Understanding Programmatic Digital Ad Buying

Understanding Programmatic Digital Ad Buying Interview With An ExpertKen Mallon Global President, Ipsos ASI|digital

You have to be fast on your feet and

”“ adaptive or else a strategy is useless– Charles de Gaulle

UNDERSTANDING PROGR AMMATIC DIGITAL AD BUYING

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Digital advertising is still somewhat of a new phenomenon and its use, measurement and performance can still stir uneasy feelings among many advertisers and marketers. When you consider that television took off in the 1950s, radio in the 1920s and before that, we had billboards, print advertising, posters, town criers and even ancient papyrus scrolls – digital is truly an infant among elders.

We know the others very, very well. We grew up with all of them and we’ve studied them for years. The world of digital advertising, however, is quite new and it is a world that that is growing and changing very quickly. As such, it creates some apprehension. But its time to set those fears aside, because digital advertising is becoming much more pertinent and much more relevant in the daily lives of your consumers. And there’s a lot we are learning about it and from it!

In my twelve years or so of experience in the realm of digital advertising, I’ve seen a lot of these changes first hand. While the impact, reach and scope of digital advertising has grown, one of the biggest changes in the digital arena that rarely gets discussed is the change in how advertisers purchase digital ad space.

I am often asked my opinion about these changes to how digital media is purchased and what advertisers need to consider to make programmatic buying work for their communications. The following is a summary of what we discuss.


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A Brief History of Digital Advertising Media Buying

The history isn’t long so it is easy to be brief, but there have been significant changes in that short space of time.

Digital advertising used to be purchased and sold 100% manually. Those with ads to sell, such as Yahoo! and MSN, would pitch their content and associated ad inventory and targeting solutions to advertisers and agencies. It worked in the other direction as well. Agencies and advertisers would put out RFPs requesting access to certain audiences in certain contexts.

Putting Programmatic on the Program

As ad networks and the alphabet soup of associated and emerging platforms such as DSPs, SSPs and RTB systems (http://www.clickz.com/clickz/column/1931527/dsps-ssps-rtbs-dmps-online-medias-alphabet-soup) developed, programmatic buying has become more commonplace.

One of the best summaries on the topic of programmatic ad buys comes from a white paper from Rocket Fuel, one of the most rapidly growing providers in this space (http://rocketfuel.com/newsroom/blog/10-questions-about-programmatic-buying-and-the-answers-marketers-need). I encourage you to download a copy of it to get their perspective.


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The Stock Market Analogy

The best way to explain how this all works is to think of the stock market. Stocks used to be bought and sold by calling a broker and providing a minimum price at which you’d be willing to sell a certain number of shares of a specific stock or with a maximum price you’d be willing to buy a certain number of shares. Those minimums, maximums and quantities used to be subjectively chosen by humans, for the most part. However, economists and mathematical scientists have studied the stock market to come up with more optimal ways to select these figures and programmatic stock exchange systems were developed in which overall goals are input and algorithms optimize the rest.

Similarly and not coincidentally, the digital ad world has developed ad exchanges. There have been a number of articles written about these exchanges and programmatic buying. In a nutshell, these are marketplaces in which ads are essentially auctioned off and, increasingly, this is done so programmatically. Ad inventory across ad networks is bought and sold by computer algorithms based on the price and a variety of attributes associated with the inventory.

The Good, The Bad and the Programmatic

Is programmatic buying good or bad for the industry? I am of the belief that market-based systems are generally good for the overall economic health of an industry largely due to the transparency created by it. The prices, amount of inventory and key metrics are all available to the buyers.

However, there are a couple of ways in which these systems are imperfect and marketers need to be aware of these limitations. One such imperfection has to do with certain types of marketplace dynamics that arise in an auction based system (which I’ll illuminate with an apple pie example) and another that I’ll explain further has to do with metric choices.


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Mmmm, Apple pie!

What do marketplaces, auctions and programmatic buying have to do with apple pies? Suppose for a minute that all apple pies were bought in auctions and suppose too, that you have a pie selling business. Now suppose your business specializes in berry pies but you like to also sell apple pies. You’ve been buying apples at a certain price for some time but now you have to buy them at an auction. You arrive and notice the prices are going much higher than you are used to.

What’s going on? What’s going on is that some of the buyers are businesses that specialize in apple products. Those who sell only apple pies, value apples greater than you value apples (since you sell mostly berry pies). The fact that you must now compete with businesses that are very focused on apples can essentially drive you out of the apple pie business. The bottom line is that auction structures favor the seller – the seller gets to sell his/her apples to the person who most wants apples. That being said, if there are plenty of apples, the auction price will go down as the big apple pie buyers accumulate what they need.


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Metrics Systems

The second issue has to do with metrics. Philosophically, I like to think about advertising in a holistic way as opposed to placing digital on its own in a silo. Positioning digital as being fundamentally different than other media, I believe, works against the media. When one thinks of digital advertising as being akin to a well-targeted magazine, one tends to create good creative and focus on reach, frequency, branding and other typical marketing metrics. In the early days of digital, the media attracted direct marketers who were more interested in immediate and direct response. This meant they focused on ad clicks and online sales (conversions) as the main metrics. This has not changed and exchanges on these ad marketplaces tend to be made based on historical and predicted clicks and conversions. If you are a brand marketer, who doesn’t sell much product online, these direct response metrics are often not the best way to optimize. So, it’s important to demand and communicate to your programmatic buying vendor the metrics you really care about.

There are many great ways to use programmatic buying and its use is growing each year. I encourage you to find out what you need to know – what it is, how it works, some best practices – because it is going to have an impact on your communications and media strategies. And if you want to join in this discussion, we at Ipsos ASI|digital are happy to provide thoughts, advice and conversations. We’ll gladly point you in the right direction.


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Interview With An ExpertWhat makes an expert is years of hands-on experience. Sharing their passion for the art and science of advertising, senior experts from Ipsos ASI offer unique insights into what makes great advertising, great. In this series, seasoned experts will discuss the power of re-transmission, leveraging emotions in advertising, virality and wear out, leveraging social media, and better measurement for better outcomes.

About Ipsos ASIIpsos ASI is a leading global research agency specializing in advertising and brand communications. Offering state-of-the art research solutions that employ measures predictive of in-market performance, our research helps clients build stronger brands.

Our areas of expertise include all aspects of advertising development and in-market evaluation across traditional and emerging media. Ipsos ASI’s goal is to help clients deliver the right message at the right time across the right media to deliver the best return for their brand.

The Ipsos ASI team of brand and communications research experts is a global community of specialists who are passionate about advertising. From concept development to production, from final execution and into post-implementation performance, we help inform client decisions at every stage of the process.

To learn more about Ipsos ASI, visit www.ipsos.com/asi

For more information, please contact:Leah McTiernan Vice President, Ipsos ASI [email protected]

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Understanding Programmatic Digital Ad Buying