The Lure of Programmatic: 1:1 Connections at Scale

Marketers are spending more money than ever to reach online consumers. How much and where they are spending is shown in the following research, which owes much to two key sources, AOL and eMarketer.

The total spend on US digital advertising in 2014 was $51 billion, 44% of which was spent on digital display. Digital display alone represented $22 billion.  In 2014, 45% of the total digital display ad spending was done programmatically; by 2016 this will rise to 2016.

Programmatic is divided into two key components: RealTime Bidding (RTB) and Programmatic Direct, depending on whether there is an auction. RTB is auctioned; Programmatic Direct guarantees inventory. Auctions themselves are further divided into open exchanges and private marketplaces, while Programmatic Direct can be either Programmatic Guaranteed (automated guarantee) or a Preferred Deal (unreserved fixed rate).

While the industry pundits have been talking about Programmatic since 2010, it has really begun to grow in the past two years. RTB was the first aspect of programmatic to take off, and for a while the two terms –Programmatic and RTB –were thought of as the same. While RTB is still the dominant transaction method,  and open exchanges still dominate, we predict that private market places will see much steeper growth over the next few years.

Why? Because advertisers want more control over where their ads appear, and as adoption by publishers increases, they have more choice. There is growing demand from agencies and other large scale ad buyers for private marketplaces, and as a result ad tech players are incorporating private marketplace capabilities. Programmatic Direct will take on RTB with increased spend by 2016, reaching 42% of programmatic ad expenditure in the US, or $8.57b. This rise will be off a base of just 8% in 2014.

Programmatic will move further toward a premium future. On the brand and agency side, the most important reasons to spend on programmatic were economic efficiency and targeting. On the publisher side, targeting was the main reason, with efficiency not far behind.

Mobile will overtake the desktop in programmatic as early as next year, taking 56.2% of all programmatic ad expenditure. This trend is consistent with the digital display market overall, which has rapidly shifted to mobile. US programmatic video is in the early states of adoption and implementation, but investment is growing. Today, publishers highly guard high value ad inventory such as TV and premium video content, though we expect a greater number of ads sold programmatically in these formats starting in 2015. Those who do decide to turn to programmatic, however, are likely to do so via programmatic direct, where they can still secure inventory guarantees.

Why will programmatic win? Because, as Hearst’s Mike Smith says in Targeted,, for the first time advertisers are able to buy individual consumers instead of audiences aggregated like bunches of grapes. Programmatic can deliver personalized messages at scale in real time. Buying decisions can be made across billions of impressions globally in milliseconds. Programmatic also helps marketers in their rapid shift to cross-screen advertising. Nothing connects like video, and programmatic can make it more powerful. Access to video inventory has sky-rocketed, with 4x growth in impressions for videos transacted programmatically.

Programmatic buying is a leap forward to integrated marketing and measurement. Measuring what matters is finally possible with new tools. In an era where the average number of digital platforms used by advertisers to address cross channel needs is 4.7, programmatic helps address media fragmentation.

 

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