Programmatic advertising is dead.
I invented it when I built the first ad exchange at Right Media in 2006, and now I'm here to deliver its eulogy.
To clarify: I don't mean that we'll see an end to "digital ad buying that involves automation and data-driven decision-making, frequently in real-time," which is how Cowen & Co. defines programmatic. All of that will still happen.
But programmatic is an obsolescent technology built for the one-dimensional and monolithic internet of Eudora and Netscape. It's wholly inadequate for the dynamic ecosystem of music and video streaming, interactive gaming, app stores, the "Internet of Things," GPS, cloud cognitive software and virtual reality.
In fact, there's not really one "Internet" (capital I) anymore. There's my internet (small i), yours and everybody else's. And this highly personal, programmable internet requires a monetization engine that can match both its intelligence and its capacity to customize user experience.
It needs programmable advertising. Here's what that looks like.
Pillar No. 1: Data Economy
In the Programmatic Age, marketers and advertisers could target large consumer segments with static, standardized creative, but it was largely impossible to customize campaigns at the individual level. Moreover, the conversation took place across a single channel. Your streaming platform wasn't talking to your newspaper, which wasn't talking to your watch, which wasn't talking to satellite weather feeds.
The Programmable Age will be different.
Today, the most sophisticated ad tech platforms empower marketers to build customized algorithms that govern when and where creative gets served, based on data as diverse as weather patterns and psychographic profiles. Tomorrow, even the creative will be programmable. A consumer opening an app in Boston in January will see an ad set against a snow-capped Faneuil Hall; another consumer may view the same ad six months later in Tokyo, set against a sunny Mount Fuji.
Not every marketer or agency will have the incentive or wherewithal to build an in-house data science team, but all will enjoy the ability to license third-party algorithms. In effect, data science will become its own service economy.
Pillar No. 2: Adaptive Intelligence
Data can be predictive, but it should also be adaptive. Other industries have embraced machine learning to replicate human insight at scale. The Programmable Age will demand that capability for marketers and advertisers.
What does that mean in real terms? It might mean applying logistical regression to predict whether a particular ad unit will be viewable before a buyer bids on and pays for that unit. Or a recipe blog's landing page might look different for someone who recently purchased avocados and chips versus someone whose shopping cart is filled with ingredients for chicken soup.
Far from replacing creativity, machine learning will fortify the ingenuity behind great campaigns and deliver a higher return on advertising spend. The programmable internet is highly personalized; its advertising must be as well.
Pillar No. 3: Frictionless Supply Chains
Programmatic advertising has long been synonymous with an over-complicated and inefficient supply chain.
From the moment a consumer clicks a link or opens an app, a single ad unit might bounce between multiple supply-side platforms and networks. Layer in rich media vendors, buy-side and sell-side ad servers, third-party verification partners and data management platforms, and you have the digital equivalent of a Rube Goldberg machine.
It's expensive, because each middleman takes a cut. It creates latency and eats away at the consumer's data plan, which contributes to widespread adoption of ad blocking. And it's opaque.
A hallmark of the Programmable Age is a compressed and frictionless supply chain. Rather than stitch together a patchwork of point solutions, marketers and publishers will increasingly migrate to consolidated platforms that power the entire market. They'll pay a transparent and reasonable technology fee, rather than exorbitant margins to broker-dealers in the middle.
When he coined the phrase in 2010, entrepreneur Sean Ellis stipulated that "a growth hacker is a person whose true north is growth." It's a concept deeply engrained in the Programmable Age.
In everyday terms, that means an open ecosystemâ€”namely, platforms with open APIsâ€”that host innovation rather than preclude it.
Innovative data science and dynamic creative agencies will provide value by plugging into consolidated, open platforms and, by so doing, will rapidly productize new offerings and establish new revenue streams.
Walled gardens aren't built to do that. They're ill-suited to the Programmable Age.
Programmatic advertising automated the delivery of static creative to consumers. But in the interconnected and personalized Programmable Age, marketers and advertisers have the opportunity to reinvent how they engage with customers, creating a fluid and relevant experience designed around the eye of the beholder.
About the Author
As co-founder, CEO and chairman of the board of directors, Brian O'Kelley leads AppNexus' strategic initiatives. He has more than a decade of experience in online advertising, including CTO of Right Media (later sold to Yahoo!), where he invented the world's first advertising exchange. Brian is a contributor to Forbes on technology-related topics, has been named to Crain's 40 Under 40 and Adweek 50 lists, and was recognized as an Ernst & Young Entrepreneur of the Year in the New York region.
Brian holds a B.S.E. in computer science from Princeton University. He lives in New York with his wife and daughter.
About the Sponsor
AppNexus is a technology company that provides trading solutions and powers marketplaces for Internet advertising. Its open, unified and powerful programmatic platform empowers customers to more effectively buy and sell media, allowing them to innovate, differentiate and transform their businesses. As the world's leading independent ad tech company, AppNexus is led by the pioneers of the web's original ad exchanges. Headquartered in New York with 23 global offices, AppNexus employs more than 1,000 of the brightest minds in advertising and technology who believe that advertising powers the Internet. For more information, follow us at @AppNexus or visit us at www.appnexus.com/en