6 misconceptions about programmatic advertising

6 MISCONCEPTIONS ABOUT PROGRAMMATIC ADVERTISING BY JESSICA MARTINEZ, NAA COMMUNICATIONS PROJECT COORDINATOR Programmatic advertising is a buzzword used often by publishers and marketers, but some are hesitant to embrace it because of several misconceptions. Publishers often think they will not be a part of the automating process while some buyers believe that programmatic offers low-end inventory, among other widespread concerns. Carl Kalapesi, vice president of industry initiatives at the Interactive Advertising Bureau, and Alanna Gombert, CEO of Gombert Consulting, spoke with NAA to clear the confusion surrounding some of the major misconceptions. 1. Misconception: Programmatic is the same as Real-Time Bidding (RTB). The terms “programmatic advertising” and “RTB” are used interchangeably within the marketplace but while programmatic covers four types of transactions, only two of them are considered RTB transactions. The other two are not because the ad unit price is not set by auction and in real time. Gombert states it this way, “Programmatic is an automated way of buying and real-time bidding is a mechanism by which you buy. Programmatic is a macro version and RTB is the subset version.” One type of RTB transaction within programmatic advertising is the open auction where anyone can buy and sell inventory and the price is set in the auction environment. The other form is the invitation-only auction, where prices are set by the auction but the publisher controls who is allowed to bid on the inventory they are selling. The other non-RTB transactions include unreserved fixed-price, in which publishers are able to offer buyers rights to buy inventory on a preferred basis and automated guaranteed, which offers a direct deal between publishers and buyers. 2. Misconception: Programmatic is made up of remnant inventory. Advertisers tend to think that programmatic buying will offer them only remnant, or low-quality, inventory. Kalapesi notes that RTB was originally used to buy and sell remnant ad units because publishers would first sell through their direct sales force and then programmatic would take up the remaining inventory. However, that is changing and marketers now have the opportunity to buy high-end ad units ranging from rising star ad units to display banner units, video, audio and more through programmatic. “Over the last three years, particularly the last 18 months, the majority of publishers we work with no longer see programmatic as a way to get rid of their unsold inventory, they see it as a core part of the way they sell it,” says Kalapesi. 3. Misconception: Programmatic ad fraud lacks effective solutions. Fraud is one of programmatic advertising’s major challenges and it is an issue that affects the digital media industry as a whole. There are several forms of ad fraud, click fraud being the most common. This occurs when “bots” click on ads in order to increase click-through rates and the number of impressions. Marketers are affected when their ad units are seen by machines instead of humans. Advertisers can work with their programmatic partners to ensure that the inventory they are buying are taking all actions possible to root out fraud. “While that can be the case in some situations, overall, the industry is working on tackling this issue,” says Kalapesi. Publishers are addressing this issue by stamping out sources of fraud and that is also why the IAB launched the Trustworthy Accountability Group, whose work focuses on increasing transparency and accountability to eliminate fraud. 4. Misconception: Programmatic leads to a reduction in ad unit prices. Just because ad units are sold in an auction environment does not mean that they are sold “cheap,” explains Kalapesi. As with any other auction environment, higher demand and limited supply can lead to higher prices within programmatic advertising.  “There’s no reason to believe that programmatic as a whole leads to lower prices,” says Kalapesi. “How it’s done and what inventory gets sold in the auction environment determines whether it’s a high or low price, not the actual transaction mechanism itself.” Gombert also notes that there are several ways to purchase inventory that will not negatively affect a publisher’s bottom line. “Buyers can either buy it in the stock market or reserve just like they always have,” says Gombert. “The stock market option is new. With the advent of the ad exchanges, there’s a way to buy inventory on an impression by impression basis.” 5. Misconception: Programmatic advertising transactions always cause errors. Due to the automated way programmatic advertising transactions function, sometimes algorithms cause errors by targeting ads to incorrect audiences. While this is a challenge, ultimately the way programmatic works depends on the type of transaction. But assuming that buying and selling is taking place within the auction environment, errors depend on who marketers are working with, explains Kalapesi. “There are good and bad vendors,” says Kalapesi. “But there are also supply-side platforms where the technology provider that publishers work with in order to sell inventory are great and don’t cause many errors.” This is where data, one of programmatic’s greatest advantage comes in. Kalapesi says the value of programmatic is using real-time data to target the message to people who are most interested in a marketer’s product and those whom a marketer is most interested in reaching. Using real-time data makes the ad experience better for consumers because they are seeing ads that are relevant to them, and it benefits marketers because they are not spending money on ads for people who are not their target consumers. 6. Misconception: Programmatic ads are not effective across devices. This is an issue to some extent because running ads, bought through programmatic, is more difficult in the mobile environment. On a desktop, programmatic relies on cookies as the technology to provide information about a particular user and whether to sell an ad to that user or not. “In the mobile environment, it’s different but there is no reason why it’s not possible across any of those platforms and we know plenty of marketers who are buying mobile inventory programmatically,” says Kalapesi. Source: 6 misconceptions about programmatic advertising