2015-06 Programmatic Advertising Guide - consolidated

imonomy interactive June 28, 2015
YOUR GUIDE TO
PROGRAMMATIC
ADVERTISING
Understanding Programmatic Advertising’s
Awesome Potential
The online advertising space seems to have new trends daily. One trend which you may not be
familiar with (and, at the same time, should pay careful attention to) is known as “programmatic
advertising”. Programmatic advertising isn’t particularly new but it is still very much an evolving
practice. That said, it is a growing trend and can make a substantial diﬀerence to your
advertising model and how you engage with your market.

The changing display ad landscape
Programmatic Advertising Guide 1

The display ad landscape has changed
dramatically in the last decade. The most
popular ad purchase model for a long time
involved advertisers or their agencies buying
“inventory” directly from publishers which, in
turn, began to create more and more websites
with more and more inventory to place ads on.

Inventory is pre-defined sections on publishers’
websites and are left open for ads. Ad networks
were created to place a higher volume of ads on
this inventory and as more inventory became
available, more ad networks were created to fill
the demand.

This led to even more complexity in the
marketplace and as it became easier for
publishers and advertisers to work with ad
networks, the market was practically flooded
with inventory. To aggravate the situation, ad
networks didn’t synchronize their operations so
advertisers found themselves with duplicate
purchases.

Ad exchanges were created to establish more
streamlined marketplaces where publishers could list their inventory and
advertisers could place ads on that inventory, more confident that they
would realize more value for their advertising spend. Ad exchanges didn’t
replace ad networks, which retained a place
in the overall process as a means to still sell
inventory directly.

Advertisers became more efficient by creating proprietary agency
trading desks or demand side platforms which gave them the
ability to trade on ad exchanges far more efficiently and,
significantly, in real-time. Publishers took similar steps and either
sold their inventory directly to the ad exchanges or established
supply side platforms which made inventory sales into ad
exchanges similarly more efficient and real-time.

Ad networks remained relevant and direct sales channels and also began to take advantage of
these emerging demand side platforms, supply side platforms and the ad exchanges
themselves. Of course these systems all work with tremendous amounts of data which facilitate
smarter and more targeted ad sales. As these systems process more and more data, they
become smarter and more capable of even more relevant ad sales based on advertisers’ very
specific criteria for their campaigns.

The display ad
landscape has
changed dramatically
in the last decade.
“… ad networks
didn’t synchronize
their operations so
advertisers found
themselves with
duplicate
purchases.”

What does all of this mean for the consumers? To begin with, advertising frequently funds the
content and services we consume online. These services require resources to operate effectively
and this is where advertising comes in.

The alternative for these service providers is to charge for their services or content and while
that is a potentially lucrative option, this may not be an appropriate monetization strategy for
most service providers which rely on a free-to-use model to build enough scale to sustain their
services and make them useful. A good example of this is Facebook.

In the traditional model, you were frequently presented with ads which, at best, were loosely
relevant to your interests. This meant you were often confronted with a multitude of largely
irrelevant ads.

As these various systems shared increasing amounts of data gathered from website traffic and
made those data available to advertisers and their agencies, they were able to better understand
their customers and segment them based on criteria such as gender, age, location, interests and
so on. This, in turn, gave publishers and advertisers the ability to select the ads that would be
more relevant to consumers visiting publishers’ websites. Increased relevance means more
useful ads and more opportunities for consumers to find what they are looking for.

This data-driven model is known as “programmatic advertising” and it offers a number of
benefits to publishers and advertisers, alike. In fact, it also benefits consumers who should find
themselves faced with far more relevant ads in a time when consumers can be overwhelmed by
all the display ads they see every day.

More efficient transactions
As the name suggests, programmatic advertising (also referred to as “programmatic buying”)
involves placing ads programmatically (using the
smart systems we outlined earlier) as opposed to
manually with humans who can be forgetful,
overwhelmed and take sick days. There are a few
types of programmatic advertising with real-time
bidding being a popular means of placing ads
very quickly based on data-driven decisions.

