The document discusses how the programmatic media industry needs to shift its focus from efficiency to effective value creation in order to better align with marketers' objectives of long-term consumer engagement. It identifies the key drivers of effective value creation as efficiency, innovation, and consumer engagement. The industry needs to develop new capabilities and metrics to measure how well it is extracting useful data and insights from consumers to improve engagement over time, rather than just focusing on cost savings. This will allow it to tap into the $13 billion untapped market for online branding spending in the US.

1. SIMMONS PERFORMANCE SOLUTIONS
Effective Value Creation In Programmatic Media Buying
A Look Beyond Efficiency
10/28/2014
For greater alignment with marketers and their digital marketing objectives, the programmatic media industry must look beyond efficiency and embrace an effective value creation strategy. This strategy will spur growth and allow participants to create true points of differentiation.
Strategic Insight to Power Growth
http://www.simmons-ps.com/

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Table of Contents
Executive Summary..................................................................................................................................... 2
Introduction ................................................................................................................................................ 4
The Central Focus ....................................................................................................................................... 4
Growth ........................................................................................................................................................ 5
Is Efficiency Enough? .................................................................................................................................. 5
Effective Value Creation ............................................................................................................................. 7
Process Alignment ...................................................................................................................................... 8
Drivers & Corresponding Tactical Requirements ........................................................................................ 9
Implementation ........................................................................................................................................ 11

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Executive Summary
Members of the programmatic media industry, and those who execute media buying in particular, should lead with effectiveness in their to value creation process. The programmatic media industry is largely a simplified workflow solution to addressing the vastly fragmented nature of digital media buying. Together the direct and indirect sales platforms have pushed industry revenues forward at a rapid rate. Revenue within the U.S. alone is predicted to double by 2018. But a singular focus on efficiency measures will only take the industry so far.
A large percentage of the marketers interviewed voiced at least minor frustrations with what they viewed as a lack of contribution to brand lift. A senior director with a major athletic shoe manufacturer summed up his frustrations by stating:
"It feels much like the old ads in the back of magazines where you included your phone number and hoped for a call. I want to know if, and how much of the targeted audience was engaged?"
Consequently, 82% of the U.S. offline ad spend is on branding while only 39% of the total online spend is. Some sources believe the significant gap between online and offline branding activity suggest that there is a $13bn untapped market in the U.S. alone. Many marketers stated that their digital marketing objective is long-term consumer engagement, and programmatic media buying must shift from its current focus to meet these marketers at their objective.
While a handful of companies have been very successful at using the efficiency game to get ahead, it does not ultimately mean that the efficient technology has made significant progress toward marketing efficacy through effective value creation. Companies like Adobe, Salesforce, SAP, Oracle, IBM, Teradata, and Marketo are betting on effectiveness by providing integrated marketing technology stacks. Ultimately, these will need to work together with the media buying efficiency stacks that Google, AOL, Yahoo, and companies like DSP's and SSP's have created in order to drive the necessary convergence between marketing tech and ad tech. In other words, efficient media buying one part of an overall marketing strategy. Therefore, one of the key table-stakes is the ability to not only develop integrated technology, but to be able to seamlessly integrate with other technologies. Even with the success of these companies, the industry must align with what were identified as the three drivers of effective long-term consumer engagement. Efficiency, innovation and consumer engagement drive effective, long-term consumer engagement and programmatic media needs to build capabilities around them.

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Though this is not a presentation on digital marketing strategy, the only way to address industry growth is to analyze how it is meeting and "should" meet its customers' objectives.
Implementing an effective value creation strategy will call for a complete commitment. Industry participants need to look for broad outcomes and develop a vision of the communication life cycle. The strategy must be enacted with measured steps and an eye toward identifying a new set of key performance indicators, which reflects the importance of each of the three drivers of success. Recent developments have shown that brands are beginning to drive the agenda strategically and probe into effectiveness. So it is time to embrace this innovative strategy to propel the industry and its participants forward.

