2013 in Review: Myths of Programmatic

Everyone talks about it but most people don’t understand what programmatic really is, what it isn’t and how it works. The people who understand programmatic are directly involved and tend to spout jargon, which ends up taking place inside of an echo chamber. Programmatic is very technical and as an industry we’ve yet to make it easy to understand.

People think: RTB is programmatic. Programmatic is ready for brand advertisers, therefore RTB is ready for brands.

We have seen this faulty logic mistakenly applied over and over. While Real Time Bidding (RTB) is programmatic not all programmatic is RTB. Programmatic is large scale automated buying, accomplished through machine-based transactions, data, and algorithms. RTB provides buyers with access to real-time inventory in an auction environment at scale. RTB is a subset of Programmatic and with limitations. RTB was an early iteration of programmatic, solving primarily for direct response advertisers’ need for scale at low cost. RTB was not built to solve specific needs of brand marketers like targeting across devices, brand safe placement with premium publishers or flexibility all with complete transparency. The current approach, Private Market Places, tries to layer on top of the RTB infrastructure the needs of brand advertisers and it is still fairly clunky. It is improving, but is it still very manual and painful.

Premium is the future of programmatic. Today’s eMarketer article further articulated the differences between programmatic direct, a new nonauction-based branch of programmatic advertising, and the typical RTB-made ad placement. Programmatic direct (or premium programmatic) offers publishers and brands a perfect marriage of audience-specific intelligence and workflow efficiencies of automation with the safety and control of traditional publisher-direct transactions. And while programmatic direct and RTB don’t compete with each other, they are best used in conjunction with each other to satisfy brand-based and performance-based goals.

Programmatic will replace direct sales

Programmatic and direct sales are not mutually exclusive initiatives. The truth is that programmatic media buying is a combination of both science (data + algorithms) and art (interpretation and analysis). The human element will always be necessary in driving big strategic decisions and making sense of vast amounts of data, on both the buy and sell sides. There are ad placements that can be bought programmatically, and those that cannot. Publishers will need to align their organizations accordingly.

Programmatic is always good for publishers.

The average cost of inventory being sold programmatically is, on average, increasing but in many cases the eCPM for individual publishers is actually going down. The common misconception is that because average CPMs are rising within exchanges than CPMs are rising for each publisher. The reality is that we are seeing inventory that used to be sold direct now being sold programmatically. While this inventory is valued at a higher price than the types of inventory previously available programmatically, it is still being sold at a eCPM to the publisher than if sold direct. However, for some publishers, they have also been reducing their sales and delivery costs, so those publishers are maintaining or improving their margins.

The age of programmatic marketing is upon us. It’s time for brands and their agency partners to make the critical changes to mindsets, skill sets, marketing processes, and adoption of new technologies for to achieve omni-channel and customer-centric marketing.

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