Publishers use real-time bidding systems to list
their inventory. You see these spaces on almost
every website you visit and they almost always
contain ads of some description. On the other
hand, advertisers use real-time bidding systems
to bid for that inventory and, if their bids are
successful, to place their ads almost immediately on publishers’ websites. According to the
Retargeter blog:

“Ad buying is horribly
inefficient. One estimate is
that $10,000 of overhead
goes into the standard ad
buy. As they say in tech,
that doesn’t scale.”
(SOURCE: DIGIDAY)

Last year, revenues attributed to real-time bidding (the backbone of
programmatic buying) reached $1.6 billion and 34% of all display
advertising revenues are projected to come from RTB by 2017.
An overview of traditional and programmatic ad placements
It is helpful to understand how a common programmatic ad placement works in contrast to
traditional, direct ad placements.

The more traditional process is direct because advertisers (or their agencies) typically approach
publishers or their preferred ad networks to buy their inventory. Ads are then placed once terms
are agreed and consumers see them when they visit the websites. Publishers have a fair amount
of control over the ad placements using this method (it remains a popular method today)
although it is a fairly blunt instrument. Directly placed ads are often poorly targeted and, as a
consequence, frequently not relevant to visitors to those websites.

“Programmatic buying won’t replace premium buying; it solves
diﬀerent problems for marketers. What it will replace is the
buying that happens in the “transactional middle,” the space of
short-term, people-led RFPs with click-through-based

performance objectives. As automated buying grows
exponentially, publishers need sellers who are as conversant
and capable in the technological aspects of putting audiences,
media brands and marketers together as they are in developing
ideas.” - Meredith Levien, EVP of Advertising, New York Times,
quoted in How Programmatic is Changing Ad Sales Teams
Programmatic advertising is far more flexible and can be very accurately tuned to suit website
visitors’ expectations. A great way to understand how a programmatic ad placement works is
using a fictitious example:

Let’s say Louise is looking for a birthday gift for her daughter who is obsessed with the Disney
movie, Frozen. Louise spends some time browsing the web, searching for Frozen toys and
accessories in her preferred search engine and online shopping websites. She finds a few
options but nothing that really grabs her.

Along the way she browses to a popular news website. In order to load the news website,
Louise’s browser connects to the news website’s server (also known as the “Publisher Content
Server”) and requests the web page associated with the link Louise clicked on.

The Publisher Content Server recognizes that the web page Louise’s browser requested
includes a space for an ad and it contacts the publisher’s Ad Server and requests an ad to insert
into that space when it presents the complete web page to Louise through her browser.

The Ad Server reviews any information it may have about Louise based on previous interactions
she may have had with websites it serves and then contacts a system known as a Supply Side
Platform which is a system that aggregates and sources ads for placement on publishers’
websites (think of it as a sort of marketplace for ads which helps publishers find the best prices).

The Supply Side Platform also assesses information it or its external data sources may have
about Louise and then makes an appropriate request for an ad from an Ad Exchange. The Ad
Exchange is connected to another series of systems which could include Demand Side
Platforms which advertisers use to present their offers for possible inventory which could, for
example, include a specific price for women aged 30 to 35, living in a particular region and with
a particular income range.

Advertisers using the Demand Side Platform participate in a bidding process and the winning
bidder (often determined by price offered and the amount of attention the advertiser’s ads have
received historically) is selected and the Demand Side Platform sends instructions to the Ad
Exchange on how to retrieve the ad “creative” (typically text and images) which relays those
instructions to the publisher’s Ad Server.

The publisher’s Ad Server then delivers the ad creative to Louise’s browser along with the rest of
the web page content. Louise, of course, is unaware of this complex transaction which has

occurred behind the scenes because it takes place so quickly. What Louise sees is the web
page she requested which contains the ad which the Ad Server sourced.

What makes this whole process particularly interesting is that the ad that was delivered was
sourced based on information which various servers had about Louise based on her search for
the ideal Frozen gift for her little girl and other information about Louise which could include her
general location and preferences. The result could be an ad for that perfect Queen Elsa dress at
a local toy store and a relieved Mom.

In contrast to the more traditional ad placement model, the data-driven nature of programmatic
advertising (specifically the combination of these smart systems and growing volumes of data
about consumers’ online behavior and preferences) creates a number of powerful opportunities
for publishers and advertisers, with consequential benefits for consumers themselves. We’ve
alluded to some of those benefits, let’s explore them and others in some more detail.


