When the concept of programmatic advertising was emerging in 2007, there were high hopes for its transformative power in advertising. Now, after years of development, the industry has major concerns about what the next decade holds for this technology.
If programmatic falls short of its promise of precision, automation, effectiveness and data enrichment, the advertising ecosystem that has capitalized on its growth could face severe consequences.
Economic and market factors have diminished programmatic’s growth
The 4As and 614 Group recently collaborated on a qualitative and quantitative study, which revealed what marketers expect from programmatic advertising. Marketers want programmatic to deliver messaging with precision and opportune timing for the right person. They want it to automate processes and simplify workflow. They want it to drive higher-level decisioning and quality data. And they want it to deliver messages that dynamically optimize.
Numerous entrepreneurs and established businesses have tackled these problems and progressed on solutions. But the barrage of challenges facing the industry is threatening to stall innovation. The major gatekeepers of internet access and web navigation are blocking cookies. Emerging regulations like GDPR and CCPA are hamstringing consumer data collection. And all the while marketers are expressing their desire to pay less for advertising services and technology.
While the programmatic train seems to be rolling along fine—eMarketer shows that $57 billion will be spent programmatically in digital display ads in the U.S. in 2019—growth has been slowing. Furthermore, 62% of this spending is going to three companies: Google, Facebook and Amazon. In short, programmatic advertising’s momentum is slowing, with just three entities cornering the market.
Growing complexity in marketing makes programmatic less effective
To be clear, programmatic is groundbreaking technology. It has brought new capabilities to our industry, it has allowed marketers to purchase data-driven, granular audiences at scale, and it has enabled brands to compete for customers. But programmatic is also leading the industry down a path that runs counter to what marketers want.
Marketers still want to reach audiences in quality environments. But now they want to automate this process to bypass the roadblocks presented by cookies, regulations and reduced agency fees. To achieve this, programmatic ad platforms would need to reduce the complexity of buying directly with vendors or even reduce the complexity of other related ad tactics, such as search and social.
Digital media was already increasing in complexity even before programmatic advertising was conceived. Marketers are continually dealing with new needs around KPIs, measurements, cost types, platforms and mediums. Today, this complexity verges on chaos, as there are more new channels to manage now than ever before, including AR, digital out of home, audio and voice search.
Programmatic technology in its current state cannot automate any of this. As an industry, the only goals we’re achieving are frustrating marketers, upsetting people who work alongside us and annoying consumers.
True automation, which is what the industry was originally looking for from programmatic technology, should be increasing productivity, decreasing labor costs, accelerating speed to market and reducing errors. Because programmatic advertising has driven up the number of platforms required, the ad tax, labor costs and more, it’s having the exact opposite effect as automation.
A better model is on the horizon
What could the new model for programmatic look like—that is, one in which agencies reach targeted audiences, perform better and keep clients happy?
The best HR systems are a good example. An effective HR department wouldn’t pursue separate vendors for payroll, stock options, benefits and time tracking. It’s not prudent to manage these functions individually. Instead, tech providers have found a way to assemble all these parts neatly into single systems. Programmatic could follow this model and integrate with the crucial functions of digital media, like direct buying, social and search buying, vendor management, collaboration and billing reconciliation.
As a standalone tool, like a hammer, programmatic functions fine today. But agencies need entire toolkits to run their business. If the industry recalibrates programmatic as the nucleus from which to run all-encompassing systems for advertisers and agencies, it could have a lasting impact on campaign effectiveness, workplace happiness and business profitability. This would put the shine back on programmatic advertising.