continue to prevail there seems to be confidence in the future with more companies wanting to target consumers on a much more personal level.
The Brightblue team have decades of experience helping clients understand media efficiency by truly digging into the drivers of sales and revenue. We have experience across automotive, retail, travel, entertainment, telecoms, FMCG, white goods, financial services, health and many other sectors. Our unique way of modelling the entire client journey truly helps marketeers understand what they can do to shine in their organisation by driving business and making a real difference to their bottom line. Get in touch if you have any questions on this article or any of the ways Brightblue can help.