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.

1. Understanding
Programmatic Digital Ad Buying
Interview With An Expert
Ken Mallon
Global President, Ipsos ASI|digital

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 and
You have to be
adaptive or else a strategy is useless
”
– Charles de Gaulle
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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 G
Digital advertising is still somewhat of a new phenomenon and its use,
measurement and performance can still stir uneasy feelings among many
advertisers and marketers. When you consider that television took off in the
1950s, radio in the 1920s and before that, we had billboards, print advertising,
posters, town criers and even ancient papyrus scrolls – digital is truly an
infant among elders.
We know the others very, very well. We grew up with all of them and we’ve
studied them for years. The world of digital advertising, however, is quite new
and it is a world that that is growing and changing very quickly. As such, it
creates some apprehension. But its time to set those fears aside, because
digital advertising is becoming much more pertinent and much more
relevant in the daily lives of your consumers. And there’s a lot we are
learning about it and from it!
In my twelve years or so of experience in the realm of digital advertising, I’ve
seen a lot of these changes first hand. While the impact, reach and scope of
digital advertising has grown, one of the biggest changes in the digital arena
that rarely gets discussed is the change in how advertisers purchase
digital ad space.
I am often asked my opinion about these changes to how digital media is
purchased and what advertisers need to consider to make programmatic
buying work for their communications. The following is a summary of what
we discuss.
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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.
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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.
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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.
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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 G
Metrics Systems
The second issue has to do with metrics. Philosophically, I like to think
about advertising in a holistic way as opposed to placing digital on
its own in a silo. Positioning digital as being fundamentally different than other
media, I believe, works against the media. When one thinks of digital advertising
as being akin to a well-targeted magazine, one tends to create good creative and
focus on reach, frequency, branding and other typical marketing metrics. In the
early days of digital, the media attracted direct marketers who were more
interested in immediate and direct response. This meant they focused on ad clicks
and online sales (conversions) as the main metrics. This has not changed and
exchanges on these ad marketplaces tend to be made based on historical and
predicted clicks and conversions. If you are a brand marketer, who doesn’t sell
much product online, these direct response metrics are often not the best way
to optimize. So, it’s important to demand and communicate to your
programmatic buying vendor the metrics you really care about.
There are many great ways to use programmatic buying and its use is growing
each year. I encourage you to find out what you need to know – what it is, how
it works, some best practices – because it is going to have an impact on your
communications 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.
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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
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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.com
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