Post on 13-Jul-2015
SIMMONS PERFORMANCE SOLUTIONS
Effective Value Creation In Programmatic Media Buying
A Look Beyond Efficiency
10/28/2014
For greater alignment with marketers and their digital marketing objectives, the programmatic media industry must look beyond efficiency and embrace an effective value creation strategy. This strategy will spur growth and allow participants to create true points of differentiation.
Strategic Insight to Power Growth
http://www.simmons-ps.com/
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 1
Table of Contents
Executive Summary..................................................................................................................................... 2
Introduction ................................................................................................................................................ 4
The Central Focus ....................................................................................................................................... 4
Growth ........................................................................................................................................................ 5
Is Efficiency Enough? .................................................................................................................................. 5
Effective Value Creation ............................................................................................................................. 7
Process Alignment ...................................................................................................................................... 8
Drivers & Corresponding Tactical Requirements ........................................................................................ 9
Implementation ........................................................................................................................................ 11
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 2
Executive Summary
Members of the programmatic media industry, and those who execute media buying in particular,
should lead with effectiveness in their to value creation process. The programmatic media industry is
largely a simplified workflow solution to addressing the vastly fragmented nature of digital media
buying. Together the direct and indirect sales platforms have pushed industry revenues forward at a
rapid rate. Revenue within the U.S. alone is predicted to double by 2018. But a singular focus on
efficiency measures will only take the industry so far.
A large percentage of the marketers interviewed voiced at least minor frustrations with what they
viewed as a lack of contribution to brand lift. A senior director with a major athletic shoe manufacturer
summed up his frustrations by stating:
"It feels much like the old ads in the back of magazines where you included your phone number and hoped for a call. I want to know if, and how much of the targeted audience was engaged?"
Consequently, 82% of the U.S. offline ad spend is on branding while only 39% of the total online spend
is. Some sources believe the significant gap between online and offline branding activity suggest that
there is a $13bn untapped market in the U.S. alone. Many marketers stated that their digital marketing
objective is long-term consumer engagement, and programmatic media buying must shift from its
current focus to meet these marketers at their objective.
While a handful of companies have been very successful at using the efficiency game to get ahead, it
does not ultimately mean that the efficient technology has made significant progress toward marketing
efficacy through effective value creation. Companies like Adobe, Salesforce, SAP, Oracle, IBM, Teradata,
and Marketo are betting on effectiveness by providing integrated marketing technology stacks.
Ultimately, these will need to work together with the media buying efficiency stacks that Google, AOL,
Yahoo, and companies like DSP's and SSP's have created in order to drive the necessary convergence
between marketing tech and ad tech. In other words, efficient media buying one part of an overall
marketing strategy. Therefore, one of the key table-stakes is the ability to not only develop integrated
technology, but to be able to seamlessly integrate with other technologies. Even with the success of
these companies, the industry must align with what were identified as the three drivers of effective
long-term consumer engagement. Efficiency, innovation and consumer engagement drive effective,
long-term consumer engagement and programmatic media needs to build capabilities around them.
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 3
Though this is not a presentation on digital marketing strategy, the only way to address industry growth
is to analyze how it is meeting and "should" meet its customers' objectives.
Implementing an effective value creation strategy will call for a complete commitment. Industry
participants need to look for broad outcomes and develop a vision of the communication life cycle. The
strategy must be enacted with measured steps and an eye toward identifying a new set of key
performance indicators, which reflects the importance of each of the three drivers of success. Recent
developments have shown that brands are beginning to drive the agenda strategically and probe into
effectiveness. So it is time to embrace this innovative strategy to propel the industry and its participants
forward.
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 4
Introduction
Now is the time for the programmatic media industry to build on its promise of efficiency and
incorporate an effective value creation strategy. The industry has been successful at bringing a
centralized automated solution to what was once the cumbersome process of selling digital impression
inventory. This has led to a meteoric rise in adoption rates and resulted in a preverbal hockey stick of
CAGR in revenues. This all sounds great, but, a narrow focus on efficiency of digital impression
transactions does not place the industry in the best position to evolve and attract what some believe is
$13bn in U.S. branding dollars left on the table, and it will continue to present a challenge to some
companies looking to develop a point of differentiation.
