Programmatic Buying: 5 Whys & Watch-Outs

As you probably know by now, programmatic buying is one of the louder buzzwords we hear today. Simply put, it stands for the technology-enabled purchase of media inventory. Business Insider provides another, albeit longer, definition. This technology replaces the human capital that is typically invested in the process of sending RFPs, reading through proposals, having lots of phone conversations, negotiating price, sending insertion orders and then executing them on a partner-by-partner basis. It’s planning and buying via a user interface — in mass and on steroids.

Programmatic Whys & Watch-Outs
The programmatic landscape is constantly evolving. Reasons to consider programmatic buying, as well as pitfalls to watch out for, are constantly changing as the technology evolves. For right now, here are the latest.

5 Reasons to Use Programmatic Buying
1) Use All Available Resources: Programmatic buying, when used in combination with a data management platform to build, identify, and activate first-party audiences, is a potent, powerful marketing tool. Your site visitors, your customer and prospect lists, your category or brand searchers can all be found and remarketed to accordingly based on their experience to date with your brand.

2) Activate Audiences: Along with first-party audiences, programmatic solutions give you the tools and ability to identify reliable third-party audiences from data providers and aggregators of all shapes and sizes. You may find that soccer moms are, indeed, exactly who is buying your products — then use look-alike targeting techniques to bring new soccer moms to your brand. You may also come to find, however, that other buying groups (recent blender buyers, DIYers, Republicans, etc.) convert at an even better rate, giving you new audiences on which to build your business.

3) Buy Context at Scale: The best kept secret about programmatic buying is that context still beats audience. An avid golfer is more likely to convert on an ad in golf content than that very same person when shown an ad in news content. Programmatic partnerships now let you identify and deliver ads in contextually relevant environments at a scale that is unreachable through publisher or vertical-network buys executed with human capital.

4) Bring Publisher and Audience Together: Programmatic practitioners are inking more and more deals every day that allow brands to overlay their most potent first- and third-party data with their top performing publisher partners. Called private marketplaces, private exchanges and many other names, publishers are piping first-look inventory to brands via technology rather than via a sales force. When the brand just needs the ad space, not a deeper integration or native experience, private marketplaces offer the best inventory to brands at rates palatable to publishers. And the best part is that the data layer can still sit on top of them.

5) Practice for Tomorrow: Chances are very good that most media inventory will be transacted programmatically in the near future. TV, radio, print (which all are already well underway in their evolution to digital ecosystems) and even out-of-home inventory can and will be bought and sold programmatically. The guys who founded Invite Media, one of the first demand side platforms (DSPs), are already knee-deep into bringing a programmatic solution to digital out-of-home buying — check out Vistar Media for more. As the dominos fall, the pace of traditional media onboarding to programmatic platforms will only increase, so you might as well get used to it.

5 Watch-Outs for Programmatic Buying
1) Verify, verify, verify: Viewable inventory isn’t the currency yet (note the six-month expiration date on this post), and a majority of exchange-based ad impressions WILL run unseen by humans if left to the technology’s own devices. It is simple to prevent and control, but one must be cognizant that the green button that tells you in your user interface that ads are running doesn’t mean humans are seeing them. (Green does not equal seen.)

2) Be Wary of False Attribution: Closely related to the above, many providers are all too happy to purchase bottom of the page, unseen inventory at bargain basement real-time billing pricing to stuff cookies on as many potential converters as possible. They then claim the view through credit for one of those poor suckers that happens to convert without having seen that ad — potentially forcing brand decision makers to cut the marketing budget for the vehicle that created the demand in the first place and give it to the bad actor that served the unseen ad just before they converted.

3) Programmatic Is Not Automatic: Yes, fancy math helps the machines make some of the more rote decisions (on exact price, place, person for each impression), but there is still a lot of human capital involved in setting up and running those machines. Just like the engineers that build the robots and the quality control techs on today’s modern assembly line, programmatic buying also has wizards behind the beautiful curtain of technology. It is part of the reason that managed service DSPs and trading desks tend to charge such high margins (30-70 percent, and we won’t get into the other reasons behind these margins in this post).

4) Without Effort, It’s Still Remnant Inventory: If you don’t take the time (and have the capability) to do No. 3 above, most of what you are buying is inventory that a huge army of professional media planners and buyers didn’t want the first time around. Public exchange inventory is largely remnant inventory. That isn’t to say it’s bad — especially if it delivers your audience in the right environment and drives return on investment — but it is still worth noting.

5) A Litany of New (Mostly Bad) Names: Most annoyingly, I don’t think we’ve yet scratched the surface for all the branded offerings that will be born in this space in the near future — particularly with the horizon set on private marketplaces. Trading desks are thinking about giving programmatic buying powers back to their web of feeder media shops. DSPs are rapidly evolving and rebundling their offerings. There is an opportunity to create a new “name” for every new way the technology is stitched together for a brand, and I promise you that it will get at least as exhausting as the ad network explosion of the 90s.

Should we all sit back and let robots do our jobs? We’re a long way off from machines completely taking over for media planners and buyers. However, every industry — from automotive to finance — looks for ways to work quicker and automate routine tasks. And under the right circumstances, programmatic can be an effective way to achieve clients’ goals.

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Ryan Derrow
Ryan Derrow

Ryan is Vice President of Media at Empower MediaMarketing, one of the largest independent media agencies in the country. His team plans and executes integrated and programmatic media for clients like Bush's Beans, Dremel, Famous Footwear, LasikPlus, and Rust-Oleum.