Long Read: Programmatic’s coming of age

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Born in 2007, the same year as Apple’s first iPhone, programmatic advertising has begun to enter its coming of age as media buying shifts into the world of automation.

While some question if it will ever be completely mature due to the ever-evolving nature of technology, it can be said that it has surpassed much of its temperamental puberty years which were clouded with brand safety scandals, ad fraud, and data privacy breaches.

Peter Barry, supply-side platform (SSP) PubMatic’s country manager for Australia and New Zealand, says programmatic has gone up but it could be time for a new term.

“It’s gotten through its awkward teenage years and I’d say we’re into adulthood right now,” Barry says. “[Programmatic] is almost a redundant term now. It’s really just automation.”

Today, the adtech industry plays a vital role as the pipes that allow advertisers and publishers to connect, and in turn helping to fund the free internet. The lines between traditional and digital media have also increasingly become blurred, as TV, radio and out-of-home (OOH) have begun to seek the benefits of programmatic.

Barry attributes this to programmatic’s ability to deliver measured results. “Dollars need to be more accountable than they ever have been and that is delivered through programmatic,” he says.

The tech industry is no stranger to disruption but 2020 has been one of the most disrupting years yet for adtech, forcing the industry to grow up even faster.

In January alone, California introduced its California Consumer Privacy Act (CCPA), directly impacting tech companies around the world with many being headquartered in Silicon Valley. Google Chrome also finally gave timeline for when it would finally remove third-party cookies.

Back at home in Australia, amid the nation’s bushfire crisis, local watchdog the Australian Competition and Consumer Commission (ACCC) had begun an inquiry into the “opaque” world of adtech.

Add to the mix, a global pandemic which forced people indoors and into isolation, the industry had been riding the rollercoaster in the first half.

With all of this change and more people in front of screens and relying on the digital world than ever before, it has been programmatic’s year to shine.

James Bayes, general manager for Australia and New Zealand at The Trade Desk, says the beauty of programmatic is its flexibility – something that has been realised more by advertisers in the wake of COVID-19.

“When this [pandemic] first started, programmatic was probably hit harder and faster in the first week or two than some other channels just because of its strength which are flexibility and agility,” Bayes says.

“It was quicker and easier to pull money out of programmatic than it was to pull out of some other media with longer cancellation deadlines.

“The reverse of that is that programmatic has been able to bounce back faster and sharper than some other channels. It is flexible. You can make a decision and be active an hour later if you’ve got creative.

“You can draw a very clear connection between the investment decisions that you’re making and the performance that is driving your business.”

The pandemic led to marketing messages becoming irrelevant overnight. In America, one cruise ship company had a commercial running through a news program that talked about how cruise ships were a breeding ground for the virus.

Samuel Tan, senior director of market development at Xandr, says it is much easier for a brand to pull an ad like this when bought programmatically.

“Programmatic has the ability to respond to a shift in consumer [behavioural] patterns,” Tan says.

While he doesn’t believe brands will make a complete move to 100% programmatic, he does think this period has been an opportunity to showcase its power and agility.

“I do think they will realise how powerful it can be to have a really great understanding of how it works and how it complements the other things that they’re doing,” he says.

“It’s not just the leftover dollars that they put to programmatic as a way to make the last touch or that final conversation. They will probably see that programmatic can be a really important part of the overall mix in terms of the customer journey.”

A maturing market
Total online advertising growth slowed in the first quarter of 2020 to year-on-year growth of 3.8%, according to the IAB Australia Online Advertising Expenditure Report (OAER).

The report, compiled by PwC, captures data until March 30. It reflects the traumatic summer season of bushfires and drought, as well as the traditional post Christmas decline, but only includes a couple of weeks when the country was seriously impacted by COVID-19 lockdown.

As a result, the report reveals the skew towards programmatic advertising has continued with 43% of all advertising bought programmatically versus 38% being bought from agencies using insertion orders (IOs). This is compared to 29% bought programmatically a year ago.

Some 56%, the bulk of content publishers’ video inventory, was bought also programmatically in the March quarter. These figures are likely to continue rising in the second quarter as a result of the pandemic.

IAB Australia CEO Gai Le Roy, like Bayes and Tan, attributes programmatic’s growing popularity to its ability to be flexible.

“Programmatic is well suited to that way of being quite efficient and flexible and I don’t think that will go away,” Le Roy says.

“I think once advertisers are used to being able to turn on and turn off the taps that suit them, they will keep using those methods.”

As traditional formats like television, radio and out-of-home (OOH) become digitised more inventory has become available to purchase in programmatic platforms.

An analysis from Zenith Media reported that 55% of all digital media was traded programmatically in Australia in 2019.