This paper presents why a focus on efficiency is not enough, why effective value creation is a more
natural fit to allow growth, and where to focus effort when building on this strategy. Both primary and
secondary research was conducted, with the former consisting mainly of executive interviews with
advertisers, publishers, industry participants, and brand marketers. Our biggest take away was that for
the industry to continue to evolve and better prepare for future possibilities, it must develop additional
expertise and shift its focus from providing basic savings to providing value. This is because the goal of
most brand marketers is effective long-term consumer engagements that cannot be measured by
limited performance indicators. So analysis focuses on how programmatic media can evolve, or utilize
current tactics and expertise to support each of the drivers of effective long-term consumer
engagement and engage in an effective value creation strategy. As one leading programmatic media
executive rhetorically asked, "What good is being efficient if we are efficient at the wrong thing?"
The Central Focus
Programmatic media is largely a simplified workflow solution to addressing the vastly fragmented nature
of digital media transactions. Buyers successfully execute the single mission of delivering upon one
element of their consumers' advertising tactics. The simplicity lies in the electronic hub provided to
advertisers to identify and purchase media across millions of fragmented sources. Participants have
addressed the complexity through the many means of identifying and attaching value to available
inventory while effectively interfacing with other members of the ecosystem.
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 5
Table 1 presents the four programmatic media transactions mechanisms. Among them there is
complete coverage of both direct and indirect auction based sales with fixed and unfixed pricing. As a
whole they have been highly effective at driving down operating cost and increasing efficiency. With the
mass migration of consumers going to the web seeking information from new and tradition news and
social media outlets, the increased efficiency has made it easier for publishers to manage yield by
making ad impressions available for sale in the platform and format of choice.
Growth
Since its inception, programmatic media has experienced rapid growth. The U.S. is the largest market
but other markets are experiencing rapid growth as well. In Table 2 we see that programmatic media
spending, while already substantial, is again predicted to double in three short years.
United States and Global Programmatic Display Ad Spending, 2011-2017
2011 2012 2013 2014 2015 2016 2017 US $2.8 $4.8 $7.5 $9.8 $12.4 $14.8 $16.9 % Change 71.4% 56.3% 30.7% 26.5% 19.4% 14.2% % of Total 62.2% 63.2% 62.5% 59.0% 56.6% 54.2% 51.8% World Wide $4.5 $7.6 $12 $16.6 $21.9 $27.3 $32.6 % Change 68.9% 57.9% 38.3% 31.9% 24.7% 19.4% All values represent billion in U.S. dollars. Source www.eMarketer.com Table 2
Is Efficiency Enough?
The development of basic performance measures demonstrates that the standard model works to
facilitate the purchase of ad impressions in cost effective way. But why is an industry aligned with CMO's
focusing on measures that make them appear to be aligned with CFO's? Being able to tell customers
Inventory Type Pricing Participation Execution
Automated Guaranteed Reserved Fixed Publisher- Advertiser Direct programmatic sale of premium guaranteed inventory
Unreserved Fixed Rate Unreserved Fixed Publisher- Advertiser Programmatic sale of unreserved inventory
Invitation Only Auction Unreserved Unfixed Publisher- Invited Advertisers RTB enabled invitation only auctions
Open Auction Unreserved Unfixed Publisher- Many Advertisers RTB enabled open auctions
Source IAB, Programmatic and Automation- The Publishers Perspective Digital Table 1
Programmatic Media Transaction Mechanisms
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 6
that you are saving them money is not always enough. Many advertisers and marketers are now
realizing that they want to know whether they are spending money wisely! Both primary and secondary
research conducted revealed that the market is ready for the industry to push further on this front.
For its November 2013 white paper "Programmatic Everywhere? Data, Technology and Future of
Audience Engagement", The Winterberry Group conducted a survey of 260 executive level marketers,
technologist and media industry leaders which produced two big takeaways:
1. 55% of publishers said their interest in programmatic was to "effectively engage" with targeted
audience.
2. 88% of panelists said they expect to deploy the approach to support "actionable insight
development."
These statistics show that advertisers wish for the industry to expand beyond its promise of efficiency,
and they are buttressed by recent developments. In its June 25, 2014 article, "Agencies Brace For A
Change As Brands Lean Into Programmatic," Ad Exchanger reported that Kellogg's, Kimberly-Clark,
Unilever, Netflix, 1-800-Flowers and Allstate Insurance have all begun to develop in-house programmatic
media buying capabilities, to drive their programmatic strategies. This is a reminder that brands have
been built with a focus on long-term consumer engagement, not on CPC or CPA.
While conducting our research we spoke with experts from across a broad spectrum of industries who
had either helped execute or direct programmatic media buying efforts through agencies. There were
several questions and comments, which showed a lack of understanding and frustration on the
overreliance on efficiency and its measures.
