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5 Programmatic Advertising Myths You Need To Stop Believing

March 29, 2018 at 10:39 AM

Often touted as a panacea or the future of marketing, programmatic advertising seems to be on everyone’s minds these days.

At the same time, there’s a lot of misinformation out there and a general sense of confusion around what it means to be programmatic. Brands of all sizes are jumping to programmatic without a clear understanding of the risks involved or the types of businesses for which programmatic makes sense.

To help you evaluate programmatic, we’ve debunked a few of the most common misconceptions around programmatic.

Here are the top five programmatic advertising myths you should kick to the curb:

 1. The Google Display Network is programmatic

Whenever programmatic comes up in a conversation, the Google Display Network (GDN) is never far behind. Despite (or, perhaps, because of) the growing popularity of programmatic, there is general confusion about how it is different from GDN and traditional display advertising.

The Google Display Network and programmatic advertising share a lot in common:

  • They’re both priced in by an automated supply-and-demand mechanism (known as Real-Time Bidding in programmatic and an Auction in GDN) that determines where an ad appears, how much it costs, and who it targets.
  • They both partner with a network of millions of website and mobile apps to offer maximum reach for your advertisements.
  • They both have the option of incorporating machine learning to deliver personalized ads to the individual consumer (known in GDN as a Smart Display Campaign).
  • They both allow for a wide variety of ad formats, including rich media, responsive, and HTML5 interactive ads.
  • They both allow for custom data and targeting, in the form of remarketing and custom audiences.

Still, GDN is not a programmatic advertising channel. There remain a few significant differences between the two:

First, GDN operates as a closed system. It contains over three million websites, but they’re all bound by a single attribute: They opted into the Google AdSense network.

In contrast, programmatic is vendor-agnostic. Its inventory spans countless ad exchanges and publishers. In other words, programmatic is not tied to any one vendor (i.e., Google). By not being reliant on a single publisher, programmatic has the added benefit of not being tied down to the targeting capabilities of any one network—allowing for granular targeting using third-party data.

Comparing the programmatic real-time bidding process with direct media buying in GDN

While the end result may look the same, programmatic and direct (GDN) advertising take two very different approaches to media buying. 

Second, the two offer different pricing models. Programmatic advertisements are almost always priced based on the number of people that view the add (eCPM, or effective Cost Per Mille / Thousand Impressions). Google AdWords and the Google Display Network offer a wider variety of pricing options, including results-based models like Cost Per Click (CPC) and Cost Per Action (CPA).

Third, programmatic is often done in real-time with up-to-the-minute reporting, while Google reporting has a data delay of up to three hours. This means advertisers will get fresher data with programmatic advertising.

And fourth, programmatic advertising has been traditionally reserved to larger brands, often at an entry cost of $10,000+ in monthly spend. However, recent months have seen a shift from the agency and trade desk model to self-serve platforms, which allow for smaller budgets. In contrast, GDN has always been a self-serve product with no minimum requirement.

While these are the big four, there are a number of small differences as well, which we’ll explore throughout this post.

more than geofence

2. Programmatic advertising offers better cost efficiency

It’s a common belief that programmatic offers better bang for your buck as it doesn’t rely on any one key player (like Google or Facebook) to set the costs.

In moving to a decentralized model, however, programmatic opens the door to a complicated supply chain. This introduces a host of different partners offering (and charging for) pieces of the puzzle: Media buying, execution, third-party targeting data, buyer technology layers, publisher technology layers, and a slew of other intermediaries.

After these fees, only 58% of programmatic advertising spend goes toward purchasing media inventory.

 Vendor fees throughout the programmatic advertising supply chain

Source: Association of National Advertisers (ANA)

When it comes to seeing a positive return on investment, marketers and agencies alike trust traditional display advertising more than programmatic. According to a study by the Audited Media Association of Australia, agencies ranked programmatic below online display and on par with social media advertising. For marketers, programmatic fared worse, below search, online display, online video, and even radio to be on par with outdoor advertising.

Despite all of this, many going into programmatic expecting it to be 10 times cheaper than traditional advertising given the use of automation, but they fail to account for the surrounding expenses.

The perceived ROI of programmatic advertising for marketers and agencies

Source: Audited Media Association of Australia (AMAA)

The Interactive Advertising Bureau (IAB) has responded to calls for more oversight by putting together a council to explore and address fee transparency in programmatic. So far, the council has released a report deconstructing the anatomy of programmatic CPM and created an interactive calculator to help advertisers understand where their dollars are going.

Despite these concerns, programmatic still offers cheap impressions, with programmatic CPMs (cost per thousand impressions) falling in the $0.50-$2 range. In contrast, the Google Display Network sees an average CPM of $2.80. There is no clear data on how the click-through rate and the effective cost-per-click and conversion rates compare.

