Snapchat And The Prisoner's Dilemma Of Programmatic

In the classic “Prisoner’s Dilemma” game theory, two crime suspects are questioned by police in different rooms, and must make simultaneous decisions to “defect” by implicating their partner in the crime, or “cooperate” by keeping silent, without knowledge of what the other suspect will choose. If the first suspect defects and the second doesn’t, the first is set free while the second goes to jail.

As a result, defecting is the strategy chosen most often -- it improves your position no matter what the other person says. However, when both defect, the outcome is worse for both than if both cooperated and kept silent.

In the advertising world, we’re facing a dilemma of our own as more and more large companies create divides between those who want the digital advertising world to be open and standards-driven, and those who want to set their own rules.

Conspicuously absent from the recent launch of Snapchat’s new API and Snapchat Partners program for advertisers was any discussion of their “programmatic” capabilities. Instead, Snapchat has made the decision to follow the lead of Facebook and other “walled gardens” by creating its own standards.

In game theory terms, this is a strategy of defection, not cooperation, from the largest players in the advertising industry. To be sure, Snapchat’s strategy may prove to be lucrative, as it has built an attractive and ever-expanding network of mobile users. But without standard ad units and visibility into how performance on Snapchat compares to other channels, marketers will be left in the dark.

With Snapchat, Facebook and others turning away from programmatic, what does this augur for the future of the programmatic advertising trend that took off just a few years ago? While some may read this as a sign that we’re in for a radical change in the way advertisers do business, in reality, the macro trend of programmatic advertising has never been more alive.

The bloom may have come off of the rose for the word “programmatic” itself, as some now associate it with fraud, ad blocking and other issues it has enabled. In its place, we’ve now developed nuanced ways of describing the methods of automated, software-based media buying. But whatever you label it -- API-driven, algorithmic, or programmable -- the inexorable trend is toward automated ways for marketers to get the greatest reach with their advertising budgets.

Programmatic advertising in its purest form provides incredible benefits to marketers, because it vastly simplifies the execution of digital campaigns that reach across multiple channels. In order to efficiently scale and migrate their budgets effectively, marketers need standard reporting on performance across channels to make honest comparisons to the rest of their spending.

Marketers who have chosen cooperation would be wise to continue embracing programmatic channels (or whatever they’re  labeled), and shouldn’t be swayed by the siren calls of the walled gardens, whose defections serve only their own interests.

In the Prisoner’s Dilemma of cooperation or defection that the world’s largest media companies face, CMOs and their budgets are the ultimate wardens; they shouldn’t shy from using their strength to enforce a harmonious future for their benefit.

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