AdExchanger Research Keeps it Real with Programmatic

Conversations about programmatic buying are happening at all levels in the industry and many believe it represents the future of advertising. With programmatic spend projections nearing $9.8 billion in 2014 (eMarketer), it seems that the dollars are finally living up to the hype. A new report from AdExchanger Research seeks to set the record straight. “The State of Programmatic Media” unearths the true status of programmatic. It features spend trends, channel adoption, growth opportunities and obstacles based on insights from more than 400 professionals in the advertising community, including marketers, agencies, publishers, and technology providers.

We’re big fans of the report (and its author). For the time-starved and curious, here are four takeaways from AdExchanger Research that we feel sum up the “state of the state” in programmatic:

1) Spend is Increasing, But Shifting Away from Auctions

Currently, more than half of marketers indicate they are managing at least 20% of their total digital media budget programmatically and more than a quarter are managing at least 60% in this fashion. Dramatic increases are seen on the agency front, where one-third of agency employees surveyed plan on managing at least 80% of clients’ digital budget programmatically in the next year. However, there is a shift happening in the types of media buys. Auction-based buys through exchanges will lose share as marketers shift to guaranteed buys and private marketplaces for premium inventory opportunities.

2) Programmatic Has Gone Multi-Channel

In its infancy, programmatic was an opportunity for the industry to trade on remnant display inventory at reduced premiums. As programmatic has matured, media is now readily purchased across multiple channels including mobile, video, social, and email. Most marketers are buying programmatically in at least four channels. AdExchanger Research also sees an increase in programmatic television buying in the coming years. The challenge is in the economics of supply and demand. Revenue still lags in programmatic media buys and publishers are working to determine ways to establish the same value from media purchased either programmatically or through direct sales. For instance, video inventory is still extremely scarce via programmatic channels (due to high value placed on it by publishers). Digital media needs to stabilize first before large, television dollars will migrate too.

3) Benefits Fluctuate

Marketers, agencies and publishers realize varying benefits in programmatic media buying. Marketers find value in the advanced audience targeting capabilities that allow them to position their message to the right audience, at the right time, in the right place. The enhanced ability to directly target with this specificity increases the return on their investment by remediating media waste and having more control over their media programs. Agencies find the most value in ROI as they feel the pressure from clients to drive more value from each media buy. Publishers lean towards enhanced operational efficiency and better sell-through of their inventory. Publishers have been trying to achieve a balance in selling more inventory while preserving the best yield. The media buying space has continued to fragment with programmatic, but publishers are starting to invest more in these efforts to keep pace with buyer expectations.

4)Addressing Obstacles

Although programmatic is reaching a maturation point, there is still much do. Inventory, education, and taxonomy of programmatic media buying are a few areas that need to be addressed. Inventory issues have been one of the most prevalent obstacles for marketers. There is ample volume of impressions available to be purchased, but marketers are looking for high impact media and more premium options. Fraudulent traffic is another issue that is plaguing the space, and marketers are demanding to see improved viewability from both agencies and publishers. Programmatic has been around for a few years, but the glut of technology partners and capabilities makes it difficult for all the players to agree on (let alone operate within) a unified taxonomy. Many players use varying definitions and have a unique way of approaching programmatic; this confusion hinders everyone in the digital ecosystem.

Can We All Work Together?

A burning issue we hear from our clients is which approach will ultimately win out. With agencies favoring a mixed-bag approach to programmatic technologies and marketers preferring a single partner approach, how will this impact the future structure of our digital ecosystem? We asked AdExchanger’s Joanna O’Connell, author of the report, for her thoughts, and below is what she had to say:

“The agency/marketer dynamic is so interesting, and - in terms of how it will play out - the future isn't clear to me. My next research report is going to look at this in more depth: specifically the question of when and how marketers should take programmatic in-house. I don't necessarily expect the answer to be, a) do it or b) don't do it. I anticipate there will be a spectrum of approaches that suit different marketers for different reasons. I've, for many years (really since learning about the DSP model back in late 2007), been a believer in consolidating as much as possible through a single platform - the big reason is that then everything is likelier to "talk" to everything else, where when multiple platforms are being used, they each operate as an independent fiefdom. No global frequency management, no global conversion optimization, etc. I get that not all platforms are created equal, at least today, and that there may be benefits realized in one (including inventory access) not available in another. I anticipate as larger marketing technology giants buy their way into the digital advertising tech ecosystem, those differences will lessen over time, and the benefits of consolidated management will outweigh the drawbacks, a la search.”

Change is coming! Fasten your seatbelts.