2014′s big online trend: Automated buying
It's up by 75 percent this year, to $3.37 billion
December 16, 2013
A few months ago, Interpublic Group said it plans to do at least half its online and offline buying by automation within the next three years. That’s building on a trend that’s very hot in the internet. A new forecast from eMarketer, the online advertising tracking firm, predicts that automated buying, often referred to as programmatic buying, will increase by 75 percent in 2013, to $3.37 billion. Next year it will increase another 38 percent, to $4.66 billion. That includes real-time bidding on exchanges run by sites such as Google and Facebook, as well as any other technologically-driven form of buying display advertising. There are a number of advantages to this type of buying, including the time saved on haggling over pricing. But many media people also have reservations about just how automated the buying process should become. They argue the human element is still the key to good media practices. Lauren T. Fisher, an analyst at eMarketer, talks to Media Life about why automated buying is so hot, what its limitations are, and how it will evolved in coming years.
First, can you define “programmatic buying” and give an example? Does it cover online only? Is there a difference between programmatic buying and real time buying?
In general when we talk about programmatic buying it’s really anything that’s automated or a technology-driven way of buying display advertising.
Most often when marketers think about programmatic buying they think about anything that’s bought on the exchanges–real-time bidding, which is a piece of programmatic buying.
Real-time bidding is a part of programmatic buying because it relies on technology and automation. Real-time bidding is an auction-based method. Programmatic, though, doesn’t necessarily have to rely on an auction.
How fast is programmatic buying growing compared to other forms of digital advertising?
Honestly I don’t know. We put out growth estimates for all of display and all of digital, and those include RTB. But unfortunately we haven’t broken it out.
It’s definitely gaining in momentum, especially when you look at a lot of the social advertising. Much of that is programmatic in nature. But it’s hard to say. I don’t think I’ve seen anything out there talking about that specifically.
What is driving this growth? Why are advertisers attracted to these types of buys?
One of the main attractions is the efficiency of it. From an RTB standpoint, it’s efficient because you’re setting all of these parameters of what you want from the advertising. And then the technology is doing the buying for you. RTB typically is also efficient from a cost standpoint.
And from the other end is programmatic-direct. Using programmatic to buy directly from a publisher is efficient because on some level you can automate the buying process. By automating the process there’s less of a back-and-forth. And in terms of fulfillment you’re using technology to fulfill the advertising as well.
I think also what’s driving growth is a larger industry recognition of the audience component. One thing about it is you can look at impressions down to the individual level. That enables marketers to do all sorts of things for understanding how many times a user sees an ad, so you can do frequency capping. Let’s say an advertiser wants to reach a specific demographic; they can target that demo using cookies and then place the ad based on that.
Having the ability to tell the system “Hey, after you’ve found this user 10 times, that’s it,” is an important thing to be able to do.
Are these buys usually handled by agencies or directly by advertisers?
It’s a mix.
There’s a couple ways that media buyers can engage in programmatic. Commonly if you’re working with an agency, they’re either using a trading desk, which is an in-house technology they’ve built to place those buys, or working with a demand-side platform, which enables programmatic advertising by setting parameters. They have huge partnerships with exchanges, publishers, etc.
In some cases a brand would be doing their own buying. In rare cases they may create their own in-house trading desk. I’ve seen articles here and there saying that may be on the rise, but I think it’s pretty early.
But it is a possibility.
How widespread is RTB online? Which sites account for the most buys?
In terms of ad spending, RTB is about 19 percent of all display ad spending this year, so about one in five digital ad dollars. By 2017 that will be about 30 percent.
In terms of sites that are most active, I would say any of the exchanges such as DoubleClick and Casale.
How many social media sites use RTB? Do you expect this to change in the coming year?
I know Facebook has FBX, which is an RTB exchange. Twitter is doing some RTB too.
I think we’ll see more of it. I expect we’ll see some growth, but in terms of additional areas I don’t cover social all that closely.
What’s the biggest misconception or misunderstanding about programmatic buying?
When I did interviews for the report a lot of the people talked about the fact that people still assume that RTB is programmatic. A lot of people forget about other types, such as programmatic direct. There’s a lot of legacy that come with the conceptions of RTB.
With RTB, one of the things people think about is how you might buy second-tier inventory, so a lot of people assume that all of programmatic advertising is low-level inventory. It may be true to some extent, but there are premium placements and publishers using programmatic.
Programmatic direct has been around for a long time, but I don’t think it’s been until this year that there’s been a lot of coverage of it.
What’s the most important thing media buyers and planners can take from this report?
I would say probably just understanding the differences between the types of programmatic advertising and how you would go about buying the inventory.
You would typically look at programmatic direct for more branding-based programs, very similar to traditional direct buying. RTB is used for more targeting or direct response.
Another thing to take away is the fact that with programmatic there is the audience capability. Media buyers should be aware of it because it’s something that will become much more important in the coming years.
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