Programmatic advertising – the use of automated, algorithmic or rules-driven approaches to buying and selling ad space – is changing the media landscape. In a market already worth over $15 billion, online display ads are now routinely bought and sold through automated exchanges. And what started as an efficient way to sell off remnant digital inventory is rapidly spreading to video and other premium inventory. In 2014, 25% of digital video inventory will be traded programmatically, rising to 70% within the next three years.
The predicted tripling of spend on programmatic advertising by 2017 will see it account for more than half of all digital advertising transactions – reinforcing the message that it is fast spreading beyond remnant inventory. For example, a recent Winterberry Group survey found that 91 percent of respondents expect to pursue a programmatic approach to audience segmentation by 2015.
Programmatic approaches are starting to evolve from real-time bidding for online impressions to encompass the broader sweep of managing and optimising customer engagement across channels and devices. This will be a highly disruptive change, but programmatic should not be seen as a threat. Rather it is an opportunity to target ever more precise audience segments and achieve better results.
Rise of the machines
Brands are increasingly adopting programmatic approaches, and not simply for low-value remnant inventory bought through RTB exchanges. The growth of programmatic into video and other premium inventory implies that brands are becoming more confident about defining, selecting and reaching their target audiences - and not necessarily with the help of their agency partners.
To reduce the risk of being cut out of the picture, agencies must respond to this trend by ensuring that they can offer the same (or better) data-driven services. Agencies must also ensure that they have a good view of performance that feeds back into optimisation strategies. Brands can measure the success of online campaigns with increasing accuracy, so agencies need to stay on their toes and demonstrate the value they are adding.
Demographic data is only the beginning
As programmatic approaches increase the ability to reach niche audience segments efficiently, the whole industry is looking to target ads in a more precise way. There is a growing recognition among both agencies and brands that demographic data is just the first step on the journey to finding and reaching the right audience.
The desire to target individuals is driving investment in richer, higher-quality data that supplements basic demographic data to provide actionable insight into personality. By adding data on behavioural, emotive and other factors that help predict buying motivation, agencies and brands can enrich and bring to life their demographic segments.
One to one advertising
We are all watching more video content than ever before, and the fragmentation of traditional TV into multiscreen, multichannel online viewing allows us to choose exactly what we watch. Although this could seem like a threat to the traditional model it is, in fact, an opportunity to put the most relevant advert in front of each person at the most opportune time. Seizing this opportunity to reach true one-to-one audiences will depend on making sense of vast amounts of data on consumers and their online and offline activities. It will also require the ability to translate very precise and rich typologies for target audiences into real- time programmatic strategies.
Adding psychographic to demographic creates a new opportunity to better align typologies and segments with planning and buying activities. By helping to bridge the gap between what the brand wants and what the agency delivers, data can improve advertising response rates and increase the agency’s perceived value-add.
Emotive engagement drives ROI
The ability to target online consumers with tailored advertising has produced an unwanted side-effect. Poorly targeted or otherwise inappropriate ads are seen as intrusive and irritating, potentially even resulting in animosity towards the brand. There is a growing recognition that more personalised and relevant advertising will translate into greater ROI, but this must be balanced against the risk of failing to engage with consumers.
What is missing from conventional approaches is the ability to target people within the same segment who have completely different buying motivations. If brands and agencies can understand these distinctions and – crucially – translate that understanding into actionable strategies, they can adapt their approach and successfully sell the same product to buyers with different motivations. As programmatic advertising reaches beyond simple RTB trading of inventory, and as brands and agencies become accustomed to using richer data sets, brand advertising and other content will increasingly be adapted in real time to improve its relevance to each individual.
A race to the top
Where data-driven programmatic approaches were once seen as a way to shift lower-value inventory, there is growing interest in using them for video, brand advertising, and more. The greater cost-efficiency of the programmatic approach is certainly one of its attractions, but this should not be construed as a race to the bottom. Brands are still focused on boosting ROI rather than on cutting costs, so there is a great opportunity for agencies to add value. This is where smart data and analytics will be absolutely critical, helping to provide actionable insight into the most valuable consumers, and enabling programmatic approaches to target them with laser precision.
As traders and planner/buyers seek to add value by improving ad relevancy, they are recognising that adding new data sources into the mix does not need to imply increased complexity or difficulty. Programmatic approaches and richer sets of data can fit easily into existing tools and approaches, with no requirement to learn completely new ways of working.
Follow that consumer...
The growth in digital reach across multiple channels and devices is changing how brands and agencies plan and execute advertising campaigns. There are now numerous ways to reach and engage audiences beyond traditional display advertising, which is driving a move towards more granular segmentation using third-party data. In the background, the trend for greater audience fragmentation – across both channels and devices – implies the need to be able to identify and follow connected consumers.
In this context, cookies are getting an increasingly bad reputation, particularly because they work poorly on the mobile devices that more and more people are using to access online content. There is no coherent answer yet to the ‘do not track’ conundrum, so cookies are not going away anytime soon. Equally, they can still add considerable value as part of a broader and richer approach to identifying and tracking consumers. Used in isolation and without any attempt to correlate them with other data on online (or even offline) indicators, cookies will be increasingly irrelevant.
But in combination with the use of richer third-party data to create detailed audience profiles, cookies can help to guarantee that advertisers are reaching a human audience, helping agencies and brands alike to ensure genuine ROI.
As consumer expectations for personalised, one-to-one marketing grow, brands know that they need to improve their ability to understand and target online audiences. Failure to engage audiences in the most appropriate way may even result in brand damage rather than just consumer indifference. Big data – including data on emotive and personality factors – will be the key to building richer and more precise audience segments. And to achieve targeting and personalisation at the speed and scale demanded in the online world, programmatic approaches will become increasingly important.
Agencies are recognising these trends, and responding by layering new sets of data onto their existing views and within their existing tools and platforms. The growing uptake of programmatic approaches, enriched with broader sets of third-party data, is making life easier for media buyer/ planners as they execute campaigns. The programmatic approach also enables better results: as the mechanics of buying and selling inventory become automated and commoditised, more emphasis can be placed on making the messages themselves more personal, targeted and effective.
With a better understanding of who customers are and why they choose to buy, agencies and brands can define much smaller and more precise segments, create messages that will resonate best with each segment, and build campaigns that will deliver improved results. Combined with the speed and precision of programmatic buying, better insight from new data sources will bring the industry closer to the holy grail of real-time, one-to-one digital marketing at scale.
By Jon Hewson, VisualDNA.
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