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Introduction
Now is the time for the programmatic media industry to build on its promise of efficiency and incorporate an effective value creation strategy. The industry has been successful at bringing a centralized automated solution to what was once the cumbersome process of selling digital impression inventory. This has led to a meteoric rise in adoption rates and resulted in a preverbal hockey stick of CAGR in revenues. This all sounds great, but, a narrow focus on efficiency of digital impression transactions does not place the industry in the best position to evolve and attract what some believe is $13bn in U.S. branding dollars left on the table, and it will continue to present a challenge to some companies looking to develop a point of differentiation.
This paper presents why a focus on efficiency is not enough, why effective value creation is a more natural fit to allow growth, and where to focus effort when building on this strategy. Both primary and secondary research was conducted, with the former consisting mainly of executive interviews with advertisers, publishers, industry participants, and brand marketers. Our biggest take away was that for the industry to continue to evolve and better prepare for future possibilities, it must develop additional expertise and shift its focus from providing basic savings to providing value. This is because the goal of most brand marketers is effective long-term consumer engagements that cannot be measured by limited performance indicators. So analysis focuses on how programmatic media can evolve, or utilize current tactics and expertise to support each of the drivers of effective long-term consumer engagement and engage in an effective value creation strategy. As one leading programmatic media executive rhetorically asked, "What good is being efficient if we are efficient at the wrong thing?"
The Central Focus
Programmatic media is largely a simplified workflow solution to addressing the vastly fragmented nature of digital media transactions. Buyers successfully execute the single mission of delivering upon one element of their consumers' advertising tactics. The simplicity lies in the electronic hub provided to advertisers to identify and purchase media across millions of fragmented sources. Participants have addressed the complexity through the many means of identifying and attaching value to available inventory while effectively interfacing with other members of the ecosystem.

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Table 1 presents the four programmatic media transactions mechanisms. Among them there is complete coverage of both direct and indirect auction based sales with fixed and unfixed pricing. As a whole they have been highly effective at driving down operating cost and increasing efficiency. With the mass migration of consumers going to the web seeking information from new and tradition news and social media outlets, the increased efficiency has made it easier for publishers to manage yield by making ad impressions available for sale in the platform and format of choice.
Growth
Since its inception, programmatic media has experienced rapid growth. The U.S. is the largest market but other markets are experiencing rapid growth as well. In Table 2 we see that programmatic media spending, while already substantial, is again predicted to double in three short years.
United States and Global Programmatic Display Ad Spending, 2011-2017 2011 2012 2013 2014 2015 2016 2017
US
$2.8
$4.8
$7.5
$9.8
$12.4
$14.8
$16.9
% Change
71.4%
56.3%
30.7%
26.5%
19.4%
14.2%
% of Total
62.2%
63.2%
62.5%
59.0%
56.6%
54.2%
51.8%
World Wide
$4.5
$7.6
$12
$16.6
$21.9
$27.3
$32.6
% Change
68.9%
57.9%
38.3%
31.9%
24.7%
19.4%
All values represent billion in U.S. dollars. Source www.eMarketer.com Table 2
Is Efficiency Enough?
The development of basic performance measures demonstrates that the standard model works to facilitate the purchase of ad impressions in cost effective way. But why is an industry aligned with CMO's focusing on measures that make them appear to be aligned with CFO's? Being able to tell customers Inventory Type Pricing Participation Execution
Automated Guaranteed
Reserved
Fixed
Publisher- Advertiser
Direct programmatic sale of premium guaranteed inventory
Unreserved Fixed Rate
Unreserved
Fixed
Publisher- Advertiser
Programmatic sale of unreserved inventory
Invitation Only Auction
Unreserved
Unfixed
Publisher- Invited Advertisers
RTB enabled invitation only auctions
Open Auction
Unreserved
Unfixed
Publisher- Many Advertisers
RTB enabled open auctions
Source IAB, Programmatic and Automation- The Publishers Perspective Digital Table 1
Programmatic Media Transaction Mechanisms

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that you are saving them money is not always enough. Many advertisers and marketers are now realizing that they want to know whether they are spending money wisely! Both primary and secondary research conducted revealed that the market is ready for the industry to push further on this front.
For its November 2013 white paper "Programmatic Everywhere? Data, Technology and Future of Audience Engagement", The Winterberry Group conducted a survey of 260 executive level marketers, technologist and media industry leaders which produced two big takeaways:
1. 55% of publishers said their interest in programmatic was to "effectively engage" with targeted audience.
2. 88% of panelists said they expect to deploy the approach to support "actionable insight development."
These statistics show that advertisers wish for the industry to expand beyond its promise of efficiency, and they are buttressed by recent developments. In its June 25, 2014 article, "Agencies Brace For A Change As Brands Lean Into Programmatic," Ad Exchanger reported that Kellogg's, Kimberly-Clark, Unilever, Netflix, 1-800-Flowers and Allstate Insurance have all begun to develop in-house programmatic media buying capabilities, to drive their programmatic strategies. This is a reminder that brands have been built with a focus on long-term consumer engagement, not on CPC or CPA.
While conducting our research we spoke with experts from across a broad spectrum of industries who had either helped execute or direct programmatic media buying efforts through agencies. There were several questions and comments, which showed a lack of understanding and frustration on the overreliance on efficiency and its measures.
A senior director with a major athletic shoe manufacturer stated:
"It feels much like the old ads in the back of magazines where you included your phone number and hoped for a call. I want to know if, and how much of the targeted audience was engaged?"

