Ask any digital marketer or marketing agency bod which discipline is first on the budget sheet, they're bound to answer 'search'. It stands to reason - although companies spend time, effort and money trying to tightly define their target audiences and deliver relevant messages at relevant times, a search audience is self-selecting.
Your ad is only served to those interested in your product or service as identified by the search phrase they enter into Google or Bing. By definition you've served the ad to the right audience at the right time.
So why do some of the online display advertising campaigns, like the type we deliver for our clients, deliver a better return on investment than their paid search activity? The answer - in part, at least - is programmatic trading.
What precisely is programmatic trading?
Programmatic trading is an automated bidding process for online advertising space via ad exchanges. Publishers load their advertising inventory into the exchange and buyers, be they clients or their agencies, buy that ad inventory from the exchange. The transactions between buyers and sellers occur automatically depending on the parameters set by both parties.
Why is programmatic buying so cost effective?
Three main reasons:
- Advertisers can buy audiences, rather than ad space per se. Those audiences can be based on their own data, such as the behaviour of the visitors to their site, on 3rd party data such as geodemographics or interests derived from browsing behaviour or, more usually, a combination of the 2. Hence, the advertiser can be highly targeted and avoid the wastage of irrelevant impressions associated with a more traditional advertising approach.
- Ad exchanges and programmatic trading have made it easy for any site to create and trade their ad space. The result? An explosion of ad inventory that has forced down the price of online display advertising - great news for advertisers. In the paid search environment, where the inventory is fixed and demand relatively constant, there has been no such deflation.
- Much like search, programmatic trading allows for the purchase of online ad inventory on a performance basis. Advertisers can measure the actions their activity is creating and bids for inventory can be changed in real time (known as Real Time Bidding or RTB). Depending on the tools being employed, these measures can be 'front end', like interactions and dwell rates, or 'back end' like conversions on the advertiser's site. Advertisers can also test different creative treatments and optimise the campaign around the one that is delivering the best results for each target segment.
At its best, programmatic buying can deliver the marketing nirvana of the right ad, with the right message, delivered to the right consumer, in the right context and bought at the right price. Its flexibility - particular the ability to segment audiences in whatever way the data allows - can make even search look like a blunt-edged tool. It's no wonder that, according to IDC research, it’s forecast to grow from 17% of UK display ad sales to 30% in 2016.
Programmatic trading’s heartland is the world of remarketing and retargeting – targeting existing customers or recent site visitors with relevant ads designed to move them through the final stages of the purchase funnel. Search can, and often does, fulfil a similar function - being most effective at the sharp end of purchase decisions. However, online display ads bought programmatically can be more effective at this task as data from the advertisers site can be used to inform a campaign which is highly targeted in terms of the creative served and the audience targeted.
But the programmatic model doesn't just apply to remarketing and retargeting...
More premium online ad inventory is becoming available which is tempting advertisers to divert brand, rather than just direct response, budgets to programmatic activity. And the programmatic approach is extending offline too - with some digital outdoor, radio and even TV space being sold in this manner.
Where advertisers and advertising agencies can benefit
The prospect of being able to buy all media programmatically opens up exciting possibilities for advertisers - by just paying a marginal cost for ad space which equates with the marginal benefit to the advertisers, inefficiencies in buying will be squeezed out of the system.
But as programmatic buying spreads, so the onus shifts more to the brand marketer who will need to become literate in both its pros and its cons. On the latter front, take its performance based nature – an advantage only if you’re measuring the right actions (for example, CTR is a bad indicator of conversion for online advertising but many brands still judge their campaigns by it).
And programmatic needs to be continually benchmarked against other techniques to keep it ‘honest’. If marketers fail to grasp these realities, then this new form of buying will fail to deliver on its promise.
Graham Painter is MD at Media Agency Cream.