Programmatic advertising’s tremendous value
proposition
Programmatic advertising’s killer feature is dramatically improved ad relevance. Other features
include transparency about pricing in the real-time bidding process (advertisers can see what
other advertisers are bidding), speed and control.

For advertisers, programmatic advertising is an opportunity to direct ads at specific target
markets almost instantaneously and far quicker than a human could place ads using the more
traditional approach. The ad exchange model favors efficiency and speed through algorithmic
trades where human intervention is more limited. This can be a concern for publishers who are
accustomed to being more in control of the process.

That said, publishers are not at the advertisers’ or the exchanges’ mercy. Exchanges like
Google’s DoubleClick Ad Exchange still give publishers a fair amount of control over the ads that
will be placed on their websites despite placements being made indirectly.

According to a case study published by Google about the Washington Post Digital’s 2011
transition to the DoubleClick Ad Exchange -

Prior to this move, WPD was especially concerned about
channel conflict and erosion of direct sales as partners began
to buy through indirect channels. “For this reason, we were
conservative about allowing our inventory to be branded on
3rd party platforms,” says Jeff Burkett, WPD’s senior director,
ad innovations & client services. But with a strong drive to
innovate, and reassured by the transparency and control
offered by AdX, WPD took a step in a new direction and
decided to sell its inventory branded.
Something to bear in mind is that publishers can make their inventory available anonymously or
branded. If the inventory is anonymous, advertisers will know what sort of traffic to expect along
with some features of the inventory without knowing which websites the inventory is available
on. With branded listings, advertisers will know which websites the inventory is available on,
along with other relevant details to inform their decision to bid for the space.

WPD’s experience seems to have been pleasantly surprising for the team:

With AdX, WPD can block ads, advertisers and ad categories,
select which buyers it wishes to work with and when, and set
specific price points per buyer – limiting channel conflict and

maintaining price integrity. “We see clearly now who’s buying
branded or anonymous inventory, and what demand-side
platform they’re coming through,” he says, recalling instances
where WPD was able to identify and resolve cases in which
direct partners were buying inventory indirectly at lower CPMs.
…
“This has by far been the biggest experiment we’ve done, and
our eCPM growth is far past what we thought this channel
would provide,” says Jeff. He now tells other publishers that
advertisers will pay the necessary rates for branded content,
and that selling branded inventory through indirect channels
won’t sacrifice brand and inventory value. “I don’t think
publishers realize what a big opportunity it is,” he says.
The WPD’s experience goes some way to alleviating concerns about giving up the direct ad
placement model which is still very popular today and shifting to the indirect programmatic
advertising model with its many benefits.

One obvious benefit is that real-time exchanges are far more efficient than the manual approach.
Publishers can establish their parameters for incoming ads and advertisers and advertisers can
make their bids, set their budgets and let the underlying systems match winning bids with
inventory and place ads almost immediately. A side benefit for both advertisers and publishers is
that programmatic advertising liberates them from relatively mundane tasks to focus on bigger
and more elaborate campaigns.

Programmatic advertising is more than just an efficient marketplace. We’ve mentioned how
programmatic advertising enables better ad targeting and how this can result in ads that are
more appealing because they are more relevant to the consumers who see them. Targeting
tactics are varied and very exciting for advertisers and publishers, alike.

Search retargeting enables advertisers to target consumers based on historical search
keywords. This tactic exploits consumers’ intent which is evidenced by the things they are
searching for. The challenge is how long search terms remain relevant for advertising purposes
but these search terms remain far better intent signals than more general signals used in more
traditional ad placements.

Data used to inform search retargeting is gathered from website search widgets, analytics
mechanisms, search engines and other similar sources. The emphasis is on your data sources
and not third party data providers.


Audience targeting is similar to search retargeting although it relies more on behavorial data from
third party data vendors. These datasets tend to be more substantial and better segmented into
more useful segments. The challenge with audience targeting is that the external data comes
with a premium on top of the usual inventory cost advertisers would expect to pay.

Perhaps one of the more interesting targeting tactics is contextual targeting. This method uses
contextual or semantic analyses to analyze website content and categorize it for ad targeting
purposes. It is an effective strategy for limiting ad spend by focusing on the most relevant target
market but it is also possible to focus too narrowly, especially if combined with other targeting
methods so it requires a fairly good understanding of the ideal target market.