3. Programmatic offers greater transparency

Echoing what we saw above, there’s a natural hesitation to trust Facebook and Google, the two “walled gardens” of non-programmatic.

With either of these platforms, advertisers are forced to rely on the same company that pockets their ad spend to tell them how their campaigns are doing. There’s no third-party audit, and the platforms selectively pick which data advertisers can access.

For many marketers, the value of programmatic is in its diversified portfolio: If your ad isn’t limited to Facebook, Google, or any other closed ecosystem, there’s less of a risk of a single company fudging the numbers.

The reality tells a different story, and more players in the game don’t translate into greater transparency.

Programmatic can feel like a black box. Marketers know what they’re spending, but they don’t always know where their ads appear or whom they target. With so many intermediaries and only surface level metrics around impressions, advertisers often lack a single source of truth into their campaign performance.

According to a survey by the Association of National Advertisers, three out of four marketing say they’re concerned with the lack of data transparency in programmatic advertising. Respondents associated their concerns with a need for unified standards for transparency, more transparent vendor relationships, and more oversight of viewability and ad fraud issues.

Programmatic reporting is also years behind the automated and real-time nature of programmatic bidding. A similar survey by Metamarkets found that 42% of buyers still receive reporting in spreadsheets and 52% find it difficult to turn the data into meaningful insights.

Programmatic has also faced an uphill battle when it comes to ad fraud, which cost the advertising industry $6.5 billion last year alone. According to the ANA’s Bot Baseline Report, as much as 37% of programmatic ad impressions were served to bots, or otherwise victim to ad stacking, domain spoofing, or pixel stuffing.

The economic cost of ad fraud in programmatic

Ad fraud is dramatically undercutting digital advertising ROI, particularly when it comes to programmatic. Source: Association of National Advertisers

While ad fraud is not unique to programmatic, the more established traditional vendors have a leg up from years of experience addressing the issue of fraud. Google now offers full refunds to ad fraud victims, while Facebook has assembled a team of over 1,000 engineers and local language/culture experts to identify and prevent ad fraud through both sophisticated AI and a human review process.

Of course, like with any marketing tech vendor, it’s essential to choose the right partner for programmatic. There are a growing number of agencies and trade desks that lead with data and fee transparency. Buyers are also starting to demand more transparency when reviewing programmatic ad contracts.

4. Programmatic advertising offers better targeting

The truth of the matter is that programmatic advertising offers different targeting. For some, it might be better. For others, it might be worse.

The value of programmatic is clear: Allowing for third-party data segments allows marketers to reach an infinite combination of potential customers. With the right data, they can send personalized messages based on online and offline behaviors, shopping history, demographics, lifestyles, interests, preferences, proximity, device type, and virtually anything else that might influence a conversion.

As powerful as this is, it comes at a cost when comparing the targeting options of traditional online advertising channels. In particular, programmatic buyers must sacrifice both the power of search intent exclusive to search engine marketing channels like Google AdWords and Bing Ads and the ability to use keyword targeting to find contextually relevant keyword placements, as can be done in the Google Display Network.

Compared to social media marketing, programmatic requires a similar trade-off: The customer data and segmentation that comes from analyzing trillions of pieces of user-generated content. 

All in all, this one’s a tossup. Programmatic offers a clear improvement over mass marketing channels, like radio, print, and TV, but the line is blurred when it comes to digital.

5. Programmatic advertising is for everyone

Last but not least, the recent influx of programmatic articles and news coverage is enough to give anyone FOMO, or the fear of missing out.

In light of this, it’s important to remember that programmatic isn’t for everyone. And that’s okay.

Although 80% of U.S. digital spending is now programmatic, adoption is skewed by large brands buying billions of impressions a day. Adoption among small and medium businesses is only at 20%.

Given the high entry costs and the focus on impressions over clicks or conversions, programmatic remains a brand awareness play with a still-indecisive contribution to the bottom line.

Is it an innovative new take on advertising that works well for some brands?


Is it the future of marketing?

That might be a stretch.


Programmatic marketing myths busted

Source: Discovery’s MythBusters

Myth busted

Programmatic advertising is an undeniably powerful tool. Combining rich targeting, third-party customer data, and an open ecosystem capable of netting you billions of daily impressions, it’s a force to be reckoned with. 

It’s also a Wild West that still needs to be reined in. Issues of ad fraud, viewability, transparency, supply chain inefficiencies, and ROI-alignment continue to shroud programmatic in a haze of healthy skepticism.

It may be the right strategy for your business. Or you may be better off with traditional display advertising. Either way, we hope this post armed you with the information needed to make that decision.


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Topics: PPC programmatic

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