Campaigns

A Byte of Programmatic Buying

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In a data driven economy Programmatic Buying is the approach marketers are shifting to in order to best utilize data and examine their selling strategies better.
by

Diarmaid Byrne

Photo Credit: rednuht

Marketers traditionally try to combine the best ideas with the best copy and visual design. Then, through placements in magazines, on radio and television, and in public spaces, they try to attract people to their product and in to their stores. Publishers and broadcasters spend time and money to understand their audience in order to be able to earn revenue by offering advertisers the appropriate
Photo Credit: Accendomarkets.com

audience for their products. If an advertiser wants to sell luxury watches they will target locations where their buyers highincome earners spend their time: lifestyle magazines, business magazines, financial newspapers, and specific sporting events, to name just a few. This entire process seems outdated: too slow, expensive and inaccurate. Surprisingly, the amount of money spent on such traditional brand advertising has not changed greatly since the growth of the internet. This is disconcerting considering we are in the most disruptive shift in communications since the invention of the modern printing press. Sophisticated supply chains, cheap processing power, constant internet access, smart-phones, and tools to connect with others and express opinions have caused this shift. This has led to an evolution in behaviour to more permissive online sharing of everything from location and opinions to purchases, feelings, photographs, and music. Entire lives are shared online. Naturally, with this new normal of unequalled
Kuliza Social Technology Quarterly Issue 07

understanding of people based on their social data, the traditional method of advertising is under threat. It is increasingly challenged by fast-paced, algorithmic bidding systems that target individual customers instead of an aggregate audience. This is known as programmatic buying. It explains why an advertisement for furniture follows users across multiple, non-furniture sites. In an interview with Forbes, Bob Arnold, the Associate Director of Digital Strategy at Kelloggs, explains programmatic buying at a high level: it allows advertisers in a matter of seconds to bid through a platform for ad space based on a number of parameters: price, data, context, and placement of the ad. The platform can also take into account the clients digital media plan brand, budget and success metrics while including other data sources and decision algorithms to find the appropriate locations for the right consumer at times when they are

most likely to be receptive to the message. Based on a users online data, a company will decide whether to target a particular customer if the customers data suggests that there is a high chance that they will purchase the product. If I am a consumer who frequently reads and watches content about fitness and exercise, and who buys sports products online, Nike may decide that I am the correct type of person to target with their ads. Through the flexibility and speed that it provides, programmatic buying is becoming more common. According to data from Forrester Research, programmatic ads increased by 17.5 percent between 2011 and 2012. Federated Media, one of the worlds largest digital advertising networks, estimate that 10 percent of display ads that people see have been sold through programmatic buying. Indeed, with the demand dropping for display ads in general, 17

Federated Media decided in November 2012 to focus its business on programmatic advertising and conversational and native advertising. With algorithms choosing which online locations to pursue for advertising, programmatic buying is having a big impact on publishers and their ad revenue. Rather than spend $10,000 on advertising on a publishers website, a brand can instead buy ad impressions on any website where their relevant audience is, and pay less per ad. In a recent article, Tanzina Vega commented that in the New York Times Company earnings in October 2012 digital advertising fell by 2.2 percent. This was attributed to a shift toward ad exchanges, real-time bidding and other programmatic buying channels by their CFO. This is a shift that is only going to continue and grow over the next years. The major cause is the ever-improving ability of companies to measure, analyse and understand everincreasing mountains of social data that people produce daily through their online

behaviour. Apart from demographic data, it is data about what they like, their opinions and views, their intentions through content they share, and also location information. The understanding based on this is the most valuable information available to brands because it allows them to offer more relevant ads to their target consumers across many more online locations that previously. As a result of targeting the appropriate consumers they will learn even more about them. It will also allow them to utilize other online social tactics to understand more about their friends and followers, such as a group coupon offer. In theory this greater understanding will benefit both the brand and the consumer, who will experience fewer irrelevant ads. Social data will have an enormous influence on business decisions. A report by Bazaar Voice and The CMO Club titled Chief Customer Advocate: How social data elevates CMOs found that 78 percent of CMOs considered social data to be effective in indicating the influence of individuals or

groups on purchase decisions. 73 percent found it effective in indicating consumer sentiment towards a brand or company. This means that social data will enable brand marketers to understand their target group, measure the impact of their online marketing efforts and thus allocate more money to methods and locations that allow them to reach their target audience more effectively and profitably. It will be a win for both brands and consumers, but publishers who rely on traditional advertising unfortunately face an uncertain future. Social networking sites may be the winners in this evolution. Many posts, tweets and shares online are inane, but added together and they can contain valuable information. As social networking sites collect ever more social data they may start to find ways to profitably use that data rather than relying on advertising. The issues then are who owns the data and what is the relevance of privacy laws to protect people.

References
CMOs Tapping into Social Data for Consumer Insight (Social Media Marketing). MDG Blog. MDG Advertising, 09 Aug 2012. Miller, Ron. Ads Will Be A Footnote In Socials Full Story. Forbes.com LLC, 24 Nov 2012. Gutman, Brandon. Kellogg Proves ROI of Digital Programmatic Buying. Forbes.com LLC, 11 Sep 2012. Sipping from the fire hose: Making sense of a torrent of tweets. Economist, 01 Oct 2011. Photo Credit: Poster Boy NYC Vega, Tanzina. The New Algorithm of Web Marketing. New York Times, 15 Nov 2012. Cheredar, Tom. Federated Media is done with banner ad sales. Venture Beat, 09 Nov 2012. Thomases, Hollis. What Media Planners Need to Know About Programmatic Buying. Clickz.com. Incisive Media, 03 Apr 2012. Global Online Advertising Spending Statistics [Infographic]. Go-Gulf.com, 02 May 2012.