Programmatic advertising: A long-term strategy for businesses?

Ad targeting doesn't really work as advertised.

Programmatic advertising: A long-term strategy for businesses?
Photo by Oleg Devyatka / Unsplash

Looking ahead: Tech products and services B2B ad spend will continue to grow, though not at the same mammoth rates we saw in 2020. By 2023 growth will slow to 15.9% over the previous year and hit $4.74 billion. Healthcare B2B ad spend growth will slow as well and hit $1.35 billion in 2023.

https://www.emarketer.com/content/us-b2b-tech-ad-spending-increased-by-50-2020


First, a quick definition of programmatic advertising:

Programmatic advertising is a large scale, real-time bidding process, whereby ads are automatically assigned to available spaces across types of media and geographic regions upon an individual user’s browser request.

https://link.springer.com/chapter/10.1007%2F978-3-030-04091-8_9

That's a lot of words that are intended to create value for clients, prospects and audiences. However:

  • Do you truly know what programmatic advertising is?
  • Do you know how programmatic advertising works?

As modern marketing professionals grapple with more responsibilities, new challenges and opportunities lay at our doorstep. And leveraging today's technology to help automate some of these responsibilities helps focus on the ultimate marketing goal:

Marketing refers to the process an organization undertakes to engage its target audience, build strong relationships to create value in order to capture value in return.

https://en.wikipedia.org/wiki/Marketing

(Automation is great. However, if we don't know how that automation works, it leaves a big hole in how we drive value to end users.)


What's new.

Nothing, really.

If you search for the phrase "is programmatic advertising dead", Google returns "About 12,800,000 results". This is a topic that has been debated in many different circles, including in Congress:

“So, how do you sustain a business model in which users don’t pay for your service?” Sen. Hatch asked Mark Zuckerberg on Tuesday.

“Senator, we run ads,” replied a smirking Zuckerberg.

https://www.thewrap.com/senator-orrin-hatch-facebook-biz-model-zuckerberg/

And while that exchange made its cheeky rounds on Twitter and other media and technology circles, it does ask a primary question:

How does programmatic advertising work?

(Free is a tough business model to explain.)

Organizations with large cash reserves and who operate a non-free business model, likely have a few explanations of why programmatic is successful:

  • It's what we've always done
  • Our advertising reports and analytics show programmatic is working
  • Do you really want me to go to my boss and explain that programmatic isn't working?

While these are all valid explanations of varying degrees, a fundamental business question still isn't being addressed:

Do we have transparency into how programmatic advertising is driving value to our audience(s)?

The answer is: There are too many assumptions and a lack of transparency to understand how the process works to say whether programmatic advertising is successful.

(Or, no for short.)

I've focused on advertising and email marketing this week for good reason:

These articles are an attempt to better understand, in today's pandemic-impacted, privacy-focused and cybersecurity-restricted marketing and advertising world, how do we truly reach our audience(s)?


Business impact.

Can you imagine, as a modern marketer, going to your boss and saying:

"I think we should remove the budget allocated to programmatic advertising because I don't think it's working. I don't know why I think that, though."?

One, rather large digital advertiser, did just that in 2017 by cutting $200 million from its digital spend, resulting in an increase in reach by 10%:

"After publicly pressuring major technology platforms to help clean up the online ad market and fork over more information about the effectiveness of digital ads, Procter & Gamble Co. slashed its spending on digital advertising by more than $200 million last year.

The consumer products giant says that its push for more transparency over the past year revealed such spending had been largely wasteful and that eliminating it helped the company reach more consumers in more effective ways."

https://www.wsj.com/articles/p-g-slashed-digital-ad-spending-by-another-100-million-1519915621

Using this one (rather large) data point, should we all cut our digital advertising budget by 10% tomorrow?

No.

And yes.

Digital advertisers likely won't ever get the transparency they need to fully understand how programmatic advertising works (and doesn't work). That's intellectual property, competitive differentiation stuff that likely won't every be divulged.

In this case, nothing will change and if there's an argument from senior leaders that "we must be advertising digitally to be competitive", then the answer is no. Budgets likely won't be cut.

However, if the marketing team (of which advertising is likely part of) is able to show higher-level reach through different channels with a truer understanding of its mechanics (ie, more transparency), then the answer is yes.

Sure, reallocating budget from programmatic to email marketing (as an example), may not be 1:1 transfer as email marketing has little additive costs.

However, investing in a better email marketing platform, bringing in consultants to better understand the technical aspects of delivery rates (DKIM, DMARC, etc.) and a deeper focus on growing their email list can create more internal accountability for marketing and advertising teams.

And create more value in the exchange between business and client.


Industry impact.

"The metaphor at the heart of the book is the 2007-2008 financial crisis, when the system failed to detect a huge vulnerability in the massive mortgage-backed securities market.

...

One reason to use the metaphor is that it calls attention to the idea that sometimes $80 billion can be wrong.”

https://www.adexchanger.com/adexchanger-talks/is-programmatic-a-bubble-with-tim-hwang-author-of-subprime-attention-crisis/

Hey. We're talking about the internet here. Getting rid of digital advertising wouldn't work.

The majority of the internet is free to access, however it's not free to operate. Servers, maintenance, cybersecurity, labor, etc. And much of that cost is covered through advertising.

In addition, there are 5,523 digital advertising agencies businesses in the US in 2021 that would be impacted.

Freeing ourselves of digital ads just wouldn't work without drastic changes to how we use the internet today.

However, businesses can better scrutinize their digital advertising spend and place budget and resources into more transparent, controllable channels to deliver the value their audience(s) expect.

“As we all chased the Holy Grail of digital, self-included, we were relinquishing too much control—blinded by shiny objects, overwhelmed by big data, and ceding power to algorithms."

https://www.wsj.com/articles/p-g-slashed-digital-ad-spending-by-another-100-million-1519915621


Sourcing

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Jamie Larson
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