The Problem With Programmatic

You've probably heard the term 'programmatic' in the past 12 months, and the thirst for a succinct, simple overview of what that means seems to continue. As a digital media expert I'm not particularly surprised by the confusion, you see we're very good at making simple solutions sound complicated. That's particularly true in agency environments, as anyone who's been pitched to will no doubt attest.

As that environment becomes increasingly fragmented I've seen an increase in these instances. Answering a client question on the subject is too often followed with hyperbole, almost as if we can't give the 'straight' answer anymore. Some might reflect on the erosion of the traditional agency model, and justify this approach based on needing to demonstrate value and understanding, in spades, to appease the modern client. Personally I don't buy into that, I just think that - on occasion - there's simply a lot of b****cks spoken in the name of validation.

So let's relate that to this subject. Whether you're a seasoned digital marketer for an SME, or you barely understand PPC advertising, you need to understand programmatic. Not only what it means for digital advertising, but also how it will influence the buying of other media.

An obvious place to start is summarising the programmatic landscape. The fanfare for the medium promised multiple buyers/sellers, and benefits for all parties in a liquidity rich environment. However, what we tend to see is a stumbling journey to achieve scale - as the industry realises existing processes aren't sufficiently transparent (or effective) to foster that growth. Bidding, fees and net CPM's are example areas of concern for many advertisers and agencies.

We are witnessing bounded rational behaviour through the lack of transparency, and a disparity in how buyers and sellers value inventory. An advertiser can pay a premium on their non-guaranteed programmatic buys, with the publisher's net received figure being much lower. Because the model isn't transparent this could mean a $5 CPM has $2 in undisclosed fees. Such examples undoubtedly lead to efforts to work around programmatic instead of optimising it; based on the issue of attributing value accurately.

An extension of the value issue comes in the form of aggregate bids. The attempt to drive efficiency (through a single bid for multiple clients/brands) seems sound in principle, however it can actually trigger outcomes that diminish effectiveness as: -

- Density & liquidity are adversely affected (and therefore efficiency).

- Can no longer factor purchase intent to advertisers budget restrictions/optimisation.

So how do we change this? How can we simplify the process? Transparency. Both in the bidding process, and in pricing/fees. There needs to be an alignment between publishers and buyers to create this, and that is the challenge. When it comes to pricing; line-by-line itemisation would remove the confusion on the buy (e.g. the $5 CPM example used earlier would be $3 CPM and $2 in fees) I'd consider this the most simple solution to avoid the disparity around value.

These are the main challenges as I see them, presuming (as most experts predict) we see the medium develop to support skipable/mutable video. The macro view of programmatic (if you want to keep it really simple) is that it shortens and simplifies a traditionally labour intensive task. The outputs of which include driving cost efficiencies for the advertiser, as well as the usual benefits associated with digital advertising - such as the data it produces (for optimising your media weights, amongst other things)

2015 will see more advertising dollars migrate from traditional channels, as consumer consumption evolves, so the quest to find the right balance is there for companies small and large. Whatever your current strategy is - I'm always happy to discuss individual situations, so feel free to ask if you're still unsure of what programmatic can do for you.