It’s been 10 years since real-time bidding took off, but a decade into the programmatic age, CMOs remain skeptical.
When we ask them why, we hear three basic refrains.
First, marketers tell us how confusing the programmatic landscape is. Second, they voice concern about how little of their advertising investment actually reaches its intended destination—the end publisher. Third, these dynamics make it easier and seemingly more of a sure bet to direct digital budgets to Facebook and Google rather than the open internet.
These points are closely related, and they frame the problems that we must solve if we want programmatic advertising to offer a viable alternative to Facebook and Google, two platforms that capture the lion’s share of incremental digital advertising budgets today.
The real cost of programmatic buys
Here’s an example of how these issues play out. Let’s say you spend $100,000 on Facebook advertising. Most of the advertising units you buy are likely viewable, as it is Facebook’s policy to charge only for ads that scroll into view. Then invest $100,000 in programmatic on the open internet. If you’re lucky, half of those units will be viewable, meaning that the other half of your money just went up in smoke.
When you buy from Facebook, your budget flows directly to Facebook. When you buy programmatic on the open internet, it’s almost impossible to know how much of your money ends up with the end publisher. Let’s be generous and assume that in today’s programmatic ecosystem, intermediaries take 25 percent of your investment. Combine this dynamic with an industry-wide viewability rate of roughly 50 percent, and perhaps $37,500 gets spent on viewed advertising.
These two challenges—viewability and inefficient supply chains—go a long way in explaining why a disproportionate share of advertising flows to a handful of walled gardens.
What the future holds
Now imagine a world where viewability emerges as a default currency on the open internet and where you only pay for viewable impressions. Also imagine a world where the vast majority of your budget flows directly to a publisher that produces quality content (which, for all of its other merits, Facebook does not). That world is not as far away as you think.
Imagine, as well, new technologies like blockchain introducing heightened transparency into the ecosystem.
There’s more. I also expect the dramatic shift in how consumers engage with premium video content—on mobile devices or connected televisions, for instance—to create a substantial market for one-to-one, personalized video advertising that will almost certainly be transacted in programmatic marketplaces.
Cleaning up programmatic
Programmatic is 10 years old, and so is AppNexus, and as we approach our anniversary, we’re building for that future, a day when every major marketer follows P&G’s general lead and demands 100 percent viewable, fraud-free, effective digital advertising.
That’s why we’re cleaning up the programmatic supply chain to put as much of the marketer’s dollar to work as possible. That means eliminating low-value intermediary actors and charting the most efficient path between buyers and sellers—a new imperative in the age of header bidding.
It’s why we’ve led the way in detecting and removing invalid traffic, “fake news,” and hate speech from our marketplace. To avail themselves fully of programmatic’s potential, marketers need certainty that their campaigns won’t appear next to objectionable content.
It’s why we’re investing heavily in machine learning. Our new optimization system, in which we’ve been devoting R&D resources for four years, is producing performance results that are between 65 percent and 85 percent better than our previous system (itself one of the best optimization systems in the industry). This isn’t incremental improvement; it’s a step-change in how programmatic works for marketers. We believe it will unlock vast opportunities for marketers and agencies.
The industry takes action
But one company can’t go it alone. This has to be a collaborative effort.
If you’re a CMO, you should adopt a supply-chain transparency platform like Amino Payments (full disclosure: I am personally an investor) so you can get end-to-end control over where your digital advertising investment is actually going. Who will be the first major marketer to see at least 80 percent of its spend end up in publisher hands, paying only for viewable impressions?
Time is no longer a luxury we can afford. The first 10 years of programmatic advertising went by in the blink of an eye. The next 10 years are going to seem even quicker. With television now at a tipping point (and news publishers well beyond it), the decisions we make today will determine the fate of the open internet.
Imagine what would happen if we could double the efficacy of TV advertising by allowing marketers to deliver the best creative to the right person at the right moment. We’d see a resurgence of advertising-based business models funding world-class video content. Traditional media companies could fight back against the technology giants that are bundling this content into subscriptions or e-commerce models.
History and technology don’t work magically in 10-year cycles, but in this particular case, we believe that programmatic is exiting its developmental decade and entering its next burst of innovation. Let’s not squander this moment. Let’s fix programmatic advertising and realize the true potential of the open internet.