Is the End Near for Programmatic Advertising?

Is the End Near for Programmatic Advertising?

“Programmatic is a dying industry.”¹

Matthew Oczkowski, head of product at Cambridge Analytica, doesn’t see a future in programmatic advertising.²

“The idea that buying a 250-by-50 square display ad is effective is false. You’re more likely to get bitten by a shark than click on one of those ad units,” he said.³

Programmatic advertising has gone through the ringer as of late, with several less-than-flattering news stories emerging. This is the state of the union, and an answer to an important question: Is this the beginning of the end for programmatic?

Anti-tracking
Effective in 2018, the General Data Protection Regulation (GDPR), launched by the European Parliament, requires companies to obtain consent from users before collecting and processing personal data.⁴

Cookies used to track billions of devices, enabling programmatic trading, will be restricted.⁵ With limited tracking capabilities, ad targeting will become increasingly difficult.

“It will mostly affect companies who rely on third party data, and agency networks that serve ads on the basis of data but don’t have direct relationship with the public,” said Stephan Loerke, CEO of the World Federation of Advertisers.⁶

Learn how publishers and advertisers alike are using visual journalism to overcome programmatic’s pitfalls.

In addition to GDPR, Apple announced a new Safari feature called Intelligent Tracking Prevention (ITP), which uses machine learning to identify third-party cookie trackers. When detected, ITP will obstruct cross-site data collection and purge website data after 24 hours.⁷

Despite Safari owning just 4 percent of market share on desktop browser and 33 percent on mobile, the potential programmatic advertising loss could be significant,⁸ considering the $32.56 billion in programmatic display ad spending in 2017.⁹

Accordingly, publishers and advertisers that rely heavily (or solely) on third-party tracking data will be affected adversely.

Brand Safety
Earlier this year, ads from reputable brands were found on YouTube videos next to extremist views and hate speech.

Worried about brand safety, many advertisers took immediate action.

More than 250 such advertisers including L’Oreal, Dish Network, Starbucks, Pepsi, Audi and General Motors pulled ads from YouTube, and some even suspended all ads on other Google platforms.¹⁰

In fact, according to MediaRadar, YouTube lost 5 percent of its top advertisers in April 2017 compared to the month before.¹¹

The very nature of programmatic advertising can be directly attributed to this critical error.

While desirable for its ease and automation – think “set it and forget it” – programmatic advertising essentially automates where ads are placed via Artificial intelligence and real-time bidding. Accordingly, brands have limited control and insight into where their ads are placed.¹²

Still, these agreements typically aren’t binding, and advertisers can back out of campaigns if they feel uneasy.

“Securing ad space in advance is not a promise to run ads no matter what,” MediaRadar CEO Todd Krizelman said. “Advertisers and their agencies can immediately cancel or put campaigns on hold if they are worried about brand safety.”¹³

Ad Fraud
Fraudulent advertising can include any of the following: Non-human traffic, limited or zero viewability or intentional misrepresentation.¹⁴ Clearly, it’s a multi-faceted issue. And one causing concern.

A report published by CMO Council revealed that ad fraud and ad misplacement are leading issues in the minds of digital marketing executives. One third of the CMOs the Council surveyed online are concerned about fake clicks and ad fraud when using automated ad placement.¹⁵

And for good reason.

A new study commissioned by WPP has shown that ad revenue wasted on fraudulent traffic, and clicks generated by bots, could reach $16.4 billion in 2017,¹⁶ which would more than double the estimated $7.2 billion in fraudulent 2016 revenue, according to the Association of National Advertisers.¹⁷

According to Integral Ad Science, almost 9 percent of programmatic ads are fraudulent, in contrast to ads delivered via direct deals with publishers – of which only 2 percent are deceiving.¹⁸

According to Johnny Hornby, founding partner at The&Partnership – which owns agencies such as CHI and M6 – those claiming ad fraud have themselves, at least partially, to blame. He suggests that too much trust has been placed in programmatic advertising, at least when it comes to choosing perfect placements.¹⁹

