15 Years of Defining Programmatic
Programmatic ad buying growth continues to explode. The online advertising ecosystem can be complex to navigate but for those that have embraced it programmatic simplifies the online ad buying, management and optimization process.
Looking back on how the industry has evolved, offline direct marketing tactics and principles have been applied to online ad technology and have now come full circle connecting the offline and online worlds. Because of these changes advertisers can now track and target audiences, and measure performance results across channels on and offline.
How did we get here? Looking back 15 years.
For today’s internet based businesses, online advertising channels like search and display are top channels used to acquire new customers. However, that wasn’t the case for us back in 2000. During the dot-com boom and crash, I was managing direct marketing programs for new customer acquisition at the “first online grocer,” HomeGrocer.com (Amazon was an investor, and it was later acquired by Webvan). We tested various direct marketing channels at HomeGrocer.com. Interestingly, we found that direct mail was the most efficient channel for us to profitably acquire new customers at scale (~$20M annual spend).
A lot has changed since the peak of the internet bubble in 2000 for advertisers. Here is a snap shot of today’s common direct marketing channels as they were used 15 years ago.
- Display – The first click-based banners were sold on HotWired.com in 1994. In 2000, display buying was done primarily through direct placements. Yahoo, AOL and MSN were the big portals around. Advertising.com, the ad network, came around in 2000 and was acquired by AOL in 2004.
- Search – Overture and Google were just getting started in 2000 with the auction-based, pay per click (PPC) model. Google launched AdWords in 2000, began offering PPC in 2002 and went public in 2004.
- Social – Facebook didn’t exist in 2000 and was founded in 2004 the same year they ran their first ads.
- Email – The perception on email marketing was low due to poor performance and offshore spammers clogging up inboxes with non-relevant content. The Can SPAM Act of 2003 helped to legitimize email marketing with clear opt-in and opt-out requirements.
- Direct Mail – Direct mail was a scalable and effective direct marketing channel. From magazine subscriber files to those compiled from warranty registration cards and phone books, advertisers had access to hundreds of marketing lists to test for performance (and all appended with demographic data). Database marketing was popular and allowed an advertiser to efficiently manage their prospect lists and direct mail communications.
With the growth of the internet and access to more audience data, the industry has progressed. Search, social and display channels have had tremendous growth and are now primary direct marketing channels for many businesses. Today we have a lot more options for online advertising.
Advertising 15 years later
Advertisers now have access to massive amounts of audience data, everything from online site activity and web analytics data to offline customer data, and 3rd party data. Offline CRM data and email marketing data can now be linked to programmatic ad buying platforms. Audience targeting can be done more efficiently now than ever before.
Today advertisers have access to advanced advertising technology platforms to help them manage and optimize their online advertising campaigns. Everything from search bid optimization, display ad buying and audience management, to site optimization and marketing automation tools.
All channels have shifted to programmatic (or automated) ad buying with a focus on audience-based buying. In display, audiences can be reached at the impression level through real-time bidding. Facebook enables social advertisers to reach custom, website and search retargeting audiences. In search, advertiser can now target audiences for their campaigns via RLSAs (Retargeting Lists for Search Ads).
Display Advertising 15 Years Later
For display advertising channels specifically, the industry has changed completely.
Ad exchanges revolutionized the industry. The ad exchange allows a publisher to sell their ad inventory in an auction environment, and an advertiser to bid on ad inventory in real time. The auction determines the fair price for the user impression. This process is similar to the stock market with buyers and sellers, but with display ads instead of stock.
Demand side platforms (DSPs) permit advertisers to plug into the ad exchanges to bid in real time on their key audiences at the user impression level. The DSP optimizes for the advertisers performance objective. The advertiser can bid what they believe to be the right price for each impression based on the available data they have about that user.
Data management platforms (DMPs) enable advertisers to consolidate audience data from various sources, identify and segment high value audiences, and activate those audiences for cross channel marketing on external ad targeting platforms like DSPs and site optimization platforms.
Dynamic creative optimization (DCO) allow advertisers to reach granular audiences with flexible ad creative that is personalized in real time to drive user engagement, conversions and integrated experiences.
Everything is in real time (or close to it). The entire real-time bidding process takes less than 100 milliseconds. When a user visits a website, before the ad appears, an ad call goes to an ad exchange which sends bid requests to participating demand-side platforms (DSPs). The DSPs in play then evaluate available data on that impression (audience, category, time of day, geo device, etc.) and send back bids based on what they know about the user and the likelihood they’ll convert for the advertiser. The ad exchange holds the auction and the highest bid wins. The ad served on the website was the highest bidder of the real time advertising auction. All this takes place in less than 100 milliseconds.
Real-Time Bidding Process
Many traditional offline direct marketing tactics and principles are still in practice and have been applied to ad tech and the online world.
In 2000, marketing databases were popular with offline direct marketers. These databases allowed for consolidation of various audiences down to individual user profiles, and expanding of audiences using 3rd party demographic, business attribute data and look-alike models. It gave the advertiser deeper insights into their audiences, enabling them to identify high value audience segments and deliver them to vendors for direct marketing channels. Does that sound like a Data Management Platform in the online world?
Direct mail letters were laser personalized with creative content (offer, message) based on the audience segment. Sound like Dynamic Creative in the online world?
We have come full circle and connected the offline and online advertising worlds by allowing advertisers to take their offline data (CRM, call center, POS), consolidate it with their online data (site visitors, web analytics) and use it for online targeting of ads.
Today marketers can meet their objectives more efficiently with Programmatic
Manual processes have given way to automated buying. CPM based selling models have moved to transparent pricing models. The massive amounts of online and offline data that is available to an advertiser can now be easily harnessed for ad targeting and optimization. Programmatic enables advertisers to buy more efficiently, reach more granular high value audiences, and as a result drive better performance.
Here is how Adobe views programmatic and some key characteristics of programmatic today.
Automated buying of ads across channels and devices
Many think of display advertising and real-time bidding (RTB) when they think of programmatic but it includes the automated buying of ads on any digital channel including Search and Social.
Data powers programmatic ad buying. To gain the most from programmatic, it’s all about using and applying data. This includes online and offline data, and 1st, 2nd and 3rd party data. Data powers the following benefits of programmatic:
- Enables an advertiser to build and reach high value audiences
- Fuels performance optimizations
- Powers personalized dynamic experiences
- Drives automated ad buying decisions across channels and devices
Advertisers have financial transparency into media costs by ad inventory source, and visibility into where their ads are running.
Advertising has come a long way
Today’s advertisers have access to integrated buy side tools – from audience management (DMP) to media buying (DSP) to dynamic creative optimization (DCO) – to help them most efficiently meet their online advertising objectives.
Programmatic ad spend continues to grow at a fast pace. According to IDC, global programmatic display spend will grow from $10B in 2014 to $70B in 2019. 60% of display transactions will be programmatic by 2019.
For advertisers that are embracing programmatic ad buying and leveraging their businesses audience data, the result is more efficient ad buying, better audience targeting across channels, and better performance results.