November 27, 2018

Increasingly, brands are opting to buy digital media through programmatic means, and the sharp uptick in adoption of this model is causing disruption among brands and agencies alike.

According to eMarketer, direct programmatic buys for digital display ads have more than doubled in the past two years, growing from $13.62 billion in 2016 to $27 billion in 2018. The growth trajectory in this space is expected to continue, and in 2020, eMarketer anticipates spending to be at $40.03 billion.

Though programmatic media buying has been possible for more than 10 years, only recently has it become an industry norm. Today, the algorithmic real-time advertising media buying and selling process is widely understood and is a common element of marketing plans.

Marketing software company dataxu measures queries per second, or the number of ads available to purchase, to gauge the size of the programmatic market. Ed Montes, chief revenue officer at dataxu, describes the exponential growth he's witnessed.

"When I started at dataxu in 2014, the number [of queries] was in the several-hundred-thousand range," he says. "Today, it's around six billion available ads at any given second. A lot of change has happened in the supply chain around who makes inventory available and how it's made available."

Montes attributes the boom in programmatic media buying to two things: the advancements of technology and mass consumer adoption of technology. Those two factors together have created an environment that allows consumers to access media whenever and wherever they want.

Programmatic buying helps advertisers purchase media with speed and agility, two qualities which are important to succeed in today's always-on media landscape.

Programmatic buying's primary benefits are its ability to enhance cost-savings and increase marketing effectiveness. Through programmatic media buying, brands can target and retarget narrow segments based on geography, buying habits, demographics, and many other variables that help ensure the advertising is displayed to the intended audience in a relevant context. Personalization and creative optimization via programmatic allows brands to showcase different creative to different audiences based on the brand's understanding of its consumers. Additionally, the technology is flexible so that as a campaign progresses, ad dollars can be reallocated to the ad spaces that are driving results.

Brands are finding new ways to grow as a result of programmatic media buying. AVEENO, for example, won a 2018 Internationalist Innovation in Media award for its campaign that leveraged the programmatic media buying to cross-sell products to existing customers. The body care brand found that loyal customers were only choosing AVEENO in one segment of its product portfolio, such as hair care or baby care. Through programmatic media buying, AVEENO targeted these customers with tailored digital advertising intended to introduce the customer to the broad range of AVEENO products. The programmatic buys were driven by data, including the time of day and weather conditions. A customer in a humid climate may have seen an ad for a hair smoothing product, but a customer in a desert climate may have seen an ad for a hydrating moisturizer. As a result, 18,000 customized content pieces reached customers via carefully considered premium publishers. Programmatic media buying enabled tailored creative and contextually relevant placement to take place on a large-scale basis.

With all the benefits of programmatic technology, it's easy to understand why brands are gravitating toward this method of media buying. But it's not without flaws. Because the almost instant online bids for ad space are bought by churning computer algorithms, it's unfortunately possible for ads to make their way into unsavory spaces, thus associating brands with unsavory content. Brand safety can be compromised if programmatic is thought of as a "set it and forget it" strategy. Brands must remain diligent in monitoring where their ads run, and marketers must strike a balance of good, cheap, and fast when considering advertising opportunities.

Another issue with programmatic media buying is transparency. According to a 2017 ANA survey, one-third of marketers surveyed are uncomfortable or very uncomfortable regarding the transparency of their brand's programmatic investments because of "hidden costs, too many middlemen, and uncertainty on where ads actually run."

Perhaps in reaction to this discomfort, there has been a surge of brands bringing programmatic buying in-house. Other ways brands have tackled transparency issues with agency partners are through contract audits and agency reviews. Additionally, an increasing number of client-side marketers are insisting on disclosed programmatic models that give the advertiser insight into final bid prices, as opposed to the less expensive and less transparent undisclosed programmatic models.

Five Ways to Maximize Your Programmatic Marketing Efforts

  •     Have a clear goal: Demonstrate success and accountability by tracking KPIs and identifying ROI goals in advance of the program's roll out.
  •     Use a white list: Not all outlets across the programmatic landscape are created equal. In fact, some can be downright damaging to your brand. Rather than serve ads across the web, create a white list of the sites/outlets that you find acceptable for ad serving.
  •     Don't operate in a vacuum: It's critical to understand that what works for one audience segment may not work for another. Try customizing messages and types of ads you serve to your various audiences while monitoring frequency, recency, and timing for each segment.
  •     Think mobile first: Mobile traffic is steadily on the rise, and ads need to be where the consumers are. Also, thinking mobile-first will ensure that ads can be transitioned across all display types, including desktop.
  •     Continue to optimize: There's no such thing as a set-it-and-forget-it campaign in the digital era. Marketers should track ad performance closely and regularly pivot based on those learnings.