A senior director with a major athletic shoe manufacturer stated:
"It feels much like the old ads in the back of magazines where you included your phone number and hoped for a call. I want to know if, and how much of the targeted audience was engaged?"
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 7
An executive with an international beverage corporation summed up his frustrations by stating:
"We know where the audience is, and reach them in a way which allows us to keep an eye on our bottom-line, but where is my audience value?"
Questions and statements like these were not raised in every marketer or advertiser interview, but a
large portion voiced at least minor frustrations with what they viewed as a lack of contribution to brand
lift. This maybe the reason that 82% of the U.S. offline ad spend is on branding while only 39% of the
total online spend is. The significant gap between online and offline branding activity suggests that there
is a $13bn untapped market in the U.S. alone (Blacksote Advisory Partners, 2013). These dollars can be
attracted to programmatic media by shifting the focus from cost savings to effective value creation, and
refocusing technology development to align with this strategy.
Effective Value Creation
Now is the time for programmatic media to build upon its expertise and shift the focus to effective value
creation. The value added activities will enable marketers to engage in what many have described as
their digital marketing objective - effective long-term consumer engagement. Developing expertise and
tactics that enable conversations between marketers and consumers will enable data and actionable
insights to be extracted to deepen both online and offline engagement processes. Of course, it is not the
goal of programmatic media to develop digital marketing strategies for advertisers & marketers. But
there needs to be an alignment of digital marketing and programmatic media's goals for better targeting
and consumer insight development, and not just on a one off basis where a click or action ends the
relationship.
The feedback loop benefits marketers because of its actionable data and insights, but the ongoing
exchange will also provide value to the targeted consumer who should only receive precise, targeted
and engaging impressions. To do so, there must be a holistic use of data to drive engagement across
platforms and locations. Only then can the conversation between consumer and marketer switch from a
passive lean back experience to an active lean forward one. Simply stated, we lean into those
experiences that truly interest us. Programmatic media has already embraced key elements of this
process. Creative optimization and targeting rules employed within real time bidding provide a solid
foundation, and expertise developed in these areas can be deployed across the entire programmatic
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 8
media landscape. To look at what programmatic media participants must do to develop an effective
value creation strategy, we first have to look at the industry's relationship with digital marketing
objectives.
Process Alignment
Figure1 represents how programmatic media buying aligns with other elements of marketing strategy to
create an effective communications strategy with consumers. Marketing communications strategies are
created to engage a receptive audience, and within this strategy are digital marketing objectives whose
success is dependent upon drivers. For programmatic media buying efforts to be effective they must
align with the drivers. Together, digital marketing and the greater marketing effort creates an ongoing
engagement with consumers to extract valuable insight to continually refine the process and message.
Efficiency InnovationCustomer
Engagement
Programmatic Media Buying
Marketers
Marketing
Digital Marketing Objectives
Online Offline
Insights
InsightsEngagement
Engagement
CreativeOptimization
Data TargetingPlatform
Integration
Effective Long-Term Consumer Engagement
Figure 1
The Effective Long-Term Consumer Engagement
Process
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 9
Drivers & Corresponding Tactical Requirements
Most of the advertisers and marketers interviewed during the course of SPS' research saw effective
long-term consumer engagement as the major objective for their digital marketing strategy. Because of
this, we used it as the focal point for tactical development to ensure alignment with effective value
creation across the programmatic media industry. The drivers to focus on are: efficiency, innovation,
and consumer engagement. Each of these is important on its own. But they are also interrelated.
Effective execution requires proper development of the technology and expertise needed for each. This
is not to say that we believe programmatic media participants are inefficient and not innovative. We
believe they are, and that they can use these strengths in a greater capacity within the effective value
creation strategy.
Efficiency is already the hallmark of programmatic media transactions. Executing ad impression
transactions has been simplified. RTB has effectively created targeting and bidding rules, along with
creative optimization, which is constantly improving with machine learning. However, effective long-
term consumer engagement requires that the efficiency measures be expanded upon. Efficiency in the
new model will also be defined by effective insight extraction along with process improvements. Each
will tell us how much useful data has been extracted and how well it is being utilized to improve the
process of communication between the marketer and consumer. Programmatic media's ability to
capture and measure vast amounts of data makes this driver easy to execute upon, but it must also
work hand and hand with the other two drivers because it will identify a path to define the needs of the
next driver, innovation.
