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Re/code: “Programmatic Is Eating the (Advertising) World”

31 March 2014 | Blog, Industry Buzz

Rajeev Goel of PubMatic makes a great case on Re/code for why publishers should embrace programmatic. While he’s talking primarily about digital, his points apply just as well to any kind of programmatic selling, including TV.

He says,

Mistakenly, many people confuse programmatic advertising — the automation of the advertising transaction and/or workflow — with the ability to get rid of direct salesforces. That’s wrong, and understanding why unlocks the key to why programmatic is eating the advertising world.

As programmatic makes it easier to unlock the value of underutilized inventory, direct salesforces are going to be more important than ever to bringing out the full potential of premium inventory as well as guiding buyers on how to best use programmatic inventory.

The case for workflow automation is quite easy to understand. Automation creates efficiency, which lowers costs and improves outcomes. No longer do we have to key in orders manually, email advertising creatives back and forth, compare impressions and discrepancy calculations using spreadsheets, or try to figure out after the fact who served the risqué ad. All of this will have workflow around it and increasing levels of automation, as rules, decisions and escalations are encoded into software programs.

Let the computers handle the difficult, error-prone busywork; free up the humans to make the important decisions.

But the heart of his argument is here:

Programmatic is expanding because it allows advertisers to pay more for ads, and to be happy about the fact that they’re doing it. We are in the midst of a multiyear transition in which it feels like ads are cheaper, but ultimately the cost of advertising is going up. The secret is that the ad being bought is more targeted, more precise and more effective, and that’s why the advertiser is happy to pay more. It’s much easier to figure out which ads are not being delivered effectively (wrong audience, wrong creative, wrong context, etc.) and to stop it; and then to look at the ads that are being delivered effectively, and to do more of that…In the legacy world of traditional ad selling, the advertiser bought almost purely on context…Each user is treated the same….[Programmatic] causes the value of the product being sold — the ad impression — to increase exponentially. But suddenly it’s much richer (context plus available audience) than it used to be (context alone).

Tying audience profiles to impressions is the key to raising CPMs while simultaneously increasing client satisfaction. Advertisers are willing to pay higher CPMs when the result is higher ROIs. As Goel observes, programmatic is raising the bar for everyone.

Read the full article.