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An executive with an international beverage corporation summed up his frustrations by stating:
"We know where the audience is, and reach them in a way which allows us to keep an eye on our bottom-line, but where is my audience value?"
Questions and statements like these were not raised in every marketer or advertiser interview, but a large portion voiced at least minor frustrations with what they viewed as a lack of contribution to brand lift. This maybe the reason that 82% of the U.S. offline ad spend is on branding while only 39% of the total online spend is. The significant gap between online and offline branding activity suggests that there is a $13bn untapped market in the U.S. alone (Blacksote Advisory Partners, 2013). These dollars can be attracted to programmatic media by shifting the focus from cost savings to effective value creation, and refocusing technology development to align with this strategy.
Effective Value Creation
Now is the time for programmatic media to build upon its expertise and shift the focus to effective value creation. The value added activities will enable marketers to engage in what many have described as their digital marketing objective - effective long-term consumer engagement. Developing expertise and tactics that enable conversations between marketers and consumers will enable data and actionable insights to be extracted to deepen both online and offline engagement processes. Of course, it is not the goal of programmatic media to develop digital marketing strategies for advertisers & marketers. But there needs to be an alignment of digital marketing and programmatic media's goals for better targeting and consumer insight development, and not just on a one off basis where a click or action ends the relationship.
The feedback loop benefits marketers because of its actionable data and insights, but the ongoing exchange will also provide value to the targeted consumer who should only receive precise, targeted and engaging impressions. To do so, there must be a holistic use of data to drive engagement across platforms and locations. Only then can the conversation between consumer and marketer switch from a passive lean back experience to an active lean forward one. Simply stated, we lean into those experiences that truly interest us. Programmatic media has already embraced key elements of this process. Creative optimization and targeting rules employed within real time bidding provide a solid foundation, and expertise developed in these areas can be deployed across the entire programmatic

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media landscape. To look at what programmatic media participants must do to develop an effective
value creation strategy, we first have to look at the industry's relationship with digital marketing
objectives.
Process Alignment
Figure1 represents how programmatic media buying aligns with other elements of marketing strategy to
create an effective communications strategy with consumers. Marketing communications strategies are
created to engage a receptive audience, and within this strategy are digital marketing objectives whose
success is dependent upon drivers. For programmatic media buying efforts to be effective they must
align with the drivers. Together, digital marketing and the greater marketing effort creates an ongoing
engagement with consumers to extract valuable insight to continually refine the process and message.
Efficiency Innovation
Customer
Engagement
Programmatic Media Buying
Marketers
Marketing
Digital Marketing Objectives
Online Offline
Insights
Engagement Insights
Engagement
Creative
Optimization
Data Targeting
Platform
Integration
Effective Long-Term Consumer Engagement
Figure 1
The Effective Long-Term Consumer Engagement
Process

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Drivers & Corresponding Tactical Requirements
Most of the advertisers and marketers interviewed during the course of SPS' research saw effective long-term consumer engagement as the major objective for their digital marketing strategy. Because of this, we used it as the focal point for tactical development to ensure alignment with effective value creation across the programmatic media industry. The drivers to focus on are: efficiency, innovation, and consumer engagement. Each of these is important on its own. But they are also interrelated. Effective execution requires proper development of the technology and expertise needed for each. This is not to say that we believe programmatic media participants are inefficient and not innovative. We believe they are, and that they can use these strengths in a greater capacity within the effective value creation strategy.
Efficiency is already the hallmark of programmatic media transactions. Executing ad impression transactions has been simplified. RTB has effectively created targeting and bidding rules, along with creative optimization, which is constantly improving with machine learning. However, effective long- term consumer engagement requires that the efficiency measures be expanded upon. Efficiency in the new model will also be defined by effective insight extraction along with process improvements. Each will tell us how much useful data has been extracted and how well it is being utilized to improve the process of communication between the marketer and consumer. Programmatic media's ability to capture and measure vast amounts of data makes this driver easy to execute upon, but it must also work hand and hand with the other two drivers because it will identify a path to define the needs of the next driver, innovation.
Innovation is the greatest strength when it comes to programmatic media transactions, but the programmatic media industry needs to refocus technology development to align with an effective value creation strategy. By nature, programmatic media companies are technology based organizations which leaves them in a great position to embrace advertiser and marketers as they push further into programmatic media. An example of this lies in how some major brands are now working to develop programmatic capabilities. In a conversation with a brand manager from Unilever, we were told that they worked with Mindshare to develop a Unilever dedicated trading desk. The goal is to track engagement and optimize in real time for creative ad placements, while using an in-house analytics team to develop models showing the performance/success of different components of the marketing

