Programmatic Increases Cost, But Produces Better-Performing Ads

The rise in programmatic media buying and publishing continues to drive up the cost of advertising, given the need to collect, use and better understand data, according to a GroupM study released Monday.

Although programmatic buying and selling produces much stronger results, GroupM futures director Adam Smith tells Media Daily News that "every layer of data added may create more cost -- sometimes "significant."

"There's been an assumption that more data is better, but now there's a realization that quality is better," Smith says. "Excess becomes difficult to manage."

This is far removed from the way advertisers buy traditional media, which has been a commissioned-driven business, he says.

The report, “Interaction 2016,” also questions and attempts to shed light on the “effectiveness of these investments,” citing “fraud, viewability and measurement” issues. It's based on data from 19 countries GroupM supports.



GroupM defines programmatic, as any online display advertisement transacted automatically as opposed to being a manual insertion order. Those participating in the study were asked to estimate what percentage of local digital display ad investment was automated. The result is a global average in 2015 of 37%, up from 21% in 2014. Excluding the USA, this is 16% and 10%.

GroupM also asked the percentage of online video comprised of local digital display. Globally that number comes to 22% in 2015, up from 20% in 2014.

While data and technology have changed video advertising for the better, the challenges around programmatic point to reach, frequency, fraud and viewablity, Smith says.

It could be time to remove the "zero from the 30-second standard that has characterized video advertising for generations," per the report, suggesting the need for a new definition of earned media in which the dividend is calculated by the number of seconds viewed over and above the point at which the advertiser is charged.

Is three seconds to view an autoplay video in Facebook long enough to measure the impression, Smith said. The market will have to decide this with help from agencies like GroupM, he said, calling on agencies to spearhead a new standard.

The video metric would measure response rates while silent or with audio, compared with the time viewed, Smith said, who said the U.S. needs to lead efforts. The rest of the world will follow.


2 comments about "Programmatic Increases Cost, But Produces Better-Performing Ads".
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  1. Ed Papazian from Media Dynamics, April 26, 2016 at 8:46 a.m.

    If programmatic buying keeps driving up advertising costs is there a point where improvements in targeting audiences are negated by the added expense? Do advertisers just keep paying more even though there is no improvement in target audience delivery from year to year? If so, isn't this something like the current "linear TV" model?

  2. Henry Blaufox from Dragon360, April 26, 2016 at 11:09 a.m.

    If programmatic is adding costs, something is wrong. Programmatic is supposed to automate and make more efficient redundant, laborious tasks, thereby reducing the cost of them. Any additional cost should be associated with added value (and added revenue) unleashed by the automation. So if we are still facing net cost increases, it points to the need to improve operations further to achieve the desired result. That's been the purpose of automation in every other industry; advertising and marketing should be no different.

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