Media Coverage

October 2nd, 2014

Why Programmatic Ad Buying Is (Currently) Problematic

Why Programmatic Ad Buying Is (Currently) Problematic

Author

Peter Daboll

Ace Metrix via Forbes

By Peter Daboll

We all continue to hear a lot of discussion at Advertising Week about programmatic. As one speaker noted, “Programmatic is like teenage sex—everyone is talking about. Everybody thinks everybody else is doing it, but no one is doing it—at least not in the way they are talking about it.”

To be clear, any screen-video programmatic is likely the future of our industry, with the promise of one-stop efficient buying of multi-screen inventory dramatically simplifying a complex process. Yet the current model is not fully baked.  The industry is barely recovering from a CPM free fall in display because of the aggressive use of exchanges. Both publishers and advertisers have reason to be wary.

The efficiency of automating the buy/sell process and creating an “efficient market” argument is theoretically solid, but has not yet been achieved in practice. There are well-documented issues with transparency and “value-stealing” from the intermediaries. A recent IAB whitepaper stated that  “despite programmatic media’s focus on efficiency, advertisers are often paying significantly higher CPMs for programmatic non-guaranteed than a publisher receives net of fees…the lack of transparency, where technology fees aren’t broken out from CPMs, results in buyers and sellers evaluating inventory value and ROI based on limited information.”  If the advertiser and the publisher are not seeing true value in programmatic, then who is? It’s clear that the programmatic efficiency story has yet to have a happy ending.

But even more important, something seems lost among all this talk of efficiency, even if it was working…well, efficiently.  Since when is advertising just about buying and selling ads efficiently? What about quality of the ad creative itself? Shouldn’t ads actually work once a viewer sees them? Doesn’t emotional connection, breakthrough, consumer attention and brand messaging matter?

Of course they do. Countless studies have shown that the lion’s share of the ROI of a campaign can be directly traced to the quality of the campaign creative. As with everything, quality matters, and this is especially true when it comes to advertising.

So why do we ignore ad quality in programmatic? Because, quite simply, no one’s figured out how to incorporate creative performance measurement into the ad-buying systems. The origin of today’s programmatic platform was a means to trade remnant inventory at low prices.  This worked fine when nobody cared about who the publisher was or the quality of the ad of a low-end impression. But as we move up the food chain and jam higher value/quality impressions, and now video, into the same platform, the lack of quality measurement becomes a big problem. The result is shaping up to be a repeat of the remnant marketplace, putting downward pressure on CPMs, regardless of how good they are.  A system where all ads are treated as equal penalizes great creative.

There are fundamental differences between low-value display and high-end video. Not just on the economics, but on the audience. Higher value impressions are more about delivering an effective consumer experience, but are more expensive to produce and run.

The ad industry is chock full of urban myths and legends. One such myth is that bad ad creatives are not really that bad. That no one will notice. But poor quality ads are, in fact, not neutral at all. Facebook, Google and others are realizing that a bad ad experience does lasting damage – not only to the advertised brands, but to the publisher. In a world where ads are considered by many to be intrusive anyway, serving a poor ad just makes everything worse. Bad ads hurt everyone in the ecosystem— when advertiser’s campaigns don’t perform, viewers hate them; they miss their ROI objectives; publishers deliver poor user experience and risk losing visitors.  A very vicious cycle.

To make matters worse, with performance metrics in CPC or CPA deals, bad creative often gets run at insane frequency levels. That’s like turning up a song you hate to unbearable decibels.

The gaping hole in the current video programmatic discussion is the lack of a consistent measure of ad quality in addition to the quality of the inventory. Programmatic buying is not in itself responsible for the destruction of value, but its lack of differentiation of quality fosters it.

Unlike an exchange, which is a zero-sum game with a winner and a loser, improving creative quality floats all boats in the ecosystem. By having an ad quality measurement standard for all ads, all players benefit. Publishers benefit by having guaranteed ad quality on their site, and can charge a “penalty tax” on low quality advertisers. Advertisers win by ensuring the most impactful creative gets run and rewards high quality producers in an auction environment. And, of course, the viewer is delighted by better experiences. Brands benefit. Publishers benefit. Consumers benefit. It’s a win, win, win.

Ad creative quality measurement creates a role reversal where brands/agencies with the best work are actually “selling” their ad content to the publishers, in addition to being buyers.

To date, the IAB’s quality assurance guidelines are all about transparency and fraud protection—a necessary and important priority. But now is the time to really focus on measuring the most impactful measure of quality—the quality of the creative itself.

The display ad industry has commoditized itself, and left unchecked, the same outcome will happen for high-end video advertising. Advertising is not just about efficiency. If we were only about efficiency, we’d each be driving a Prius—and Escalades and Mercedes and so many other choices would cease to exist. Human response to a brilliant creative campaign will always dwarf how efficiently the ad was delivered. The key is to measure creative impact before so that the best ads are paired with the best inventory. That’s where programmatic will really make an impact.

To read the original article, visit Forbes.

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