Programmatic Technology: The Next 10 Years
Although real-time bidding (RTB) has been one of the most transformative developments in digital advertising in the past decade, some marketers remain unconvinced of the technology’s potential to unlock better performance for advertisers. Why?
Marketers usually raise three concerns when it comes to programmatic. First, they find the current programmatic landscape confusing - rife with entities bearing esoteric acronyms like DSPs, DMPs, and SSPs (among others), each with opaque relationships to each other. Second, there are numerous questions surrounding the supply chain – what portion of their advertising investment actually reaches the end publisher? Lastly, they feel that, despite their lack of transparency, the Facebook-Google duopoly drive better results for them than programmatic advertising on the open internet.
As Facebook and Google continue to capture the majority of incremental digital advertising budgets, we need to address the concerns and problems raised by marketers to ensure programmatic advertising offers a viable alternative to this oligopoly.
Understanding the real cost of programmatic buys
Viewability and inefficient supply chains are two key industry challenges that explain why these walled gardens receive a disproportionate share of advertising dollars.
If a marketer spends $100,000 on Facebook advertising, they know that most of the advertising units are actually seen by a consumer, because it’s Facebook’s policy to only charge for ads that scroll into view. Comparatively, if the marketer invests that same amount in programmatic on the open internet, as many as half of those units may be viewable, which means the marketer just wasted as much as $50,000 in campaign budget.
Buying from Facebook means one’s budget goes directly to Facebook. On the open internet, it’s less clear how much money ends up with the end publisher. If we were to assume that in today’s crowded programmatic ecosystem, intermediaries receive 25% of the advertising investment, in addition to a viewability rate of approximately 50%, then only about $37,500 gets spent on viewed advertising.
We must work to fix this discrepancy, ensuring a much greater portion of the marketer’s dollar reaches its intended destination.
The good news is the world of programmatic is moving towards a more efficient and transparent model. Viewability will become the default currency, where marketers only pay for viewable impressions. Marketers like P&G are already demanding viewable, fraud-free, effective digital advertising. AppNexus is building for a future in which this is the standard.
Second, and equally as important, is the goal of creating efficient and transparent marketplaces where the vast majority of advertisers’ budgets flow directly to publishers that produce quality content. We need to clean up the advertising supply chain by eliminating low-value intermediary actors, outlining the most efficient path between buyers and sellers, and putting as much of the marketer’s money as possible to work. That’s why AppNexus is making heavy investments in machine learning, and better optimisation systems will help improve performance results and unlock opportunities for marketers and agencies.
Further, new technologies like blockchain offer the opportunity to imagine heightened transparency in the ecosystem.
Integral to building safer, more efficient marketplaces are initiatives to identify and remove invalid traffic, 'fake news,' and hate speech from the ecosystem, as advertisers need assurances that their campaigns won’t appear side-by-side with offensive or objectionable content.
We’re also likely to see a dramatic shift in how audiences consume premium video content – whether on mobile phones or connected televisions – which will create a significant market for one-to-one, personalised video advertising that can be transacted programmatically.
Uniting the industry to secure the fate of the open internet
Facebook and Google’s continued dominance has made it imperative that our industry work together to safeguard the open internet during the next ten years. With television approaching its tipping point, the decisions independent advertising technology companies make today are critical for determining the future of the open internet.
If we augment the efficiency and effectiveness of TV advertising to ensure marketers are able to deliver the best creative to the right audience at exactly the right moment, we will see renewed interest in advertising-based business models funding video content. This would open up more opportunities for traditional media companies to counter the walled gardens of Google and Facebook.
As our industry hurtles into another decade of innovation, the promise of programmatic to protect the open internet is still very much alive. It’s time to fix programmatic advertising and help marketers realize the true potential and value of programmatic advertising.
Nigel Gilbert, VP, Strategic Development, EMEA, AppNexus.
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