Contextual targeting works best with more semantic signals so focus on text-rich web pages
and is used effectively in advertising models such as in-image advertising. Another benefit of
this tactic is that the cost premium on top of the usual cost for inventory is relatively small.

Taking programmatic advertising
further
You probably have a good sense of just how effective
programmatic advertising can be when it comes to
desktop display ads. You may be thinking about what
this could mean for mobile and that is where
programmatic advertising becomes even more
interesting.

Consider how much time you spend using your mobile
phone each day and how smartphones have become
primary computers for a growing number of people.
Your mobile phone is probably almost always with you
and when you need to find something, do something
on the go, you increasingly turn to your smartphone to
get things done.

Mobile devices offer advertisers the benefit of real-time
contextual awareness. Your phone probably has
location-aware services running in the background and
a growing number of mobile apps are using your
location at any point in time to present you with highly
relevant information. The Foursquare app uses signals
from your daily activities and from your friends’
activities to learn what appeals to you and then makes
personalized suggestions tailored to your preferences.

The opportunities for advertisers include hyper-local targeting that may be time-specific too. An
example could be being able to tell potential customers about a limited special on pizza or ice-
cream that is only available for a few hours from a particular store in their immediate vicinity.
Alternatively, advertisers could simply use consumers’ geolocation information to present them
“From friends’
recommendations to
information about the
places and things that
interest you, Facebook
helps you connect with the
world around you. To
better show you this
content at just the right
place and time, today
we’re launching a new
feature called place tips.
Place tips will show you
fun, useful and relevant
info about the place you’re
at.”
FACEBOOK’S UPDATE ANNOUNCEMENT ABOUT

with ads for a local neighbourhood retailer when those consumers are in the area. It is a great
way to limit spending and increasing conversions with hyper-relevant ads.

The emerging “wearables” trend takes this even further. Imagine being able to send a notification
to a consumer’s smart watch that a nearby store has a special on bottled water when the
consumer is on her way back from a run which she used her smart watch to track.

As programmatic advertising becomes more personal, a significant challenge is taking adequate
steps to protect consumers’ personal data. While personal data is a powerful tool to make ads
more relevant and engaging, processing that data adds a fair amount of scrutiny from regulators
and consumer watchdogs which are increasingly concerned about misuse of that data and
seemingly frequent data leaks.

Participants in the programmatic advertising ecosystem are going to have to think carefully
about justifications for processing personal information; data retention and data security.

Is programmatic advertising just hype?
The short answer is “no”, despite all the jargon being used in discussions about it. Programmatic
advertising isn’t going to magically fix low conversion rates but it does offer advertisers a
powerful option to present more relevant ads to more specific market segments and, in the
process, preserve limited advertising budgets.

It can be tempting to think that programmatic advertising is the only game in town. It is certainly
a compelling option but it comprises a variety of methods of placing ads programmatically. More

traditional, direct ad placements are still attractive in
many situations and the lines between the more
traditional ad placement models and programmatic
advertising are increasingly blurred and traditional
channels connect to ad exchanges, Supply Side
Platforms and Demand Side Platforms.

Remember, too, that this isn’t just about technology
and data driven advertising for the sake of it. Beyond
the efficiency, targeting and cost benefits to
advertisers and publishers, consumers are the
ultimate beneficiaries of programmatic advertising
because it should make advertising a more useful
and relevant experience.

About the authors
Co-authored by imonomy’s Amit Halawa-Alon, Co-CEO, and Paul Jacobson, Content Marketing
Specialist.

imonomy is a leading in-image advertising technology company. Our Visual Semantic Engine
analyzes and understands website content and programmatically pairs appropriate ads from our
vast and varied inventory with that content.

We help advertisers engage meaningfully with potential customers by more accurately and
programmatically targeting those customers; manage their advertising costs and, ultimately,
convert those interactions into sales. Our products give publishers a range of ad format options
which they can use to increase their advertising revenue by placing unobtrusive ads on the most
enticing content on their websites: images.
Beyond automation,
programmatic should be
about making advertising
better, some argue. “This is
about selling dog food to
dog owners,” as one
executive puts it
succinctly.
ADWEEK’S ARTICLE “PROGRAMMATIC ADVERTISING

2015-06 Programmatic Advertising Guide - consolidated

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