State of Programmatic Survey Report

In 2017, the ANA surveyed key client-side marketer members in an effort to understand the state of programmatic buying in the marketing industry. The 149 survey participants helped to uncover challenges and trends related to programmatic media buying. From the findings, the ANA published recommendations for marketers on how to maximize their programmatic efforts and what "watch outs" to be mindful of as this type of media buying becomes more prevalent in the industry.

Key Findings

  •     A great majority (85 percent) of respondents stated that their company is currently conducting programmatic initiatives, either in-house or with an agency.
  •     The top cited benefits of programmatic buying are better audience targeting, the ability to build audience reach, and real-time optimization.
  •     Companies are focusing their programmatic media buying on online display on a desktop (85 percent), followed by mobile display (74 percent), online video on a desktop (71 percent), and mobile video (62 percent).
  •     A large majority (78 percent) of respondents are either concerned or very concerned about brand safety issues in programmatic buying.
  •     More than a third of respondents (35 percent) have reduced the role of external agency(ies) as a result of the expansion of their in-house capabilities for programmatic buying. This is a notable increase from the 2016 ANA/Forrester study that found only 14 percent of ANA marketers doing this.
  •     Most respondents have one staff member who devotes 100 percent of his/her time to programmatic initiatives and three employees who work on programmatic initiatives as part of their other work responsibilities.
  •     Only 40 percent of respondents are comfortable or very comfortable about the transparency they receive with their programmatic media investments. A third are uncomfortable or very uncomfortable. Those who said they were uncomfortable cited factors including hidden costs, too many middlemen, and uncertainty on where ads actually run.
  •     19 percent of respondents have opted in to an undisclosed programmatic model with their agency/agency trading desk. This typically refers to media purchased on an advertiser's behalf that does not disclose the actual closing/winning bid prices, only the final price, which can hide margins and fees. The 2016 ANA/Forrester survey indicated that 34 percent of respondents had opted in to an undisclosed programmatic model. The ANA is aware that many marketers have made changes to programmatic buying practices to address media transparency concerns, and specifically, fewer marketers are now opting in to undisclosed programmatic deals.

Survey Conclusions

Programmatic advertising is both an opportunity and a challenge for marketers today. It offers better audience targeting, real-time optimization, and the ability to build audience reach. However, given transparency and brand safety concerns, unlocking the best of programmatic advertising requires education and knowledge. Many marketers are taking a more proactive role in managing their programmatic investments.

A majority of companies (69 percent) set the strategy and campaign direction for their programmatic initiatives and nearly half (47 percent) hold the contracts for their technology providers like DSPs and DMPs. An important tenet of programmatic knowledge is understanding how the value of ownership and access to a company's own data enhances transparency.

Significant progress has been made by ANA members over the past two years to better understand undisclosed programmatic models, which typically only disclose the final bid price of media purchased on an advertiser's behalf and can hide large margins and fees. Fewer companies are choosing to enter into an undisclosed programmatic model — 19 percent in 2017 versus 34 percent in 2016.

Most companies have their agency partner(s) manage some of the more hands-on aspects of programmatic advertising, including campaign execution (80 percent), reporting (78 percent), data analysis during the campaign (73 percent), and audience planning (54 percent). However, more than a third of respondents (35 percent) have reduced the role of external agency(ies) as a result of the expansion of their in-house capabilities for programmatic buying. This is a notable increase from the 2016 ANA/Forrester study that found 14 percent of ANA marketers were reducing the role of their external agency as a result of in-house expansion. Understanding the programmatic process and supply chain is crucial even for those companies which outsource these activities, as this knowledge
can assist companies in deciding the responsibilities that are best outsourced and those that should be done in-house.

Satisfaction with programmatic performance among ANA members is mixed. Half are very satisfied/satisfied, but 46 percent are unsure or neutral. This indicates that better reporting and more ROI data are needed from the industry. Forty-four percent of marketers elected to use third-party attribution partners to help determine the success of their programmatic ads. These companies help marketers determine the value of paid media impressions and other touchpoints along the consumer path to purchase.

