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Demystifying Programmatic Buying

By May 19, 2014

By Colin Jeavons

We live in a world where machines make big decisions. Algorithmic systems execute a majority of stock trades and even predict significant world events. It should come as no surprise that data science is also automating the buying of supply side inventory for online advertising, and it’s gaining a sizable foothold.

The industry refers to the automated purchasing of online advertising media as “programmatic buying.” It now accounts for 20% of all digital advertising spend, according to Interactive Advertising Bureau research. Programmatic involves the buying of website ad slots by advertisers using sophisticated software systems. Human involvement is significantly reduced as these systems operate at enormous scale, often making decisions in real time.

Now, we’re starting to see programmatic buying enhanced by new machine learning tools, such as semantic technology. Semantic engines generate marketing efficiencies by determining the context of both ads and web pages, helping machines to understand how to target and buy the most relevant inventory through the contextual meaning of words. Bing, Facebook, Google and other search providers use semantic technology to produce results that reflect a deeper understanding of a search query. This technology maximizes efficiency by informing decisions, much like what search engines have begun doing.

A search provider wants to save its users’ time. For example, a search for a flight to Miami that displays dates and prices from airports nearby is a better user experience compared to a simple listing of travel websites. Run that search on your favorite engine, and you’ll see how it utilizes context. Programmatic buying makes that level of targeting even more efficient.

Consumers don’t go around searching for advertisements, but may appreciate viewing ads that are relevant to them and/or the content they are viewing. Peer reviewed research from leading scientific journals has shown that personal relevance is vital to how people learn, so better relevance increases the odds of consumer recall. Intelligent buying systems can make that determination based on a consumer profile, deep understanding of content, and other real-time elements.

The objective of programmatic buying isn’t to replace human beings: it improves efficiency by eliminating time-consuming manual processes that don’t add any value.

Automating buying saves marketers valuable time, enabling them to craft more customized and sophisticated campaigns. Sellers can add value in the planning process by becoming a more collaborative partner. The end result is more time being spent working.

There’s a clear value proposition and precedent on the Web, but programmatic buying remains an enigma to most client-side marketers who remain largely unaware of its benefits. A recent survey conducted by the Association of National Advertisers and Forrester Research found that only 23% of respondents understand the concept and another 29% had never heard of programmatic buying. 26% could grasp what it does, but were unclear about how to apply it to their advertising campaigns.

Programmatic buying is here, and its growth shouldn’t be unexpected. Real Time Bidding (RTB) will account for 22.0% of total U.S. digital display advertising spending in 2014, or $4.66 billion. eMarketer’s estimates include spending across all digital display formats, including banners, video and social across all devices.

Time will tell how fast advertisers are willing to adapt to these new technologies. To keep up with an evolving media landscape and consumer demand the industry must also evolve in their approach to running successful advertising campaigns.

Colin Jeavons is CEO of NTENT.