Programmatic among audio advertising has been experiencing continued growth over the last few years. A recent IAB Australia Audio State of the Nation survey found the advantage of data and targeting is driving the adoption of programmatic trading in audio advertising.

In the survey, 56% of media buyers indicated they are accessing some of their audio inventory via programmatic channels. The number of media buyers using programmatic guaranteed buying has increased from 37% to 47% in the last year.

Meanwhile, programmatic digital out-of-home (DOOH) is still in its early days but it is set to become a big growth area for the industry, especially post-pandemic. Already this year, MediaCom and GroupM have announced a partnership with Hivestack to enable programmatic buying across out-of-home (OOH) inventory.

Val Morgan Outdoor (VMO) managing director Paul Butler told AdNews earlier in the year that his business, which primarily utilises smaller screens located in areas such as service stations, is already making strides in achieving an effective programmatic offering. The business is using a facial recognition tool, Dart, measuring audiences and delivering 10 million impressions a week.

Butler says it is increasingly becoming a vital tool in developing its programmatic offering as clients continue to look for easier ways of adjusting campaigns by time, location and other audience metrics.

The rise of gaming is opening options for programmatic as well but the real driver of growth comes from video and connected TV (CTV).

The explosion of video
Le Roy says programmatic is quickly becoming the dominant way to buy media. In particular, she notes the “explosion” of video inventory entering the market.

“Over the last two years, there’s been a lot more video inventory, particularly on the CTV side of things, brought into the market,” she says.

“In terms of overall adoption in market, it’s an incredibly effective format.”

It also presents a greater yield for publishers, as the inventory is more expensive per unit.

Video management platform Telaria, recently merged with online advertising technology company Rubicon Project, believes all television will eventually be watched through an internet connection and therefore become classified as over-the-top (OTT). As a result, the company’s senior vice president APAC, Juliette Stead, says all TV advertising will be traded programmatically in the future.

“There’s already massive growth in that area and we’re just going to see that continue to grow,” Stead says.

“I would say that a lot of that has happened because there’s efficiency from both sides. Buyers are able to make really informed decisions about what supply they do and don’t buy, at impression level.

“From a publisher perspective as well, they’re better able to manage all of this supply that they’ve got and that they are making available, and they are able to apply that to addressable segments. Those addressable segments can then be traded through programmatic pipes.

“It allows for really strong creative buying and really targeted buying, whilst also being able to achieve reach and scale.”

While much of display advertising is bought through open auction environments which involve lots of bidding and data, Stead says she sees more private marketplace deals taking place with broadcast video on demand (BVOD) and other OTT formats.

In 2019, 93% of sales that ran through the Telaria platform in Australia were through private marketplace buys.

“A lot of supply is traded through upfront agreement between broadcasters and the agents of brands, and then it’s executed through programmatic pipes,” she says.

“It just shows really that it’s an efficient buying method, as opposed to what has been going on with the open auction environment.”

In line with its growing popularity, a number of adtech players are focusing their efforts in the TV space. However, just like with online advertising, programmatic TV buying has to resolve its own set of issues before it can be classified as a mature format.

The Trade Desk, a buy-side platform, recently announced it would extend its partnership with consumer cross-screen television and analytics provider Samba TV outside of the US to international markets beginning in Australia.

The expansion of the partnership globally will provide advertisers with insights on content consumption and advertising effectiveness across addressable TV screens.

“Integrating that into our TV planning tools is going to help brands to execute their digital investment strategies based upon prior linear TV viewing behaviour,” Bayes says.

“It’s stitching the screens together into a single investment decision and single view of a user.”

On the other side of the supply chain, sell-side platform PubMatic has just released the first OTT and CTV header bidding solution which will enable ads to run seamlessly and improve the revenue that media owners get from their streaming video ads.

Until its release in June, header bidding did not exist at scale for OTT inventory. The new product solves problems around ad frequency, ad pods and publisher yields, while also providing a “TV-like” experience for ads in OTT environments.

A cookie-less future
Google Chrome’s announcement at the start of the year to remove third-party cookies came as little surprise to most of the industry. Other web browsers like Safari and Mozilla Firefox had already abolished them, and they had no place among newer formats for digital advertising, like OTT, audio and DOOH.

What the announcement did do though, was offer a timeline for when the browser would remove them. This has seen the industry start to band together to come up with other alternatives aside from Google’s Privacy Sandbox.

“We have a real opportunity to build out products that are going to last for the next 10, 20, 50 years rather than cookies, which were probably not intended to do what they’re doing today,” PubMatic’s Barry says.

Some of the replacements that are being built at the moment surround identity with a number of players including LiveRamp and ID5 coming up with their own solutions to help the industry and also protect the privacy of consumers.

