Much has been made of programmatic media buying being the future of everything for digital advertising. And indeed, the application of data and technology has been transformative for the media industry.
Someone once told me that if I need to know how to use a fax machine, ask a digital media planner/buyer.
Today’s technological advancements are finally changing that perception, and technology’s application to the complicated business of valuing and buying digital ad impressions is creating immense process efficiencies.
But programmatic is having a much wider impact and creating more than just cost and time efficiencies.
It is transforming the very principles that underpin what we do in media, not just how we buy it. Never before have we had the opportunity to target and engage audiences so precisely, with such specific messages and at such appropriate times in the purchase funnel.
Never before have we had such a propellant that brings together the creative and media sides of the business so efficiently.
And the efficiencies and effectiveness that we can eke out of media by strategically applying data and technology at every stage of the planning, buying, and reporting process are not just beneficial for agencies, but also for clients, publishers, and the many sides of the digital ecosystem that have often struggled to find integration points with an industry that has traditionally been hung up on buying media.
Due to the transformative possibilities that programmatic technology is presenting, I am often asked; ’Does this mean that programmatic will replace the old media buying models?’ And ‘Will media agencies disappear?’
There are some interesting parallels that can be drawn with other industries where programmatic trading has completely replaced older business models; the energy sector is a good example.
Like digital ad impressions, electricity is a completely non-storable asset. It can’t be put in a storeroom and later sold off (when the price for the commodity is higher, for example).
Economic theory tells us that an auction is the best way to determine the price of a non-storable asset: buyers and sellers deciding there and then what the asset is worth, with that value potentially being very different now than in 5 minutes or 5 hours.
It works for electricity. But does it work in digital advertising? I am not so sure. Firstly, electricity is much the same and advertising impressions are not. There are significant variances in ad impression quality - you only need to look at the current debate surrounding viewability to see that!
Secondly, with electricity the buyer is not bothered who the seller is. Do you know which power station your electricity comes from? Nor do I. However, I am yet to meet a client who does not care where their media is placed.
Even with the many verification tools that provide brand safety assurances, clients prefer to know where their ads will be.
Similarly, the electricity supplier does not care who the buyer is. Power stations do not decide on the exact individuals they are going to sell to. However, in the media industry publishers care deeply about who their advertisers are. A premium publisher would, for example, much rather run ads for a luxury car brand than for a gambling site.
Finally, the technology utilised in the utilities industry is, compared to our industry, relatively straightforward.
In media, the need and desire to bend to the distortions to the ‘free market’, has given rise to many vying technology companies and niche players, all of whom have a different USP, or focus on solving one or other problem.
DSPs, SSPs, DCOs, DMPs, Adnets, Exchanges; all of them have their unique take on today’s media challenges and in their (genuine) efforts to help resolve these, are actually creating a further layer of complexity.
The upshot is that the distortions in our industry are not contrived but genuine concerns and needs on all sides of the media ecosystem. As an industry we need to deal with these varying challenges, rather than ignore them and hope they will go away if only our technology were up to scratch.
So, we come back to the question; Will programmatic be the future of our industry? Certainly it has a major role to play, but programmatic is much more than just buying specific media in real time. It is a truly advantageous, time and cost effective process - bringing data and technology into the process of executing an ad campaign, even across pre-bought inventory, captures many if not all of the advantages.
Using data and technology is a complex business, and getting ever more complicated. As such, agencies will not disappear but they will need to adapt, as will clients and publishers.
As programmatic technology enables efficiencies at every stage of the media buy, these savings can be used to finance enhanced internal organisational changes, creating more agile business structure, all achieved by utilising powerful analytics and insights tools.
That is why today, we are competing for a whole new different type of industry person – the focus has shifted significantly to data scientists, analysts, developers and software technologists.
And with this in mind, we can see that the term programmatic is doing us all a disservice. Somehow it implies that technology can now do everything, that the machines have taken over and that in turn we can reduce the amount of investment in people. But nothing could be further from the truth.
Caspar Schlickum is CEO at Xaxis EMEA. Follow him on Twitter
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Last updated 08/05/2014