This article written by Diarmaid Byrne, Editor, STQ, was published in issue 07 of Social Technology Quarterly. Summary: In a data driven economy Programmatic Buying is the approach marketers are shifting to in order to best utilize data and examine their selling strategies better.

1. 16
A‘Byte’of
Programmatic
Buying
Campaigns

2. Kuliza Social Technology Quarterly Issue 07 17
In a data driven economy
Programmatic Buying is
the approach marketers are
shifting to in order to best
utilize data and examine
their selling strategies
better.
by Diarmaid Byrne
Photo Credit: rednuht
Marketers traditionally try to combine the
best ideas with the best copy and visual
design. Then, through placements in
magazines, on radio and television, and in
public spaces, they try to attract people to
their product and in to their stores.
Publishers and broadcasters spend time
and money to understand their audience
in order to be able to earn revenue by
offering advertisers the appropriate
audience for their products. If an advertiser
wants to sell luxury watches they will
target locations where their buyers – high-
income earners – spend their time: lifestyle
magazines, business magazines, financial
newspapers, and specific sporting events,
to name just a few.
This entire process seems outdated: too
slow, expensive and inaccurate. Surprisingly,
the amount of money spent on such
traditional brand advertising has not changed
greatly since the growth of the internet.
This is disconcerting considering we are in
the most disruptive shift in communications
since the invention of the modern printing
press. Sophisticated supply chains, cheap
processing power, constant internet access,
smart-phones, and tools to connect with
others and express opinions have caused
this shift. This has led to an evolution in
behaviour to more permissive online sharing
of everything from location and opinions
to purchases, feelings, photographs, and
music. Entire lives are shared online.
Naturally, with this new normal of unequalled
understanding of people based on their social
data, the traditional method of advertising is
under threat. It is increasingly challenged
by fast-paced, algorithmic bidding systems
that target individual customers instead of
an aggregate audience. This is known as
‘programmatic buying’. It explains why an
advertisement for furniture follows users
across multiple, non-furniture sites.
In an interview with Forbes, Bob Arnold,
the Associate Director of Digital Strategy at
Kelloggs, explains programmatic buying at
a high level: it allows advertisers in a matter
of seconds to bid through a platform for ad
space based on a number of parameters:
price, data, context, and placement of
the ad. The platform can also take into
account the client’s digital media plan –
brand, budget and success metrics – while
including other data sources and decision
algorithms to find the appropriate locations
for the right consumer at times when they are
most likely to be receptive to the message.
Based on a user’s online data, a company
will decide whether to target a particular
customer if the customer’s data suggests
that there is a high chance that they will
purchase the product. If I am a consumer
who frequently reads and watches content
about fitness and exercise, and who buys
sports products online, Nike may decide
that I am the correct type of person to target
with their ads.
Through the flexibility and speed that it
provides, programmatic buying is becoming
more common. According to data from
Forrester Research, programmatic ads
increased by 17.5 percent between 2011
and 2012. Federated Media, one of the
world’s largest digital advertising networks,
estimate that 10 percent of display ads
that people see have been sold through
programmatic buying. Indeed, with the
demand dropping for display ads in general,
Photo Credit: Accendomarkets.com

3. Federated Media decided in November
2012 to focus its business on programmatic
advertising and conversational and native
advertising.
With algorithms choosing which online
locations to pursue for advertising,
programmatic buying is having a big impact
on publishers and their ad revenue. Rather
than spend $10,000 on advertising on a
publisher’s website, a brand can instead
buy ad impressions on any website where
their relevant audience is, and pay less
per ad. In a recent article, Tanzina Vega
commented that in the New York Times
Company earnings in October 2012 digital
advertising fell by 2.2 percent. This was
attributed to a “shift toward ad exchanges,
real-time bidding and other programmatic
buying channels” by their CFO.
Thisisashiftthatisonlygoingtocontinueand
grow over the next years. The major cause
is the ever-improving ability of companies
to measure, analyse and understand ever-
increasing mountains of social data that
people produce daily through their online
behaviour. Apart from demographic data, it
is data about what they like, their opinions
and views, their intentions through content
they share, and also location information.
The understanding based on this is the
most valuable information available to
brands because it allows them to offer
more relevant ads to their target consumers
across many more online locations that
previously. As a result of targeting the
appropriate consumers they will learn
even more about them. It will also allow
them to utilize other online social tactics to
understand more about their friends and
followers, such as a group coupon offer.
In theory this greater understanding will
benefit both the brand and the consumer,
who will experience fewer irrelevant ads.
Social data will have an enormous influence
on business decisions. A report by Bazaar
Voice and The CMO Club titled “Chief
Customer Advocate: How social data
elevates CMOs” found that 78 percent of
CMOs considered social data to be effective
in indicating the influence of individuals or
groups on purchase decisions. 73 percent
found it effective in indicating consumer
sentiment towards a brand or company.
This means that social data will enable
brand marketers to understand their target
group, measure the impact of their online
marketing efforts and thus allocate more
money to methods and locations that allow
them to reach their target audience more
effectively and profitably. It will be a win for
both brands and consumers, but publishers
who rely on traditional advertising
unfortunately face an uncertain future.
Social networking sites may be the winners
in this evolution. Many posts, tweets and
shares online are inane, but added together
and they can contain valuable information.
As social networking sites collect ever more
social data they may start to find ways to
profitably use that data rather than relying
on advertising. The issues then are who
owns the data and what is the relevance of
privacy laws to protect people.
References
“CMOs Tapping into Social Data for Consumer
Insight (Social Media Marketing).” MDG Blog.
MDG Advertising,09 Aug 2012.
Miller, Ron.“AdsWill Be A Footnote In Social’s Full
Story.” Forbes.com LLC,24 Nov 2012.
Gutman, Brandon. “Kellogg Proves ROI of Digital
Programmatic Buying.” Forbes.com LLC, 11 Sep
2012.
“Sipping from the fire hose: Making sense of a
torrent of tweets.” Economist,01 Oct 2011.
Vega, Tanzina. “The New Algorithm of Web
Marketing.” NewYork Times,15 Nov 2012.
Cheredar, Tom. “Federated Media is done with
banner ad sales.”Venture Beat,09 Nov 2012.
Thomases, Hollis. “What Media Planners Need to
Know About Programmatic Buying.” Clickz.com.
Incisive Media,03 Apr 2012.
“Global Online Advertising Spending Statistics
[Infographic].” Go-Gulf.com,02 May 2012.
Photo Credit: Poster Boy NYC