• by Victor Milligan , March 28, 2013

The current debate surrounding programmatic media-buying is a familiar – if dystopian – topic, straight out of science fiction. Think of Stanley Kubrik’s classic "2001: A Space Odyssey," where HAL 9000, the ship’s computer, kills most of the crew because of design “imperfections.” Fortunately, experience tells a different, more positive, story.

1.    Transition is disruptive: No matter how many people see it coming, technology-driven change affects which businesses survive and thrive, where they invest and how they operate. Transition also changes peoples’ day-to-day job functions and the skills that are valued.

The question for ad tech is not “will it change?” – but, how do we capitalize on it at the business and personal level?

2.    Successful change requires standards: Trading environments are “systems of systems” that require known interfaces and protocols to work. Advanced trading environments provide standard business signals (e.g., prevailing market price) that anchor decision systems to a trusted variable.

An open, standards-based market allows ad tech companies to focus on features and capabilities – like programmatic reserve capabilities – that help drive the industry forward. OpenRTB 1.0 and 2.0 are good examples of the type of standards that benefit the entire industry.

3.    Successful change is about intelligence, not mechanics: The initial focus of a technology transition is making the system work. That focus quickly shifts to improving overall ecosystem performance and system intelligence – the ability of embedded controls to de-risk operations and of decisioning algorithms to learn, sense and respond to market signals – and becomes the main measure of performance.

In ad tech the question is not whether programmatic works; it’s whether it works well. The strength, flexibility and intelligence of business controls and decision algorithms — from yield optimization to targeting to risk mitigation and value creation — will be key measures of programmatic’s performance.

4.    New risks arise: Technology systems sometimes inherit, sometimes remove, and sometimes create risk. Ad tech can learn from methods that both detected and minimized risk:

a.    Value erosion risk: Technology must do more than create economies of scale; it must provide a platform to create value.

b.    Disruption, security and privacy risk: Like all technology, ad tech is vulnerable to risk and attacks. The industry needs tools and processes to minimize risk, reward reliable and resilient technologies, and recognize that managing risk from external threats is an arms race rather than a battle to be won or lost.

c.    Brand risk: This is unique to ad tech due to the relationship between consumers, publishers and advertisers. Ad tech needs two complementary systems: controls that prevent risk and tools to detect/eliminate as close to real-time as possible.

5.    Transformation leads to solutions/services that matter: Beyond creating efficiencies, another role of technology is to enable ongoing innovation. 

In ad tech, programmatic markets serve as a platform for participants to create formal or situational markets (e.g., private exchanges, guaranteed programmatic) that adapt to market dynamics to continually maximize results.

6.    Data becomes its own currency: Big data is a natural byproduct of the transition to technology-based markets: technology spawns data; organizations eventually manage that data; it is then converted into value.

We’re seeing this pattern repeated in ad tech, where advancing from managing data to converting it into value has become a major factor in determining which businesses will win and which will lose. Given the volume of the data in question, analytics and decision algorithms are fundamental to the success of programmatic markets.

Defining Programmatic Markets

We aggregate these six factors into our definition of programmatic, not just a working version, but a productive version of programmatic markets.  Programmatic markets are open, intelligent, risk-managed and adaptive technology platforms that give participants a rich set of options to create sustainable value – whether measured by revenue, campaign success, brand lift, sales lift, or customers acquired.