10 Things You Need to Know Now About Programmatic Buying

The 411 on Buying Digital Ads Without Speaking to a Single Human

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The advertising industry is on a march toward automation. Plenty of advertisers today are buying digital ads without speaking to a single human at a media company, and print and TV ads might not be far behind. Automated, or programmatic, buying is growing not only because it makes ad transactions more efficient but because it can make them more effective, as long as the right data is applied.

When surfing the wave of automation, here are 10 things you should know:

The pie is growing (fast).

Programmatic buying is on track to make up $14.88 billion of the approximately $58.6 billion digital advertising pie this year, according to eMarketer. That's a nearly $5 billion leap from 2014, when it accounted for $9.9 billion.

It's not just for direct response anymore.

Programmatic-buying systems now have access to some traditional TV inventory and plenty of ad time in "over the top" TV delivered via the web, making the practice increasingly attractive to brand marketers. Imagine this programmatic scenario: You serve a branding commercial to someone on her TV and follow it with a display or Facebook ad on her desktop or mobile device. "Many of the big brands are thinking about more full-funnel tracking and buying of media," said Brian Stempeck, chief client officer at The Trade Desk, an automated-buying platform.

Data rules.

Ad buyers can use programmatic buying to fan ads across the web and then, mid-campaign, evaluate what's working best -- which geographies, times of day, audience segments, publishers -- to narrow their target accordingly, so they're paying only for highly effective ads. This is a radical change from traditional ad buying, where a buyer agrees to run a certain number of ads with a publisher and is locked in to the contract.

Brands are taking it in-house.

Marketers' internal programmatic ad buying is the fastest-growing category of programmatic spending, according to ad-tech company Index Exchange. At the end of 2013, 11% of the ads bought through Index were from brands' in-house teams. At the end of 2014, the number had grown to 15%. "It's absolutely remarkable," said Index CEO Andrew Casale.

Mobile is a major issue.

The behavioral targeting capabilities of programmatic systems are heavily tied to tracking cookies, a major problem when it comes to mobile, where cookies are ineffective. The limitation of the cookie is causing difficulty for marketers that want to run campaigns across mobile devices and desktop. "I still take a skeptical eye toward a lot of cross-device [solutions] because it's an emerging technology," said The Trade Desk's Mr. Stempeck.

Social networks are gaining clout.

Over the past few years, Facebook, Twitter and LinkedIn have gobbled up programmatic ad-tech companies in a play to sell ads across the web, not just through their own platforms. Unlike the vast majority of independent ad-tech firms, these social-media networks have reams of login data, allowing them to connect user identities across devices. These social companies' offerings are poised to overtake the competition -- with the possible exception of Google.

Fraud is still a problem.

All the industry talk about fighting fraud doesn't seem to have eliminated it. The programmatic ecosystem is especially susceptible to a fraudulent practice called "URL masking," where a publisher lists its website in the ad exchanges as another, usually more reputable, website entirely. The buyer has no idea where the ads are actually running.

The big players are set.

Don't expect to see a big, new programmatic technology company pop up anytime soon. Venture capitalist Jerry Neumann said he's stopped investing in ad-tech for the time being because the top players are now entrenched. "When I was investing in ad-tech four to seven years ago, there was more opportunity than competition," he said. Now? Not so much.

It's not just banner ads.

Some brands have said they plan to move all their display-ad spending through programmatic channels. And that's led technology players to build functionality that allows brands to buy more than standard banner ads. Ad network Undertone, for instance, made its premium ad units available programmatically earlier this year. "We anticipate this being able to unlock a lot of programmatic budgets for brands," Undertone co-founder Eric Franchi said at the time.

It can be good for viewability.

Though programmatic buying is sometimes derided as a swamp of nonviewable, fraudulent, garbage inventory, there are controls available within the technology that allow buyers to purchase ads that are more viewable than others. You can get as granular as buying only the top 10% of ads that are viewed for the longest time. Good news for advertisers.

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