In this guest post, Procurement Leaders invites AudienceScience’s Mike Peralta to explain ’programmatic’ and its impact on marketing spend.
Put simply, ‘programmatic’ is the automated buying and selling of digital advertising (display, video, mobile etc) using advertising technology.
Originally it was used to buy ‘remnant’ inventory which is the lower value ad space publishers have left over after premium ad sales, but it is increasingly used across the majority of advertisers’ digital advertising activity. eMarketer predictions suggest that more than half (59%) of display ads were traded this way in 2015. It is also projected that digital media will surpass traditional media spending by 2019, according to Magna Global.
The sheer growth in digital media spending should have the attention of procurement departments. These have tended not to be massively involved in negotiating advertising technology contracts as marketing departments have handed this role to their agencies as part of their overall media buying responsibilities. However, given the inexorable rise in programmatic there is a growing role for procurement to play in ensuring that their agencies are transparent about data, media, and technology costs in a way that delivers maximum value for the brand.
Transparency in costs is essential to maximising every pound spent on advertising. Programmatic deals based on a percentage of media spent can incentivise partners in the programmatic process to spend more, irrespective of the outcome it creates, rather than to optimise the impact of the spend. Procurement teams can help marketers determine the Total Cost of Ownership and benefits in securing advertising technology, similar to how they secure the services of other marketing technology platforms.
There are immediate benefits when brands hold the contracts for their advertising technology themselves. As a partner to marketing, procurement teams can help marketers realise the benefits of owning the contractual relationship with advertising technology platforms:
- Transparency: According to the World Federation of Advertisers only $40 out of every $100 spent on online advertising goes to delivering impressions as fees are taken by agencies and up to ten middlemen - with the advertiser being kept in the dark about who is getting a share of this money and why. Procurement teams are experts in asking difficult questions to identify where budgets are being spent and which programmatic partners are adding value.
- Data ownership: When advertisers use an agency trading desk to handle their programmatic buying, they don’t realise the trading desk may pool their data with other clients’ data for the targeting of other campaigns. Procurement teams can help in drafting clear contracts that ensure full data ownership is retained.
- In-house or out?: More advertisers, such as Netflix and Kellogg’s, are bringing programmatic in-house to take full control themselves. Others are seeking the flexibility to own the technology but using external resources from their agency or the professional services of an advertising technology platform to help manage the programmatic process. Procurement teams can help marketers assess the growing number of options they can use and identify the most appropriate route for them to take.
It is time for procurement teams to build up their understanding of how programmatic works and play to their own strengths in helping marketers better discern the appropriate programmatic approach as soon all media, including TV, will be addressable (i.e. targetable and personalised across tightly defined target audiences and also measurable). With programmatic driving the majority of these campaigns, marketing teams will need the help of procurement departments more than ever to ensure that their advertising technology delivers what they need at the right price – both in terms of cost and business best practice.
Mike Peralta is CEO at AudienceScience.