The programmatic advertising phenomenon, already widely accepted in the US and Western European markets, is global and irreversible. Programmatic advertising technologies are reshaping the way digital media inventory is bought and sold.
Programmatic advertising has evolved from being a novelty to quickly becoming one of the leading growth drivers in digital advertising. Magna Global projects that programmatic ad spend reached $21bn globally in 2014, a 52% increase from 2013, of which $9.3bn was transacted through real-time bidding (RTB) methods. Growth will remain strong over the next four years, with an average annual growth rate of 27%, to reach $53bn by 2018.
Programmatic is more than a buzzword
Before diving into the opportunities and challenges surrounding programmatic advertising, it’s important to define both what it is and what it isn’t.
Programmatic refers to the automation of manual processes in the advertising industry in general and, more specifically, in the digital media-buying process.
Complex and labour-intensive processes of buying and booking media (eg, calling media managers, booking impressions, sending invoices, etc.) are becoming less and less necessary. Today, marketers have the technology and tools to do most of these tasks automatically, eliminating often inefficient manual processes from the media buying and media placement activities performed by buyers and sellers in the market.
Thus, the main benefit of programmatic is the efficiency it creates in the digital advertising marketplace. Media buying is becoming more automated, thereby reducing transaction costs on both the buy and sell sides. Additionally, programmatic advertising opens up new opportunities for publishers to monetise a broader spectrum of their digital ad inventory. This has a knock-on benefit for advertisers who can better reach the long tail of publishers’ readers and users, thereby opening up new paths for customer acquisition and retention.
Finally, programmatic advertising enables advertisers to leverage consumer data at scale to improve the overall efficiency of their digital ad campaigns.
Programmatic doesn't mean only executing data-driven and RTB campaigns. In many cases, the majority of a marketer’s digital ad budget will actually be allocated to guaranteed media, with the remainder being utilized for RTB.
Programmatic isn’t just for big brands
Programmatic buying is not only reserved for big global brands looking to reach millions of new consumers. Regional advertisers are also adopting programmatic buying and leveraging the latest targeting improvements to acquire new customers around their businesses and target local audiences. Borrell Associates estimates that the share of local programmatic digital ad spend in the US will reach $5bn in 2015, having grown from 4.7% to 10% of local digital ad spend.
The mobile programmatic ad opportunity
Publishers are quickly adopting programmatic techniques from display for use with mobile. However, the demand side (ie, brand advertisers) has been relatively slow to allocate a proportionate amount of their digital ad budgets to meet mobile programmatic supply. This surplus of supply is the main reason for the ongoing problem of low fill rates and CPM associated with mobile ad campaigns.
According to a recent Ovum study of 200 marketers (43% from companies with annual revenue of more than $500m), more than 76% of brand marketers consider programmatic buying in mobile advertising to be an important development. However, there is a big difference between considering and actually allocating budget. For example: only 27% of those 200 marketers surveyed are actually buying inventory programmatically. Most advertisers are not putting their money where their users are when it comes to where they allocate their digital ad budgets. Once marketers seize the opportunity, the mobile programmatic ad market will become a more profitable place for both the demand and the supply side.
Video and mobile programmatic are a match made in heaven
eMarketer asserts that this year, US adults will spend an average of 39 minutes per day watching videos on mobile, double the amount of time spent in 2013. No wonder digital video is the fastest-growing component of programmatic advertising, projected by the same outlet to grow 204.3% in 2015 and cross the $2bn mark.
Video will be the "gateway to mobile" for many brand advertisers that are hesitant to allocate budgets to mobile. Why? Video fits mobile like a glove. It's accessible; mobile phone screens are getting bigger; battery-life is improving; and improved bandwidth allows quality streaming.
As programmatic buying of video grows, look for more mobile video opportunities to come to market.
Programmatic is now
Today's manual processes are to programmatic as VHS is to Netflix. Programmatic, though still in its infancy, is most certainly a reality and is the future of digital advertising. In two to three years, the majority of media buying will be done programmatically and the industry will be leaner and more efficient because of it.