Understanding Programmatic Digital Ad Buying


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Is programmatic buying good or bad for the industry? In this Interview With An Expert, Ken Mallon, Global President of Ipsos ASI | digital, shares his perspective on what you need to consider to make programmatic buying work for your communications plan.

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Understanding Programmatic Digital Ad Buying

  1. 1. UnderstandingProgrammatic Digital Ad BuyingInterview With An ExpertKen MallonGlobal President, Ipsos ASI|digital
  2. 2. U N D E R S TA N D I N G P R O G R A M M AT I C D I G I TA L A D B U Y I N G“ fast on your feet andYou have to be adaptive or else a strategy is useless ” – Charles de Gaulle 2
  3. 3. U N D E R S TA N D I N G P R O G R A M M AT I C D I G I TA L A D B U Y I N GDigital advertising is still somewhat of a new phenomenon and its use,measurement and performance can still stir uneasy feelings among manyadvertisers and marketers. When you consider that television took off in the1950s, radio in the 1920s and before that, we had billboards, print advertising,posters, town criers and even ancient papyrus scrolls – digital is truly aninfant among elders.We know the others very, very well. We grew up with all of them and we’vestudied them for years. The world of digital advertising, however, is quite newand it is a world that that is growing and changing very quickly. As such, itcreates some apprehension. But its time to set those fears aside, becausedigital advertising is becoming much more pertinent and much morerelevant in the daily lives of your consumers. And there’s a lot we arelearning about it and from it!In my twelve years or so of experience in the realm of digital advertising, I’veseen a lot of these changes first hand. While the impact, reach and scope ofdigital advertising has grown, one of the biggest changes in the digital arenathat rarely gets discussed is the change in how advertisers purchasedigital ad space.I am often asked my opinion about these changes to how digital media ispurchased and what advertisers need to consider to make programmaticbuying work for their communications. The following is a summary of whatwe discuss. 3
  4. 4. U N D E R S TA N D I N G P R O G R A M M AT I C D I G I TA L A D B U Y I N G A Brief History of Digital Advertising Media Buying The history isn’t long so it is easy to be brief, but there have been significant changes in that short space of time. Digital advertising used to be purchased and sold 100% manually. Those with ads to sell, such as Yahoo! and MSN, would pitch their content and associated ad inventory and targeting solutions to advertisers and agencies. It worked in the other direction as well. Agencies and advertisers would put out RFPs requesting access to certain audiences in certain contexts. Putting Programmatic on the Program As ad networks and the alphabet soup of associated and emerging platforms such as DSPs, SSPs and RTB systems (http://www.clickz.com/clickz/ column/1931527/dsps-ssps-rtbs-dmps-online-medias-alphabet-soup) developed, programmatic buying has become more commonplace. One of the best summaries on the topic of programmatic ad buys comes from a white paper from Rocket Fuel, one of the most rapidly growing providers in this space (http://rocketfuel.com/newsroom/blog/10-questions-about- programmatic-buying-and-the-answers-marketers-need). I encourage you to download a copy of it to get their perspective. 4
  5. 5. U N D E R S TA N D I N G P R O G R A M M AT I C D I G I TA L A D B U Y I N G The Stock Market Analogy The best way to explain how this all works is to think of the stock market. Stocks used to be bought and sold by calling a broker and providing a minimum price at which you’d be willing to sell a certain number of shares of a specific stock or with a maximum price you’d be willing to buy a certain number of shares. Those minimums, maximums and quantities used to be subjectively chosen by humans, for the most part. However, economists and mathematical scientists have studied the stock market to come up with more optimal ways to select these figures and programmatic stock exchange systems were developed in which overall goals are input and algorithms optimize the rest. Similarly and not coincidentally, the digital ad world has developed ad exchanges. There have been a number of articles written about these exchanges and programmatic buying. In a nutshell, these are marketplaces in which ads are essentially auctioned off and, increasingly, this is done so programmatically. Ad inventory across ad networks is bought and sold by computer algorithms based on the price and a variety of attributes associated with the inventory. The Good, The Bad and the Programmatic Is programmatic buying good or bad for the industry? I am of the belief that market-based systems are generally good for the overall economic health of an industry largely due to the transparency created by it. The prices, amount of inventory and key metrics are all available to the buyers. However, there are a couple of ways in which these systems are imperfect and marketers need to be aware of these limitations. One such imperfection has to do with certain types of marketplace dynamics that arise in an auction based system (which I’ll illuminate with an apple pie example) and another that I’ll explain further has to do with metric choices. 5Copyright ©2013 Ipsos Corporation. All rights reserved. 1 3 - 0 2 - 2 5