Transparency is still a large issue for marketers investing in programmatic advertising. Less than half (40 percent) of ANA marketers are very comfortable/comfortable with the transparency of their programmatic media investments. Respondents said they didn't know where their ads were running, what percentage of their money goes to fees, or were unable to receive clear data on results.

Buying Benefits of Programmatic Buying

The top cited benefits of programmatic advertising are better audience targeting, which 96 percent of respondents said was very important or important, the ability to build audience reach (90 percent), and real-time optimization (85 percent). These findings were similar in the ANA/Forrester 2016 report "The State of Programmatic Buying."

Staffing and Trends in Outsourced versus In-House Capabilities
More than a third of respondents (35 percent) have reduced the role of external agency(ies) as a result of the expansion of their in-house capabilities for programmatic buying. This is a notable change from the 2016 study, which reported that 14 percent of ANA marketers were reducing the role of their external agency as a result of in-house expansion.

2018 ANA Survey Finds More Brands Bringing Media Buying In-House

The ANA's most recent study on in-house agencies was published in October 2018. In this survey of marketer member companies, the ANA found that in-house agencies are increasingly taking on the role of media buying when compared to a similar study released in 2013.

Top media planning/buying services handled in-house are for social media (40 percent, up from 28 percent), search engine marketing (30 percent, up from 27 percent), search engine optimization (28 percent, up from 22 percent), and programmatic (24 percent and not measured in 2013).

Among those members with an in-house agency, 55 percent perform some media planning and buying services in-house (similar to the 53 percent from the 2013 survey).

Recommendations Based on Survey Results

Based on the survey findings, the ANA suggests marketers consider these recommendations for optimizing their programmatic initiatives.

Determine How Your Organization Will Define Programmatic Success

Set a clear path forward for your programmatic initiatives. Gather intelligence on how your peers are setting expectations for their campaigns and select your benchmarks intelligently. Make sure your team develops well-defined and actionable KPIs and works with your attribution partner and technology providers if necessary to see that your campaigns are hitting the right marks.

Build Internal Expertise

One of the major benefits of programmatic advertising is the ability to track the impact of a company's investment and optimize ad campaigns in real time. However, this is only an advantage if brands are able to interpret results and optimize accordingly, making the case for building expertise into your marketing team.

Own the Data and Knowledge

Marketers should consider owning the contracts for the DMP, DSP, or both, and then give their agency access to the platform to run the campaigns. This gives brands more leverage to demand transparency into contracts and fees, a high degree of control over programmatic planning and execution, autonomy over tech stack and partners,
the ability to directly control transaction data, and ease of portability in the event of an agency change.

Understand the Tradeoffs of an Undisclosed Programmatic Model

The ANA is aware that many marketers have made changes to programmatic buying practices to address media transparency concerns, and, specifically, fewer marketers are now opting in to undisclosed programmatic deals. ANA members are encouraged to ask questions and fully understand the tradeoffs between disclosed (more transparency) and undisclosed (no transparency but perhaps cheaper) to make the programmatic deals that are in their best interests.

Implement Top Performer Best Practices to Combat Bot Fraud

Bot fraud (defined as ad fraud perpetrated by automated entities capable of consuming digital content) in programmatic advertising should be a red flag for marketers. The ANA has partnered with White Ops on three separate studies to measure bot fraud in digital advertising. In the 2014 and 2016 studies, ANA and White Ops found that programmatic advertising had a high risk of fraud. The latest study, published in 2017, found that fraud in programmatic was no different than non-programmatic. Programmatic buying has become a much bigger part of the overall market, especially for digital display advertising, and many programmatic platforms have instituted sophisticated security controls against botty traffic sourcing that have helped reduce fraud.

Be Aware of Source Traffic

Marketers should also be aware of sourced traffic in digital advertising buys — including programmatic buys — and clearly understand its use in their media schedules. Sourced traffic is when digital media sellers pay to acquire visitors through third parties. According to the latest ANA/White Ops study, traffic sourcing is still the top contributor to ad fraud, with 3.6 times as much fraud coming from sourced than non-sourced traffic. Marketers should demand transparency from publishers about traffic sources and build language into RFPs and insertion orders that requires publishers to identify all third-party sources of traffic. Marketers should consult with their counsel to develop specific provisions that best serve their company's individual interests.

