Tesla and SpaceX CEO Elon Musk summed it up best when he said, "If humans are to survive, we must merge with machines." What I am about to say may be seen by some of my contemporaries as sacrilegious. But advertisers need to spend less of their budget on programmatic as we know it. This is not a war on programmatic. It is a necessary and nuanced evolution to avoid certain pitfalls.
The rise of programmatic advertising changed the game by allowing marketers to reach consumers on thousands of sites free of human interaction on open exchanges offering millions of impressions. Recently, however, programmatic is showing chinks in the armor. It has become synonymous with remnant inventory and fraudulent ad traffic, which WPP projected will cost brands a record $16.4 billion in 2017. It also led to a YouTube ad boycott and myriad lawsuits.
To avoid the pitfalls coming from programmatic, more companies are turning to Private Marketplace. PMP can be self-service like open exchanges, but, it is an invitation-only marketplace with a limited number of sites offering premium inventory from world-class publishers.
Data from eMarketer, Magna Global and Forrester Research found that the use of PMPs is increasing, while programmatic on open exchanges is declining. ESPN is managing 95 percent of its ad buying through PMPs, and mobile PMPs have grown for six consecutive quarters. But why are more advertisers turning to PMP?
Avoid remnant inventory on open exchanges. RTB on open exchanges should be known as the "race to the bottom" due to the low quality of the inventory offered. Hard earned money spent on ads will appear on hard-to-find pages buried on obscure websites not targeting the right demographic. Moreover, when a consumer finally sees the ad, it may be their 100th impression during their online session, and by then they are either annoyed or numb to the ad placements.
Open exchanges work with 10,000 publishers and promise millions of impressions, but brands will not know the exact sites their ads will run on. PMP utilizes the same automated buying technology but does so with a controlled number of high-quality publishers so the advertiser will know on exactly which sites their ads will appear. JPMorgan Chase recently decided they wanted more human oversight and went from having ads on 400,000 websites down to 5,000, and their ROI improved due to the higher quality ad inventory on very reputable digital properties.
Exclusive inventory with world-class publishers. PMP media companies often have exclusive deals with reputable publishers. Not all PMP companies are alike, and advertisers should find out which direct-to-publisher relationships the company has before agreeing to partner with them. Enjoy watching your high-performing ad campaign in real time, AND picture your competitor outside the virtual velvet rope unable to join the party.
Brand safety. AT&T is the latest company to halt advertising with Google after their ads ran with a YouTube video promoting terrorism. While YouTube, Google and Facebook get most the blame, it is just the tip of the iceberg. When advertisers work with PMP companies, they will know exactly what sites they will appear on and their ads will not wind up next to abhorrent content.
Fewer bots, less fraud and invalid traffic. In 2016, 30 percent of the $27 billion spent on open exchanges was on invalid traffic, compared to nearly 10 percent in PMP. For multinational organizations, that percentage difference can equate to billions of dollars wasted. While the industry is unable to currently eradicate IVT, advertisers should only work with PMP companies that include terms in their contract stating that clients will not be charged for any impressions classified as IVT by companies such as Moat or Integral Ad Science.
Omni-channel PMP generates the highest ROI. Unlike running an ad on open exchanges, when you use PMP, you can see which site or group of sites is performing well and adjust your campaign in real-time to capitalize on the ROI being generated from those sites. Moreover, studies show that an omni-channel strategy severely outperforms single, dual or multi-channel campaigns. According to Gartner Research, ad campaigns that integrate four or more channels outperform single or dual-channel campaigns by 300 percent. KitchenAid, who recently ran a PMP campaign for its Mini Mixer across eight channels, saw a 468 percent brand lift in purchase intent measured by Nielsen, which was astounding because the industry average measured by Nielsen is an 8.4 percent lift in purchase intent. Incorporating channels such as connected TV and DOOH advertisers are seeing higher return on advertising spend.
Programmatic changed the game in a great way. As with all progress, unforeseen issues and unintended consequences such as those mentioned above—tend to follow. More companies are finding that the premium inventory available in PMPs are safer and are maximizing return on advertising spend.
Tom Alexander is Founder and CEO of PK4 Media.