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campaign. These goals demonstrate a measured approach to consumer engagement. This represents enormous potential for programmatic media. In relationships like this the programmatic media industry and its participants can flex their innovative muscle and drive the long-term consumer engagement.
Developing the expertise to target consumers across electronic devices will lead to long-term consumer engagement. Forrester defines an adult who owns at least three connected devices and accesses the internet at multiple times a day as a perpetually connected adult. Currently 42% of U.S. adult consumers meet this definition (Joanna O'Connell, 2013). Innovation must continue the push on cookie-less targeting so that consumers can be targeted wherever their preference in devices or location leads them any given day. This process is complimented by real time predictive analytics which are a necessity to identifying the proper audience and are dependent upon data management. By data management, we mean obtaining, defining, modeling, and retaining relevant data.
Lastly, innovation must take place on the measurement front. Audience engagement and insights must be defined and effectively measured to ensure growth. Currently, there are tools in place which measure at least a portion of these, but they are not at scale and need improvement to achieve mass adoption. Measurement tools will be vital to identify and drive areas needing improvement.
Consumer Engagement must be a two-way street. Industry participants must engage consumers with an eye toward not only impression placement but insight extraction and, above all else, relevance to ensure the development of a continuing feedback loop to deepen the ongoing conversation. The industry has done a good job of creative optimization and tailoring messaging to audiences, but the process must take a step forward with targeting across devices, geography, time, etc.
Major developments are taking place that can lead to deeper consumer engagements. Reuters conducted a survey that revealed that 77% of television viewers used an electronic device while viewing television (Accenture, 2013). This presents an enormous opportunity to reinforce engagement messaging across platforms. Of course, innovation needs to lead this process in order to take advantage of the opportunity to provide congruent messaging across platforms. But what we see here is individuals taking part in a passive lean back activity, while also engaging in a lean forward experience where they are actively engaged in the use of devices.

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Programmatic television buying represents a potential complement to consumer engagement across platforms. There is an ongoing debate over the future of broadcast television, with valuable arguments on both side. But it is not the purpose of this paper to analyze broadcast television's future. Programmatic media sales have made inroads in cable television, which is highly understandable given the fragmented nature of the audience According to Neilson, 65% of viewing is now on television shows with less than 0.5% ratings and broadcast television has seen a 50% drop in ratings (Morgan, 2014). But paid television services can easily provide data on program viewership which can be coupled with online and offline data to create better targeting rules. One industry insider pointed to the challenge of changing the currency with which broadcast television is traded, referring to Nielson Ratings. But, just as RTB could be used as an innovation center to test new targeting models, so too could programmatic television. If companies scale an automated platform for the transaction of network television ads the technology could benefit all streaming video platforms.
Whatever the form or device, placement must not be viewed as intrusive but engaging. The key here is to shift the focus from how much did we pay for an action to how much did we learn about the consumer for future interactions, and ultimately brand lift.
Implementation
As always, the execution and development of effective strategy and supporting initiatives is dependent upon proper leadership, planning and personnel. A focus on effective value creation requires that all levels of the organization accept their company's position within the programmatic media buying industry. The danger within the industry is that the fragmented state of technology lends to silo thinking. Silo thinking means that leadership within a company becomes too focused on their technology and expertise to see how it fits within the industry as a whole. The human element must blend the technology expertise with strategy to provide true value.
To ensure proper execution, participants of programmatic media buying must look for broad outcomes to develop effective ongoing conversations with consumer segments. The outcomes will be the basis of the development of actionable insight for use in the development of a communication lifecycle. The entire process must be incremental and aided by the development of measures that go beyond the prominently used efficiency measures. These steps will go a long way in shaping the future of the industry and attracting addition revenue.

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