The idea behind these solutions being that they would be able to still build an identity for consumers but done so in a safe and private manner.

Barry says first-party data will also become important in targeting consumers but he says relying on this alternative could leave smaller publishers in the dark.

“The challenge is to get as many publishers and marketers using these [ID] solutions as possible,” he says.

“Big publishers who have tons of logged-in users or an addressable audience, they will be okay. The concern I have is for the tier two – the medium and small publishers – the ones who create amazing content. It’s the diverse content that we all go to the internet for.

“They don’t have that relationship with their users. They don’t have a massive audience. It’s a niche audience, but still valuable and important to them.

“We, as an industry, have a responsibility to come up with a solution that can scale, that works for everybody and not just the walled gardens, and then the big broadcasters and the ones who have deep pockets.”

Along with finding a new solution to suit all parties and replace cookies, many are calling for a return to the traditional method of using context.

Krish Raja, director of product and platform strategy at Amobee, says the industry lost its way when it came to cookies, using it as an easy option to get in front of consumers quickly. Now the “OG of targeting” is back in vogue.

“It’s always been there and it will never go away,” Raja says.

“It’s been there since day dot, since people have been putting paper up on lampposts. If you’re advertising something around the right context and you can associate your brand with it, that can be pretty powerful.”

Not only a tried and trusted solution, contextual advertising provides a safer approach to protecting consumer privacy. No longer will that pair of shoes a consumer looked at once, be able to stalk them across the internet. Relevance through context will prevail instead.

Like Raja, Tan from Xandr, agrees that third-party cookies to create hyper-targeted personalised advertising has been used as the “easy” solution to reach consumers.

As third-party cookies continue to phase out, the industry has entered what he calls “context 2.0” which comes influenced by increased control from consumers over how their data is used and the raft of data privacy laws being introduced around the world.

“As consumers take more control over how their data gets used in the various parts of the ecosystem, that’s growing this need for understanding ‘Where are you? What are you consuming as a consumer?’ rather than who you are,” he says.

“Understanding the context allows for the same kind of rich advertising conversation without necessarily breaching privacy regulations.”

The opaque world of adtech
Transparency, or the industry’s perceived lack of, has long been a point of contention among vendors, brands, agencies and regulators.

The ACCC has begun its inquiry into digital advertising and taken submissions from across the industry. The focus is on whether marketers get enough information to understand how effective ad dollars are when using ad agencies and other adtech services.

Speaking at the Programmatic Summit in March, Peter Leonard, professor of practice at UNSW Business School and principal at Data Synergies, warned the industry that the inquiry will get “ugly”.

He highlighted a quote in the report that he thought would particularly agitate the regulator: “Between 20% and 75% advertiser’s expenditure is taken up by suppliers in the adtech supply chain.”

“If there’s one thing that regulators really hate, it’s not actually knowing who’s making what money in a market,” Leonard said.

“That’s opacity from a regulated point of view and because you’re in business and they’re in government and they’re regulators, by definition you’re up to something that’s probably bad if the regulator doesn’t understand it.”

While Leonard’s breakdown of what the ACCC would be looking for was rather ominous, it’s hard to find anyone who will go on the record to say that the inquiry is a negative thing for the industry. Instead, most welcome it with open arms.

Opacity is one of the core focuses for the ACCC in its investigation. Raja says that there is a notion out there that when an industry becomes too complex, it then becomes opaque. Therefore, the only way to make it less complex is to consolidate but this shouldn’t be the case.

“Having complexity supports the economy,” he says.

“It supports a lot of people, small businesses. There’s lots of good things about having a big thriving economy with loads of different players in it, but that’s complex which creates a lack of transparency.”

Barry says adtech, just like other industries, needs to be held to account. In saying that though, he does believe most parties are working hard to do the right thing.

“We’re in a better place than we have been in the last 10 or 12 years since programmatic started,” he says.

“I’ve never seen a cleaner supply chain and more successful initiatives around cleaning it up.”

The Trade Desk has also welcomed the ACCC’s inquiry with Bayes calling it a “healthy” process.

“Anything that is done by individual players within the supply chain, whether it be us, others or regulators, to ensure that there is an open marketplace with transparency and free flow of information, we believe that will only add to building a strong open internet and that’s a really good thing,” Bayes says.

Earlier in the year, The Trade Desk was one of a number of parties to participate in a landmark study by UK industry body, the Incorporated Society of British Advertisers (ISBA). The study, which was compiled in conjunction with PwC, was the first of its kind to dive into the world of the programmatic supply chain.

