The Real Power of Programmatic: My Response

Recently in AdExchanger, Joanna O’Connell wrote that the real power of programmatic lies in its ability to create a level playing field among advertisers.  In the open exchange model, she argues, it is not always the biggest marketer who wins, it’s the smartest. 

While I agree that the output of the programmatic revolution should not just be about lower rates, I don’t expect we’ll be living in an advertising democracy anytime soon either. 

To date, cost has been the single biggest value prop for buying through an Open Exchange.  The dynamism of the market and the buyer’s ability to procure inventory in real-time via auction often nets a lower cost per impression, which is a benefit to any advertiser, big or small. 

But I don’t think we will ever see a huge shift toward RTB buying on Open Exchanges.  In addition to all the reasons Joanna refers to (legacy rate cards, volume, relationships, and larger sponsorships), there is a bigger issue: advertisers’ need for assurance.  This is something we see out in the field every day at Videology, where over 90% of our clients buy video ads in a reserved fashion.  Brands want assurance about what they are getting – they want a guaranteed outcome.  While a local car wash can take the risk that their ad will deliver below expectations, a major global retailer with carefully calculated investments and goals cannot. 

The TV Upfront is a great example of this. The reason such a high percentage of media is still bought in the Upfront is because buyers want guaranteed volume: fixed costs, flighting to match weekly GRP goals, and assurance that their ad will run when they want it to.  Imagine Macy’s getting outbid by Kohl’s a week before Black Friday, or a movie launch failing to hit a reach goal before opening weekend because a sudden spike in demand ate up all the supply! 

Advertisers are willing to pay a premium for a sure thing, particularly if a brand’s communication plan is tied to a specific event.  An advertiser cannot let market forces dictate whether or not a there will be the opportunity to communicate with consumers at a specific point in time. 

In the end, there is likely greatest value in a balanced approach: Upfront, Scatter and Opportunistic (RTB) all have their place in a media buying strategy.  Relying solely on one method, such as Open Exchanges or any other, is a dangerous approach.  The real value of Programmatic is not in creating democracy or changing the media infrastructures that have been in place for many decades; it’s about making these processes more efficient, more accessible, and more valuable through data and automation. 

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