Innovation is the greatest strength when it comes to programmatic media transactions, but the
programmatic media industry needs to refocus technology development to align with an effective value
creation strategy. By nature, programmatic media companies are technology based organizations which
leaves them in a great position to embrace advertiser and marketers as they push further into
programmatic media. An example of this lies in how some major brands are now working to develop
programmatic capabilities. In a conversation with a brand manager from Unilever, we were told that
they worked with Mindshare to develop a Unilever dedicated trading desk. The goal is to track
engagement and optimize in real time for creative ad placements, while using an in-house analytics
team to develop models showing the performance/success of different components of the marketing
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 10
campaign. These goals demonstrate a measured approach to consumer engagement. This represents
enormous potential for programmatic media. In relationships like this the programmatic media industry
and its participants can flex their innovative muscle and drive the long-term consumer engagement.
Developing the expertise to target consumers across electronic devices will lead to long-term consumer
engagement. Forrester defines an adult who owns at least three connected devices and accesses the
internet at multiple times a day as a perpetually connected adult. Currently 42% of U.S. adult consumers
meet this definition (Joanna O'Connell, 2013). Innovation must continue the push on cookie-less
targeting so that consumers can be targeted wherever their preference in devices or location leads them
any given day. This process is complimented by real time predictive analytics which are a necessity to
identifying the proper audience and are dependent upon data management. By data management, we
mean obtaining, defining, modeling, and retaining relevant data.
Lastly, innovation must take place on the measurement front. Audience engagement and insights must
be defined and effectively measured to ensure growth. Currently, there are tools in place which
measure at least a portion of these, but they are not at scale and need improvement to achieve mass
adoption. Measurement tools will be vital to identify and drive areas needing improvement.
Consumer Engagement must be a two-way street. Industry participants must engage consumers with an
eye toward not only impression placement but insight extraction and, above all else, relevance to
ensure the development of a continuing feedback loop to deepen the ongoing conversation. The
industry has done a good job of creative optimization and tailoring messaging to audiences, but the
process must take a step forward with targeting across devices, geography, time, etc.
Major developments are taking place that can lead to deeper consumer engagements. Reuters
conducted a survey that revealed that 77% of television viewers used an electronic device while viewing
television (Accenture, 2013). This presents an enormous opportunity to reinforce engagement
messaging across platforms. Of course, innovation needs to lead this process in order to take advantage
of the opportunity to provide congruent messaging across platforms. But what we see here is individuals
taking part in a passive lean back activity, while also engaging in a lean forward experience where they
are actively engaged in the use of devices.
S i m m o n s P e r f o r m a n c e S o l u t i o n s
Page 11
Programmatic television buying represents a potential complement to consumer engagement across
platforms. There is an ongoing debate over the future of broadcast television, with valuable arguments
on both side. But it is not the purpose of this paper to analyze broadcast television's future.
Programmatic media sales have made inroads in cable television, which is highly understandable given
the fragmented nature of the audience According to Neilson, 65% of viewing is now on television shows
with less than 0.5% ratings and broadcast television has seen a 50% drop in ratings (Morgan, 2014). But
paid television services can easily provide data on program viewership which can be coupled with online
and offline data to create better targeting rules. One industry insider pointed to the challenge of
changing the currency with which broadcast television is traded, referring to Nielson Ratings. But, just as
RTB could be used as an innovation center to test new targeting models, so too could programmatic
television. If companies scale an automated platform for the transaction of network television ads the
technology could benefit all streaming video platforms.
Whatever the form or device, placement must not be viewed as intrusive but engaging. The key here is
to shift the focus from how much did we pay for an action to how much did we learn about the
consumer for future interactions, and ultimately brand lift.
Implementation
As always, the execution and development of effective strategy and supporting initiatives is dependent
upon proper leadership, planning and personnel. A focus on effective value creation requires that all
levels of the organization accept their company's position within the programmatic media buying
industry. The danger within the industry is that the fragmented state of technology lends to silo
thinking. Silo thinking means that leadership within a company becomes too focused on their
technology and expertise to see how it fits within the industry as a whole. The human element must
blend the technology expertise with strategy to provide true value.
To ensure proper execution, participants of programmatic media buying must look for broad outcomes
to develop effective ongoing conversations with consumer segments. The outcomes will be the basis of
the development of actionable insight for use in the development of a communication lifecycle. The
entire process must be incremental and aided by the development of measures that go beyond the
prominently used efficiency measures. These steps will go a long way in shaping the future of the
industry and attracting addition revenue.