“If you listened to presentations from tech companies and agencies you would think we knew everything about everybody and were able to chop creative up into different bits so we can place the right message to the right person at the right time in the right place,” he said.²⁰

“It sounds great but it’s not true.”²¹

Still, Programmatic Spend Continues to Rise
According to eMarketer, programmatic digital display ad spending will reach $32.56 billion this year – up from $25.48 billion in 2016 – and will continue to grow to $45.94 billion by 2019.²²

What’s more: A 2017 survey from AdRoll found that 40 percent of marketers spent more than half of their online budgets on programmatic advertising, up from 7 percent in 2013.²³

Programmatic has certainly faced a variety of challenges in 2017. But the increasing spend suggests it is here to stay, at least for the time-being.

1 Baker, Rosie. “Programmatic is a dying game: Cambridge Analytica.” Adnews. Adnews, 4 Apr. 2017. Web. 23 Oct. 2017.
2 IBID
3 IBID
4 Southern, Lucinda. “What publishers should know about the new EU data laws.” Digiday. Digiday, 15 Apr. 2016. Web. 23 Oct. 2017.
5 Graves, Rupert. “GDPR will trigger a massive transformation of programmatic advertising.” Medium. Medium, 20 Jun. 2017. Web. 23 Oct. 2017.
6 Hall, Emma. “New EU data regulations will ‘rip global digital ecosystem apart.” AdAge. AdAge, 2 Dec. 2016. Web. 23 Oct. 2017.
7 Ha, Anthony. “Apple defends new ad-tracking prevention measures in Safari.” TechCrunch. 15 Sep. 2017. Web. 23 Oct. 2017.
8 Browser market share, n.d. https://www.netmarketshare.com/browser-market-share.aspx?qprid=0&qpcustomd=0, Web. 23 Oct. 2017.
9 Fisher, Lauren. “Advancing programmatic advertising: buyers and sellers seek greater control over ad campaigns and audiences reached.” eMarketer (2017): 2-3. Web.
10 Castillo, Michelle. “YouTube ad scandals caused 5 percent of top advertisers to leave, says analytics firm.” CNBC. CNBC, 5 May. 2017. Web. 23 Oct. 2017.
11 IBID
12 Shani, Or. “An Introduction to Programmatic Advertising.” Marketing Land, 9 Feb. 2015, marketingland.com/get-programmatic-primer-programmatic-advertising-94502.
13 Castillo, Michelle. “YouTube ad scandals caused 5 percent of top advertisers to leave, says analytics firm.” CNBC. CNBC, 5 May. 2017. Web. 23 Oct. 2017.
14 Vidakovich, Ratko. “The Many Faces Of Programmatic Ad Fraud.” Marketing Land, 28 Sept. 2015
15 Handley, Lucy. “Chief marketers have ‘significant fear’ about ad fraud – and here’s what media agencies need to do about it.” CNBC. CNBC, 26 Sep. 2017. 23 Oct. 2017.
16 Gallagher, Kevin. “Ad fraud estimates doubled.” Business Insider. Business Insider, 16 Mar. 2017. Web. 23 Oct. 2017.
17 Neff, Jack. “P&G Tells Digital to Clean Up, Lays Down New Rules for Agencies and Ad Tech to Get Paid.” Ad Age, 29 Jan. 2017
18 Gallagher, Kevin. “Ad fraud estimates doubled.” Business Insider. Business Insider, 16 Mar. 2017. Web. 23 Oct. 2017.
19 Vizard, Sarah. “Ad Fraud: The Marketing Industry’s $7.2bn Problem.” Marketing Week, 26 Jan. 2016
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21 IBID
22 Fisher, Lauren. “Advancing programmatic advertising: buyers and sellers seek greater control over ad campaigns and audiences reached.” eMarketer (2017): 2-3. Web.
23 IBID