Media Buying Evolves in Response to Changing TV and Video Landscape

Recent changes in the marketing industry have affected where marketers place television and video ads. These changes include growing online and mobile video consumption, new "over-the-top" TV services, household addressable ads, and "advanced TV" audiences defined outside of Nielsen ratings. New research from the ANA and Forrester provides insight on how marketers have adapted to the evolving television and video landscape and how the changes will affect their plans for the future.

The ANA and Forrester conducted research to find out how effective TV and video advertising are in spite of the rise of social media and online video. The study provided key findings on how brands used TV advertising:

  •     77 percent of respondents said they bought cable ads in 2017.
  •     58 percent of respondents said that TV effectiveness has increased over the past five years.
  •     Those who said it decreased cited new TV services and media fragmentation as the top two answers, and cord-cutting was at the bottom of the list of reasons they felt it decreased.
  •     Respondents said they're also using other types of video advertising, including social media, online video, and over-the-top (OTT) services.

Social media sites perform slightly better than TV for short-term sales objectives, but they don't measure up for longer-term goals. Budgets are increasing for social platforms, but TV was viewed as effective by more respondents.

The research also found that despite the rise of social media, TV remains unchallenged in its effectiveness for brand building. However, that effectiveness is beginning to decline due to fragmented viewing habits. Two new approaches to TV have emerged to overcome this challenge: Addressable TV delivers ads to specific households, and advanced TV uses rich audience data to allow advertisers to create schedules that maximize reach beyond age and gender. The study provided key findings in these areas:

  •     15 percent regularly include addressable TV in their plans, and 17 percent regularly include advanced TV in their plans.
  •     35 percent have experimented with addressable TV, and 20 percent have experimented with advanced TV.
  •     26 percent are knowledgeable about addressable TV but haven't bought it yet, and 19 percent are knowledgeable about advanced TV but haven't bought it yet.
  •     18 percent are aware of addressable TV but don't know enough to use it, and 25 percent are aware of advanced TV but don't know enough to use it.
  •     6 percent were not aware of addressable TV at all, and 19 percent were not aware of advanced TV at all.

The research also found that barriers to using addressable and advanced TV fade quickly, and in 2018, 86 percent of those experienced in addressable TV said they are very likely to continue to invest in it. Eighty-six percent of experienced users of advanced TV also plan to continue to spend money on it. As a result, both groups will likely cut back on their traditional TV spends.


Here are four tips for marketers looking to make the most of these new TV and video advertising opportunities.

  •     Evolve the buying guidelines. Marketers shouldn't compare the effectiveness of a buy against a general audience but against the more detailed strategic audiences that might be used in a campaign.
  •     Modularize planning. Addressable and advanced buys allow marketers to think about other sub-target segments so they can reach light TV viewers during the times they watch. This allows them to create layered plans that will provide better coverage.
  •     Become a data detective. Marketers should ask the right questions. How do we know this is the right data to find the audience we're looking for? Is that data based on observed behaviors or a self-report? Is the data at the household level or the individual level? How frequently is the data updated?
  •     Hybridize TV and digital buying skills. Digital marketers may dismiss TV because they don't understand the brand awareness that it delivers, but brands can take the best of both worlds (traditional and addressable/advanced TV) to optimize all of their capabilities.

Q&A with Jim Nail, Principal Analyst at Forrest Research

Q. Assuming the target is sizeable, is addressable TV scalable?

A. We need to redefine reach here. It's dependent on your product category. Can you scale addressable TV to reach 1.7 million people? Maybe, but there still needs to be an evolution. If there is demand there, I believe viewers will respond.

Q. For brands that have yet to use traditional TV, do you recommend diving in with advanced and addressable TV first?

A. It depends on the product category and your objectives. Where you can define a tight target audience, addressable can be effective. There's no one-size-fits-all answer.

Q. How do you target your client database for business marketing?

A. That's a really interesting challenge, and it adds a layer of complexity on top of what advanced TV companies are doing. They can take an in-house list and match it up to the providers of these services. A lot of that is based on home address, so it will be more challenging.

Q. Does the effectiveness offset the cost?

A. Yes it does. In many cases, additional cost is worth it. Would you do an entire campaign with only addressable TV? Probably not, but would you spend a little bit more to get to the heavy buyer? That could be a good deal.

