May 13, 2017

Here are three reasons programmatic is failing:

Reason #3:  Prices Will Always Go Down

Programmatic revenue earned by publishers fluctuates based on fill rates.  Publishers will invariably lower their floor prices to increase their fill rates as the end of a quarter nears, in an attempt to get to their quota.  Nothing is ever going to reverse this from happening.

Additionally, programmatic is exclusively about ad performance.  Prices may rise for moments in time, but ad performance will always bring prices back down. A cost-per-action goal is arbitrarily set by an advertiser (or agency).  

Whether it’s a cost-per-click of under $5 or a cost-per-customer-acquisition of $125, the buyer's goal is to deliver a lower cost per action than the year or quarter prior.  Paying a lower price for the display of the ad is the easiest lever to pull to meet these lower-cost-per-action expectations, and publishers selling programmatically will always lack leverage to stop that from happening.  

Lastly, programmatic prices will always go down because of the constant glut of supply. The idea of bidding for each impression looked good on a whiteboard and in a patent application.  In reality, there will never be enough advertisers bidding to overcome this oversupply problem and cause prices to rise.

Reason #2:  Programmatic Numbers Have Question Pox All Over Them

Is the data used to target ad impressions latent, which is a fancy way of saying, did ad impressions for a hotel chain get wasted on people who already booked their rooms?  Are impression delivery numbers artificially inflated because of bots?  Did ad impressions appear on unsafe sites or in unsafe placements on sites considered safe?  Were programmatic impressions served but not seen?  Did autoplay dramatically pump up the number of programmatic pre-roll video ads viewed?  Did any of these programmatic video pre-roll ads run prior to unsavory content?  Were 100% of the clicks reported on programmatic mobile display ads accidental?

The answer to every question above is "yes."

Reason #1:  Even if You Could Show Clients Their Ads, You Wouldn’t

When I bought print media, we sent clients checking copies so they could see their own ads.  Our clients consistently asked for additional copies to share with their bosses and other executives at their company.

The biggest reason why programmatic online advertising is failing is that even if you could, you would never show 95 out of 100 programmatic ad placements to the clients who paid for them.

First, programmatic ad impressions are disconnected from the content in which they appear, so they always look foolishly out of place.  Two, most programmatic ads appear either in terrible placements on premium publishers, or on terrible sites clients would never buy direct.  Three, all programmatic ads appear with way too many other advertisers on the same page view.  

You would never show clients any of these kinds of ad placements because if you did, they would feel worse about their investment, not better.

Not showing advertisers their own ads has been the elephant in the programmatic room from day one.  The minute clients like Marc Pritchard at P&G — and others like him working for premium brands — start requesting “checking copies” of their online ads, programmatic advertising will have a huge problem.

The greatest programmatic sale has been convincing publishers to buy into selling ads this way.  Most see programmatic as our industry’s inevitable future. I look at how these ads get priced  — and, most importantly, how they appear — and see an emperor on display with no clothes on.

About the author

Ari Rosenberg, Founder, Performance Pricing Holdings, LLC
Courtesy of mediapost



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