The unofficial buzzword in advertising — especially mobile — for 2014 is programmatic. While programmatic has become one of the most talked-about innovations in advertising this year, a surprising chunk of the ad world still don’t have a clue what it actually is.
So for the uninitiated, programmatic simply means automating the process of buying advertising inventory. Programmatic has made a huge impact on mobile advertising, with a momentous shift among mobile ad networks to demand side platforms (DSPs), which allow them to better focus on client needs while automated exchanges handle the ad inventory.
Programmatic has begun automating the buying, placement and optimization of advertising. That means time-tested methods like face-to-face meetings and phone calls are going the way of the travel agent in some advertising circles. But it also means a faster, easier and more cost effective process, less prone to human error, for both buyers and publishers.
It all adds up to some pretty big business. According to Karsten Weide, an analyst at International Data Corporation (IDC), total programmatic spending, including all mobile and online display and video advertising, amounted to $4.8 billion last year. That figure has more than doubled to more than $10 billion in 2014, with programmatic now accounting for 45 percent of the US digital display advertising market, according to eMarketer.
But what should we be on the lookout for in 2015 when it comes to programmatic?
“Anything that can be automated will be automated,” Weide told inma’s David Murphy, who points to forecasts predicting $14.7 billion in programmatic spending for 2015, $38.1 billion by 2016 and a staggering $55.3 billion by 2017 as proof that the disruptive technology is here to stay. Xaxis CEO Brian Lesser told Advertising Age that we’re witnessing nothing short of a “fundamental shift.”
“Not just [in] how media is bought, but how advertisers can engage with consumers more effectively,” said Lesser.
Toward Greater Recognition
In addition to rapid growth in use, 2015 will see greater recognition and understanding of programmatic among advertising professionals. According to the Association of National Advertisers, which surveyed more than 150 marketers, only 26 percent of respondents both know what programmatic is and have used it before.
We expect this to change very quickly, especially in light of the next major programmatic development for 2015, the evolution from auction-style real-time bidding (RTB) to a ‘programmatic direct,’ or private marketplace-based approach. Part of the ignorance regarding programmatic stems from the assumption by too many people that it is indistinguishable from auction-style buying. But the move away from RTB is giving buyers and their clients welcome planning certainty missing from the bidding process.
With greater recognition comes the need for advertisers and their digital providers to adopt identity solutions. Both big PII-owning players like Google, Facebook and Amazon, as well as niche players specializing in ‘cross-device’ will have to come up with solid identity solutions.
We saw in in 2014 how many major brands brought their programmatic operations in-house. The desire to get closer to the data will encourage more marketers in this direction. But note that not all of them will be successful, particularly companies with small marketing teams who may struggle to find sufficient resources to go in-house.
Programmatic Killed the TV Ad Star
Some observers believe programmatic will soon dominate the world of advertising, and not just in new media. Television, radio and print will not be immune. This is what’s sending a shiver down the spines of advertising professionals. But they shouldn’t worry too much; the need for the type of intelligent and creative insight and supervision that only the human brain can provide means there is room for them to thrive for the foreseeable future.
That being said, there will be a pronounced shift toward programmatic as more television and movies are streamed over the Internet. Hulu, as well as cable and satellite providers, have ventured into the world of programmatic. More traditional TV networks like ABC are about to join them.
The future, in fact, may not involve a choice between programmatic and traditional advertising, but rather more choices involving an evolved combination of both, delivering better outcomes for clients, publishers and media agencies.