The study revealed that 15% of advertisers’ spend could not be attributed for, falling under the category “unknown delta”. This percentage makes up one-third of the supply chain costs.

Naturally, it caused widespread discussion as the figures were plastered across headlines with questions on the whereabouts of this 15% of digital ad spend.

Some say discrepancies are part of the industry. Others say the complexity of adtech means to find every single discrepancy requires an abundance of time and patience – something that not everyone is willing to do.

Barry says it is important to not jump to the conclusion that every discrepancy is fraud.

“We need to be mindful of the fact that it could be match rates,
it could be latency, it could be currency fluctuations, it could be reporting,” he says.

“It can be a whole bunch of things, and yes, it can be fraud also. We’ve come so far in our industry, I think we need to make sure that we’re not setting ourselves back by just assuming that it’s fraud.”

The other key takeout from the study, that has caused a lot of discussion, was the notion that publishers getting only 51% of digital ad spend was negative.

Bayes says the concept that 100% of every dollar should go from buyer to seller misses the value the supply chain offers.

“There’s a lot of partners within the programmatic supply chain who add enormous value in improving campaign performance,” he says.

“Whether that’s a DSP that helps people identify the right impression to buy at the right time and the right place. Or an SSP that helps publishers maximise their yield or a third-party data provider.”

Building standards
Alongside its findings, ISBA released two recommendations in the report: collaborate and build industry standards.

Developing standards sounds like a simple solution but in the fast-paced world of adtech where things are changing at lightning speed, some say this proves tricky to maintain and have called out problems with industry adoption.

Tan says it is important to create standards that aren’t too rigid or curtail innovation.

“When it comes to standardisation, you don’t want to be tinkering with it a lot because that creates a lot more confusion,” he says.

“What you don’t want is to create a set of standards that only a few can comply with.”

By creating a framework that is accessible for all parties and not just the big players, Tan says that will help the industry continue to innovate.

The IAB Tech Lab has been working globally to develop standards such as sellers.json and OpenRTB SupplyChain object that the market can adopt to improve transparency and eradicate fraud.

Both were designed to identify all intermediaries that participate in the flow of money from the buying platform back to the publisher. They build on ads.txt and app-ads.txt which require publishers to publish the lists of their authorised sellers and resellers to their websites in order for programmatic buyers to easily access those lists.

Together these protocols aim to achieve greater transparency, brand safety, and trust in the digital advertising ecosystem.

Le Roy hopes the ISBA study will give the industry momentum. “We’re hoping to use this report locally to try and make Australia a bit of a superstar in terms of transparency,” she says.“We’re looking at the possibility of doing a local pilot here to work with the most current and up to date standards.”

As programmatic continues to rise in popularity across different media, AdNews asked media agencies how the role of media buyers will change in the coming years.

The role of media buyers will continue to evolve considerably in the coming years, as the popularity of programmatic rises. With greater access to, and advances in, data and technology across all channels, media buyers will increasingly need to have a more holistic approach to offline and online. Ultimately, I think media buyers will be in an enviable position for their cross-channel knowledge and expertise, and they will be invaluable in providing strategic recommendations to clients.

Funnily enough the more things change the more they will stay the same. Buyers will need to be versed in analysing data and know how to successfully bid for audiences’ attention. They will also need to regularly upskill their adtech knowledge and buying platform application skills every six months. But… what remains the same is a media buyer’s understanding of the fundamental capabilities of each media channel. What experience does it offer the consumer and how can it amplify the media strategy and brand messages advertisers want to deliver.

Working towards campaign objectives will be the same but new skills will be required. Media buyers will be operating in real-time and genuinely trading the marketplace, so they’ll make decisions faster and be more agile. It will be more data driven. I believe the skills will merge roles of media buyers will become outcome focused, so they will be cross channel and channel neutral. Using both their left and right brain, technically capable yet strategic. They will be a bit like traffic controllers, seeing three dimensionally, thinking how they can make campaigns work.

Programmatic is driving automation and efficiency. This evolution is daunting for some, however, the role of the media planner plays a critical and exciting role. Planners will be able to move away from traditional methodologies and develop their analytical, technical and strategic skills to make informed decisions based on deep and rich insights from programmatic activity. Through automation and efficiency gains, media planners will be able to place a higher focus on business outcomes, with reduced administrative load and increased accountability on delivering real business impact.

The most immediate impact will be a shift in skillset from traditionally negotiation-based to a balance of technical knowledge and relationship building. Media buyers will be expected to work with their agency peers to identify ways to adapt partner ad tech products to suit client needs. Finally, close relationships built over the years will prove vital when guiding media partners along their own programmatic journey, ensuring this is aligned with the ambitions of the agency and the clients we represent.

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