Q. For brands measured on performance as opposed to brand-building, do you have tips for switching over to TV?

A. Set up a test, measure it. Set what the cost per sale is, and figure out if it fits into your business model and if you have the tools for measuring TV attribution.


The Future of Programmatic Buying

The ANA's Marketing Futures initiative is focused on innovation within the marketing industry, and the program aims to prepare marketers with actionable insights on the latest trends. Marketing Futures conducted interviews with subject matter experts to create a detailed report on the future of programmatic buying. According to the report, programmatic buying is evolving beyond digital media buying, and it now includes connected TV and ad-supported omnichannel media using different platforms.

Marketers can expect to see targeted traffic connected by increasingly accurate consumer data which will reach a better, more personalized audience. The audience will find the ads they view addressing their specific consumer interests, thereby creating higher overall consumer satisfaction. Econsultancy's Ben Davis shares that by using this approach you could be "serving ads on Spotify during the consumer's morning commute, engaging them with an in-feed ad on LinkedIn during their lunch break, and again while they are surfing on mobile on their way home."

This comprehensive approach, which efficiently creates targeted advertising matches, will also see a rise in advertising costs. As consumers become more demanding, their expectation to be matched and entertained in the omnichannel ad space will also grow, requiring higher quality and more creative advertisements to grab their attention.

As ads become better matched with the consumer's day-to-day experience, their value will increase and consumers will find them less disruptive and more entertaining. Ads that are tailored to each individual consumer they target are expected to increase engagement and will make investments in higher quality content more manageable and desirable. This level of customization will result in fewer advertisements, since ad-funding expenses will increase with each ad that is created.
Best Practices

JPMorgan Chase Prioritizes Brand Safety and Brings Programmatic Buying In-House

JPMorgan Chase transformed its business by building an in-house programmatic team and doubling down on its commitment to brand safety.

Programmatic Pilot

After successfully bringing search capabilities in-house, Chase explored the possibility of bringing programmatic buying in-house as well. The initiative began at about the same time the ANA, in conjunction with K2, released a report on transparency issues plaguing the advertising industry, so the impetus to take control of ad dollars and renew focus on brand safety was strong.

The brand began with a pilot program and set forth two main objectives. The first was to demonstrate how this initiative would fundamentally transform the business; Chase was not seeking incremental gains from this project. The second goal was to succeed not only at achieving key metrics, but to win the confidence of internal clients. The project needed to demonstrate that the in-house team could function at the same level or a higher level than an agency partner could. Viewability, effective CPMs, and acquisition targets were the key metrics tracked.

The pilot was successful, and the brand gathered some key learnings that guided the development of a complete department. The brand's programmatic ecosystem was fully transparent and included first-party data, which was key to unlocking target audience insights.

Another benefit to creating an internal team is the longevity of the talent working on the business. Agencies are a competitive environment where employees come and go quickly. At Chase, the retention rate is higher, and there is an advantage to having long-term employees who know the business, own their roles, and are invested in the long-term success of the organization.

The brand faced some challenges during the pilot when it came to internal bureaucratic hurdles. Chase learned that agencies are more efficient at invoicing and drafting vendor contracts. The brand is working to create a smoother workflow in those areas.

Brand Safety and the Whitelist

When Chase found itself on a website synonymous with hate speech and fake news, it took swift action to ensure the safety of the brand. The site was put on a blacklist and was blocked. But the same scenario arose again: a different ad had been placed on an illicit site. And a third time. On a company level and on a human level, Chase did not want to be associated with fake news or bigoted content, but blacklisting sites was not working.

Chase eventually concluded that by working off a blacklist, the brand was simply playing goalkeeper or whack-a-mole. New unsavory sites would continue to pop up, and it was impossible to block them all. Instead, the brand created a whitelist: a narrow list of approved websites where its ads were permitted to run. To create the whitelist, Chase examined the 400,000 websites on which its ads were appearing. The majority of sites served only one impression. After removing the single-impression sites, the brand had a working list of 12,000 sites. Chase sifted through the list manually and removed any sites that were irrelevant or unpleasant.

The whitelist is maintained on a monthly basis. An important operational piece of this process change was to alert the entire organization and make the whitelist available to all.

While Chase ads are now run on far fewer websites, the ad placement is much more relevant to the Chase audience. The whitelist resulted in a 5 percent increase in viewability. The brand also saw a reduction of ad fraud by 49 percent. The quality over quantity adage rang true for Chase.

Case Study