  6. 6. U N D E R S TA N D I N G P R O G R A M M AT I C D I G I TA L A D B U Y I N G Mmmm, Apple pie! What do marketplaces, auctions and programmatic buying have to do with apple pies? Suppose for a minute that all apple pies were bought in auctions and suppose too, that you have a pie selling business. Now suppose your business specializes in berry pies but you like to also sell apple pies. You’ve been buying apples at a certain price for some time but now you have to buy them at an auction. You arrive and notice the prices are going much higher than you are used to. What’s going on? What’s going on is that some of the buyers are businesses that specialize in apple products. Those who sell only apple pies, value apples greater than you value apples (since you sell mostly berry pies). The fact that you must now compete with businesses that are very focused on apples can essentially drive you out of the apple pie business. The bottom line is that auction structures favor the seller – the seller gets to sell his/her apples to the person who most wants apples. That being said, if there are plenty of apples, the auction price will go down as the big apple pie buyers accumulate what they need. 6
  7. 7. U N D E R S TA N D I N G P R O G R A M M AT I C D I G I TA L A D B U Y I N GMetrics SystemsThe second issue has to do with metrics. Philosophically, I like to thinkabout advertising in a holistic way as opposed to placing digital onits own in a silo. Positioning digital as being fundamentally different than othermedia, I believe, works against the media. When one thinks of digital advertisingas being akin to a well-targeted magazine, one tends to create good creative andfocus on reach, frequency, branding and other typical marketing metrics. In theearly days of digital, the media attracted direct marketers who were moreinterested in immediate and direct response. This meant they focused on ad clicksand online sales (conversions) as the main metrics. This has not changed andexchanges on these ad marketplaces tend to be made based on historical andpredicted clicks and conversions. If you are a brand marketer, who doesn’t sellmuch product online, these direct response metrics are often not the best wayto optimize. So, it’s important to demand and communicate to yourprogrammatic buying vendor the metrics you really care about.There are many great ways to use programmatic buying and its use is growingeach year. I encourage you to find out what you need to know – what it is, howit works, some best practices – because it is going to have an impact on yourcommunications and media strategies. And if you want to join in this discussion,we at Ipsos ASI|digital are happy to provide thoughts, advice and conversations.We’ll gladly point you in the right direction. 7
  8. 8. Interview With An Expert What makes an expert is years of hands-on experience. Sharing their passion for the art and science of advertising, senior experts from Ipsos ASI offer unique insights into what makes great advertising, great. In this series, seasoned experts will discuss the power of re-transmission, leveraging emotions in advertising, virality and wear out, leveraging social media, and better measurement for better outcomes. About Ipsos ASI Ipsos ASI is a leading global research agency specializing in advertising and brand communications. Offering state-of-the art research solutions that employ measures predictive of in-market performance, our research helps clients build stronger brands. Our areas of expertise include all aspects of advertising development and in-market evaluation across traditional and emerging media. Ipsos ASI’s goal is to help clients deliver the right message at the right time across the right media to deliver the best return for their brand. The Ipsos ASI team of brand and communications research experts is a global community of specialists who are passionate about advertising. From concept development to production, from final execution and into post-implementation performance, we help inform client decisions at every stage of the process. To learn more about Ipsos ASI, visit www.ipsos.com/asi For more information, please contact: Leah McTiernan Vice President, Ipsos ASI leah.mctiernan @ ipsos.comCopyright ©2013 Ipsos Corporation. All rights reserved. 1 3 - 0 2 - 2 5