i3 | January 06, 2019

Programmatic Ad Buying

Gary Arlen

This year, 86.3 percent of digital display advertising – highly targeted and very responsive – will be placed by automated "programmatic" buyers, up from 80 percent now, according to a new eMarketer analysis. The growth of ads on connected TV and over-the-top video channels will divert some spending from mobile and other platforms, according to eMarketer.

Equally significant is the role that artificial intelligence (AI) will play in the automation of media buying, selling and fulfillment. eMarketer's outlook on programmatic advertising sees automated systems handling nearly $69 billion of media buying in 2020, up from $36.3 billion in 2017.

Programmatic advertising is present through the media ecosystems, including conventional broadcasting. In this new world, an advertiser buys impressions – not mass audiences. Proponents deem the process efficient, transparent and cost effective since the automated matching of media availabilities and target consumers eliminates time-consuming negotiations.

AI Programmatic Ads

A study by Econsultancy and MediaMath finds that more than 45 percent of global advertisers use AI to target audiences to hone in on potential customers. The study also found that 42 percent of advertisers are using AI for "dynamic creativity," like customizing specific messages to consumers.

"AI gives marketers additional insights about their consumers," eMarketer explains. It cites data analysis as "AI's most common use case among client-side and agency respondents." It has also identified problems facing advertisers using AI tools. Nearly a third of companies are challenged applying AI to their workflow and many are confused about what AI is.

Some marketers are still exploring how programmatic systems differ from other automated processes, such as Real-Time Bidding (RTB), the buying and selling of online ad impressions through auctions that occur while a web page is loading. RTB is a type of programmatic advertising; it represented about 42 percent of programmatic display ad spending last year.

Social advertising is fueling programmatic advertising, as digital video has increased. eMarketer's study estimates that 81 percent of digital video ad spending ($23 billion) in 2018 was transacted programmatically.

Ad Industry Transformation

Despite the efficiencies and cost savings, programmatic has a dark side. Some analysts fret about "safe environments" – and the possibility that an automated system will place ads on an inappropriate media site that is inconsistent with a brand's image. There are also trust issues, such as dealing with fraud, bots and bad advertisements.

And there's also the challenge of scale. Reeve Benaron, CEO and chairman of AudienceX, an ad-tech firm, recently blogged that middlemarket companies have not benefitted from programmatic buying because it’s too complex to navigate.

"Programmatic advertising shouldn’t require difficult choices," Benaron says."Whatever the media budget, smaller companies should have access to the same cuttingedge tools that the bigger players are using."

Nonetheless, the programmatic matching of messages and customers is transforming the advertising business.

In a Forbes interview, Matt Sweeney, CEO North America of Xaxis, cited the value of AI and machine learning to process huge amounts of data crossplatform engagement with customers. He sees the value of this data-driven approach in the highly fragmented media landscape.

"Instead of measuring the clickthrough rate, you let the technology build multi-metric optimizations and sequential messages" that allow companies to engage prospective customers "with more content," Sweeney says.

"The new frontier is applying data to linear media audiences as well as digital audiences and having it all connected in a holistic and efficient way," he adds.

January/February 2019 i3 Cover Issue

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