Today’s forecast: The state of programmatic

A decade later it’s an industry of its own. Agencies, brands, and entire tech companies dedicate major resources to planning and executing programmatic strategies. Platforms as wide-ranging as mobile, OTT and TV have become targets of programmatic buyers. By 2020, eMarketer projects that $69 billion in sales will be dedicated to programmatic.

“I think the 2008 to 2012 story for programmatic was largely a tactical one…It wasn’t about transforming the world and solving TV’s problems,” said Joe Meehan, IPONWEB’s GM of North America. That’s exactly what many in the digital ad industry, from brands to agencies, want it to do now. But even a decade into its existence, programmatic technology may not be fulfilling its promise.

So where are we now? And how are things changing? We reached out to key executives from all sides of the industry to find out.

The in-housing trend is slowing

In 2018, marketers’ fears and frustrations with programmatic advertising reached a tipping point. A variety of issues—including fraud, brand safety, lack of transparency, and ineffective targeting—contributed to brands’ growing fears. Those fears drove many marketers to seriously consider—and in many cases move forward with—in-housing.

But over the past several months many marketers,  including major brands like Intel and Vodafone, have begun to reconsider, halting their plans or re-structuring some of their programmatic efforts around their external agencies. “I think a lot of people don’t think about the complexity of programmatic,” said Oscar Garza, evp of media activation at the digital agency Essence. “They think they can buy impressions at their DSP, and buy impressions within their wall, and be successful. But they can’t because they don’t understand it. And they’re being lead by consultants that don’t necessarily quite understand it.”

In that same vein, marketers have dramatically underestimated the amount of talent and expertise that’s required to make such an in-house model viable. “You can’t really make it work at a brand if you don’t understand the fundamental workings of the technology, including the points of conflict and the potential risks around fraud,” said Meehan.

Some brands are now moving to a hybrid model in which some of the technological infrastructure and manpower is handled by outside entities, including agencies. It’s quite probably that this hybrid approach is where the industry is headed overall, and for good reason. “I think that hybrid solution is actually the best way to go,” said Meehan. “Do what you can internally if you have the skills.”

Still, industry incentives are indeed pushing brand marketers to get more involved

There’s no question that some of the concerns that drove marketers to start in-housing are reasonable.

Fraud, transparency and brand safety issues persist. Display ad targeting can be haphazard. And some agency and tech providers have failed to deliver the level of sophisticated attribution that, once upon a time, they promised.

When programmatic first emerged as a new revenue source, marketers jumped on board without truly understanding its dynamics. But who needs to know the ins-and-outs when you have an agency that can do it for you? Indeed, marketers ceded too much control of the process to agencies. And some of the tech providers that helped facilitate that power shift over-promised while delivering a less-than-stellar product.

That’s why the hybrid model seems so viable at the moment. Marketers may not be equipped to do everything themselves — but they can certainly take more control, provided they have the skillset and technology to do so. “There probably aren’t many brands that [can] truly in-house programmatic,” said Meehan. “I think what they need is the discipline and the subject matter expertise of understanding how it all works and where the points of failure could be, so that they can make sure it’s being well managed.”

That will likely involve hiring new talent and bringing some technology in-house. But it will also involve close relationships with publishers, in many cases, agencies. “I think that’s mostly what the brands are [asking]: ‘why can’t they access [publishers’] inventory directly?” said Meehan. “‘Why do I have to use all this other technology?’ I think publishers have a tremendous opportunity to leverage that to create more value for themselves.”

Direct relationships with publishers are becoming increasingly crucial

For good or ill, the programmatic ad industry is starting to consolidate around multi-platform publishers with strong reputations for quality inventory and transparency. Many other publishers are being blacklisted or automatically blocked as a result of whitelisting.

There’s also been a trend toward tighter relationships between publishers and brands, belying the idea that programmatic must strip the humanity out of ad-buying. “There’s a growing acceptance that programmatic doesn’t mean no humans [are involved],” said Ryan Pauley, chief revenue officer of Vox Media. “On the marketer side that means a lot more hands on keyboards. On the publisher side, the one-to-one relationships are important —  being able to deliver insights back to clients about performance, about the audience, about the inventory. That’s going to be where the publishers separate themselves.”

As some publishers develop better reputations for one-to-one programmatic relationships than others, that could mean a smaller programmatic playing field for marketers. But it could also mean less risk — and more control. “Once [publishers] have control they start getting more visibility into the data,” said Meehan. “They see what the buy side is actually interested in, what they’re willing to pay.”

The trend toward tighter relationships between brands and publishers could signal that marketers are finally beginning to realize that effective programmatic buying requires a concerted strategy in addition to first-rate technological infrastructure.

Sophisticated technology is more important than ever

Marketers and publishers alike agree that it’s as crucial as ever for brands to be active across the programmatic ecosystem. That’s the only way to attain the necessary reach in today’s sprawling digital marketplace. As the programmatic industry evolves, forcing tighter working relationships between agencies, publishers and marketers’ in-house teams, it becomes even more vital to get the tech element right.

But marketers will need to find a balance between actually hitting their targets, doing so at the proper scale, and doing so without breaking their budget. And when you factor in the sheer number of concerns that programmatic marketers need to stay aware of —  fraud, attribution, viewability and more — it becomes even more crucial to seek out reputable tech partners.

Technology is the glue that can hold marketers, agencies and publishers together, fostering increasingly effective working relationships.

Where are we now?

Programmatic is still the digital marketing industry’s dominant media-buying method and revenue source, and that’s not changing anytime soon. But it has a ways to go before it supplants television or heralds in an age of transparent, fraud-free media trading.

To take more control while maintaining an understanding of the complex programmatic landscape, marketers should consider a hybrid approach as opposed to full in-housing. For a better shot at transparency and strategic control, they’d be well-advised to form tighter bonds with reputable publishers. The very foundations of the programmatic industry need to shift and adapt, keeping up not only with emerging technology, but the media industry itself. Media, after all, is in a constant state of flux —  and it’s only continuing to expand.

In 2008, programmatic was built to solve a problem. In 2019, there are new problems that need solving for. Programmatic is still part of the solution – but marketers, publishers and tech providers alike need to keep up with the industry as its changes only proliferate.