The Practical Programmatic
- Monday, June 23rd, 2014
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Programmatic is garnering a whole lot of attention – it’s forecast to account for more than 50 per cent of mobile spend by 2015 – but we still need to better understand what it is and what it does, says Nexage CMO, Victor Milligan.
Programmatic solves a critical problem. Mobile advertising – and digital advertising – has reached a scale where human processes are too costly, inefficient and unworkable. Humans would drown in scale, and if we kept current processes in place, we would create an industry that simply can’t work.
This reality existed in other industries (e.g. finance, credit cards, etc.). Those industries adopted high-volume transaction environments to enable efficiency at scale while enabling decisioning at the most granular level. Our version of this is programmatic – a high-volume transaction environment that enables intelligent, impression-level decisions.
Programmatic causes change – and change is hard. Programmatic is a new language, requires different skills, and alters processes. We should think of this transition as a change management process, and adapting to change will take time. This is not a comment on programmatic (good or bad); it is a reality of an industry going through significant change.
Programmatic has many piece-parts. Sometimes programmatic is positioned as a monolithic thing – it is not. It is has several key parts:
- Technology: Programmatic uses high-volume transaction technology, including Real Time Bidding (RTB).
- Transactions: Programmatic uses two transactions: buying transactions and auctions. Buying transactions support exclusive buyer-seller transactions (i.e., guaranteed, not competed) such as programmatic direct. Auctions support competitive trades.
- Data: Impression-level trading means that exchanges (like ours), buyers, trading desks, and agencies can enrich a single impression with audience segments, including CRM data. The ability to enrich and target at the impression level is the “nuclear power” of programmatic.
- Markets: Programmatic has three core markets: programmatic direct, which automates the direct, one-to-one relationship between a publisher and buyer (e.g. agencies/trading desks); private exchanges (typically first-look) where publishers offer high-value inventory to select buyers in an auction; and the open exchange, where multiple buyers and sellers transact in an auction. Done well, market participants have the flexibility to operate all three markets in parallel and tear down/stand up new markets quickly and easily.
Support for ad formats
Programmatic supports virtually all ad formats. Programmatic’s support for standard rich media and video is well-understood. Support for native ad formats is less clear because the definition of “native” is fuzzy. Some native formats unique to a publisher and advertiser may never be candidates for programmatic due to lack of scale, but most will. It’s helpful to separate the container of the ad from the ad’s context. The best examples of “native at scale” are news feed ads. They mostly use the 300 x 250 container (which acts as a standard ad format) and yet are sufficiently customized to the publisher’s content to be deemed “native”. These are ideal candidates for programmatic.
In conclusion, programmatic is not simply a technology; it is a way of doing business. It is quickly becoming the core foundation for mobile and digital advertising. Programmatic mobile advertising is expected to grow faster than desktop since it piggy-backs on the learnings of desktop but eschews the legacy systems and mindset of desktop. Our job is to make it work (well). But we need to do so with less “jargon and hype”. We need to strip it down to the basics and help people understand, engage, and master programmatic.
Victor Milligan is CMO of Nexage