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Marketers will continue to grapple with cross-device targeting in 2016.

How Does Programmatic Buying Work? It’s Time to Figure It Out

January 7th, 2016   ||    by Todd Wasserman

There was a time when programmatic buying was merely a buzzword and represented only a small fraction of the market. However, eMarketer estimates that programmatic will account for 63 percent of US display ad spending in 2016, adding up to around $20.4 billion. Programmatic TV, meanwhile, accounts for roughly 3 percent to 5 percent of spending, according to one industry estimate, but that figure could at least double in the upcoming year.

However, how does programmatic buying work? Media buyers will need to figure that out in 2016, if they haven’t already.

How Does Programmatic Buying Work?

Programmatic is merely a synonym for “automated.” Traditionally, ad buys were made on a person-to-person basis and employed requests for proposals and insertion orders, but in programmatic, the humans are absent from the equation. While marketers are still in the business of creating campaigns and defining targets, the grunt work of actually buying the ads is increasingly done by machines.

What This Means for Media Buyers

“I think it’s inevitable that programmatic takes over everything,” said Jim Nail, a principal analyst at Forrester Research. “There are just too many advantages.”

This doesn’t mean the bots will take your job, necessarily, but “if your job is putting together media plans on Excel spreadsheets and crunching a bunch of numbers, then yes, your job is going away,” Nail said. “Not in 2016, but it’s going to go away.”

On the other hand, if your job is about maximizing the client’s dollar, you’re in a good position. However, you need to understand the media ecosystem and the technology behind it, including end-to-end chains, cookies, and user IDs.

  • End-to-End Chains: Larger vendors make it easy to fully automate the buying process by providing full stacks of end-to-end solutions. The downside is that you are then relegated to their respected ecosystesms, but with lots of vendors in the market that allow you to buy freely on the open web, you might find a better option.
  • Cookies: One of the major narratives of programmatic in 2015 was the realization that as consumers were turning more to their mobile devices, desktop-based cookies became increasingly ineffective. Cookies are all but useless on mobile, since web browsing only makes up 12 percent of time spent on such devices, versus 88 percent for apps, according to comScore.
  • User IDs: Ideally, there would be one ID that could target users across devices: a user ID. Being able to target consistently—whether it’s through TV, laptops, or phones—is the holy grail of advertising right now. Though some services manage to provide a user ID that transcends device type, stepping out of those digital ecosystems means cobbling together a solution. For his part, Nail said he thinks the industry will solve the cross-device targeting conundrum at some point, but not likely in 2016.

Looking Ahead

If anything, the cross-device problem will become even more knotty in 2016 as virtual reality devices hit the market and the Internet of Things continues its march to dominance.

Nail maintains that marketing will need to fight an uphill battle to catch up. Since the industry existed for so long with a scarcity-based mindset in which there were few opportunities to reach customers, he said he believes marketers have overplayed their hand by using their new access via digital formats to bombard consumers.

“They’re still thinking—every time they have an opportunity—that they have to get their message in front of [consumers],” Nail said. “They’re not really thinking about whether those messages make any sense.”

To learn more about the current landscape of programmatic buying, contact Videa.

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