At the start of every year, digital marketing teams around the world draw up checklists of short- to medium-term challenges they must address in order to meet the moment successfully. The 2023 edition probably includes big-ticket action items like:
Of course, there are many moving targets on this list—the landscape changes, and new priorities emerge. However, there are certain challenges that remain ever-present, and those always-on initiatives are essential to driving brand awareness and customer acquisition.
Maximizing return on investment (ROI) from programmatic ad spend is one such example. It’s an enterprise that’s simultaneously crucial (given the ubiquity of the programmatic market) and complex (given the pace of evolution across the digital ecosystem).
Programmatic ad spending remains strong in the US, despite—or perhaps because of—macroeconomic headwinds. Indeed, the flexibility afforded by programmatic makes it a safer bet in times of uncertainty, as advertisers can quickly shift budgets and optimize spend toward channels, platforms, or formats that are delivering high returns without the headache of navigating cancellation terms. The medium is so pervasive today that it encompasses over 90% of US digital display ad spending and its share is expected to increase incrementally through 2023 and 2024. Programmatic also continues to gain traction in maturing channels including connected TV (CTV), digital out-of-home (DOOH), and podcasting, as well as more traditional channels like linear TV (more on all that later). Then there’s the added dynamics of retail media networks, around which programmatic advertisers are swirling with interest thanks to their treasure trove of first-party consumer data and closed-loop attribution.
Put it all together and it becomes clear that maximizing ROI on programmatic ad spend is a huge undertaking. It requires connecting the dots between different tech players in the supply chain, different point solutions, different pricing methodologies, and unstandardized metrics—that’s a lot of moving parts! Here, we’ll break down some of the complexities involved in driving programmatic performance, including definitions and formulas, important trends across the current programmatic landscape, and tactics marketers can implement to capitalize on programmatic’s potential.
Ready? Let’s dive in.
Programmatic ROI is exactly what it sounds like: it refers to the return on investment a company makes from its programmatic media buying initiatives. It can be calculated to show the payoff on programmatic spending holistically or it can be broken down in more granular terms—be it by channel (CTV, audio, native, etc.), device (smartphone, desktop, TV), ad type (video, non-video), campaign, creative, or even demographic and geographic data.
It’s pretty simple, really. And, also, really important to measure.
At a time when marketers are facing mounting pressure internally and externally—from boardrooms to justify spending and from consumers to deliver seamless personalized advertising experiences—it’s more critical than ever for marketing organizations to accurately track performance and identify where they are most effective. Embracing the use of ROI as a discipline can help build more robust and agile brands that are set up to cultivate meaningful long-term relationships with their audience. It’s marketing 101 in 2023.
Calculating ROI is done through a straightforward formula: subtracting the initial investment from its final value, dividing the resulting number by the cost of the investment, and finally, multiplying it by 100.
For example, let’s say a company spent $250k on a social campaign that generated $1 million in revenue. The number crunching would look like this:
Net income ($1 million – $250k = $750k) / Cost of investment ($250k) = 3. x 100 = 300%.
Obviously, the goal with any ROI-based project is to end up with as high a positive number as possible, but success is truly in the eye of the beholder. What constitutes a triumph depends on all manner of factors. Some companies also establish a threshold for ROI that considers risk tolerance and the cost of human resources, below which they may be hesitant to make investments.
It’s also worth noting that ROI doesn’t necessarily have to be financial in nature. Once marketing organizations have set up ways to track the dollar value of programmatic activities, there are also benefits to factoring softer metrics into the equation—think engagement on social media, ad impressions, new subscribers, video views, or website sessions. They all contribute to building brand awareness and establishing an active presence in the minds of consumers. When managed properly, these KPIs can help reduce the need for paid media in the first place, thus essentially driving higher ROI in the process.
Blink and you’ll miss something significant in the world of programmatic, such is the speed of its evolution and growth. Right now, programmatic accounts for 91.1% of total US digital ad spending, with marketers stateside forecast to spend $21.49 billion more on programmatic display ads than they did last year (a 16.9% jump). For context, that’s more than double the increase predicted in Canada, China, France, Germany, and the UK combined.
But where’s all that money going? How does it break down? And how is it being served? Let’s explore:
This is easier said than done, especially when a given campaign can span several channels and platforms that report against independent metrics. Brands today are using an average of 18 disparate data sources in their campaigns (up from 15 in 2022). And incredibly, only 14% of marketing organizations claim to have a complete 360-degree view of their customer base. Fourteen percent! Operating through disconnected silos leaves you susceptible to all kinds of issues from an operational and legal standpoint. It's also a drain on resources with media planners forced to spend a disproportionate amount of time trying to wrangle their data into a cohesive story. Gaining unfiltered visibility into your data at scale is truly transformative in the modern advertising climate—and maximally effective, consumer-centric advertising (and consequently better ROI) is next to impossible without it.
Once you have your data ducks in a row (or if they are already lined up nicely), be sure to actually use your analytics to understand your baseline potential and develop strategic hypotheses that can inform campaign execution. Learn as much as you can. Play with different scenarios. If your data reveals distinct clusters of consumers who derive different value and benefits from associating with your brand, apply that knowledge to the stories you’re telling across your programmatic media—that’s data-driven marketing. Then it’s all about testing. Programmatic makes it easy to swap out concepts. Experiment with copy, visuals, links, whatever, and narrow down what your audience is responding to. If there’s any doubt whether something is working, simply turn it off and observe the effects.
Regardless of how good your data is, how streamlined your measurement is, or how robust your targeting is, nothing can mitigate the shortcomings of ads displaying lackluster creative. Given how much digital media people consume on a daily basis (8 hours and 23 minutes’ worth, to be precise), simply “turning up” and exposing your brand or product is not enough. Your marketing must forge emotional connections with consumers and set you apart from all the noise. That means tailoring your messaging and design and creating specific stories for specific personas. It also calls for more collaborative ways of working between your media folks and creative teams—get together to discuss the finer details of audience segmentation and dive into the successes and failures of past performance. Your ads will become all the richer as a result.
Sure, programmatic is automation in action. So, by definition, if you’re executing media buys programmatically, you’re already actively embracing automation. But fully leveraging the potential of advertising automation extends to what happens behind the scenes, aka the platform(s) you use to activate and measure your campaigns. Programmatic is a complex beast, so it’s vital to utilize technology that simplifies some of the work for you and helps you stay nimble—be that by consolidating your workflow, using machine learning to optimize bid adjustments, or centralizing performance data. Those who do so can save time, cut costs, and focus on what matters: strategy and outcomes.
Time commitments aside, there are no drawbacks to regularly auditing your programmatic supply path. As the market collectively adjusts for a focus on privacy and the end of third-party cookies, advertisers and publishers are cutting out unnecessary intermediaries and opting out of relationships that don’t offer clear value as part of this sea change. New laws have also come into play requiring a more thorough understanding of who has access to consumer data throughout the bid stream, meaning there is no better time to conduct a review of your partners. A violation around data today can have serious repercussions—just ask Sephora and Kochava.
It’s a new day for marketers, and industry-wide transformations are reshaping how brands connect with consumers. Programmatic is just one cog in that machine, but it’s a powerful and dynamic one. Orchestrating performance across programmatic channels relies on a host of capabilities and processes, but for those willing to invest in them, better campaign ROI awaits.
Looking for more programmatic content? You’re in the right place. We’ve got the top seven programmatic advertising trends to know for 2023. We’ve got everything you need to know about programmatic guaranteed. And we’ve also got a handy quiz that helps you identify which programmatic buying method is right for your organization (including all-in on in-housing, a hybrid approach, or outsourcing).