If 2015 wasn’t the year of programmatic, 2016 certainly will be. In anticipation of the 2016 Programmatic Summit, we spoke to some of the biggest names in the space to pinpoint the trends to watch out for.
Programmatic gets on the agenda
A recent Warc and AppNexus study involving more than 200 advertising professionals in the Asia Pacific region found that while many in the business believe programmatic is fast becoming an important form of advertising execution, a third still feel under-informed when it comes to programmatic technology.
Dave Osborn, VP of ad tech provider AppNexus says: “If it is the most important thing and most of you feel uninformed, that is a bit of an issue.”
With many chief marketing officers still figuring out their digital strategy, programmatic is falling under this umbrella making it a minuscule portion of the total marketing budget. As JJ Eastwood from digital marketing platform, RocketFuel, says: “You’ve got a CMO who spends 20% of his total marketing spend on digital; and when I say digital that could be search, display, social. It’s only when digital starts to creep up to be that 40-50% of their marketing spend that they start to take it really seriously.”
By all accounts, we’re on track to see digital spend increase and Eastwood quotes an encouraging prediction. He says: “By 2018 there will be at least a billion dollars flowing through programmatic pipes in Australia. So that’s a relatively big business. And then the bigger number, which a lot of people are excited about, is that by 2020 there will be $100 billion flowing through programmatic pipe globally.”
From an agency perspective, Ricky Chanana, national digital and trading director at media agency Maxus, agrees programmatic is only going to increase its share of the marketing budget. He says:
“CMOs and brands that have already equipped their marketing teams to deal with the shifting landscape will enjoy a significant advantage over their competitors in delivering more effective results across the board.”
Osborn adds: “It will be big. There is still a ways to go and quite a bit of education.”
According to AdAge, we shouldn’t expect to see big, new programmatic tech companies entering the market. Venture capitalist Jerry Neumann told the publication earlier this year: “When I was investing in ad-tech four to seven years ago, there was more opportunity than competition.”
While AppNexus’ Osborn agrees, saying that instead of new players coming in we’ll see the existing providers gobbling up smaller offerings, Expedia’s senior director of brand marketing, Vic Walia, says there’s still disruption to come. He says: “There’s going to be disruptive technology that comes into play that looks at either a very small piece of the pie or the whole ecosystem and says, ‘There’s another way of doing this’. We’ve seen that in several different categories, several industries. It would be, I think, irresponsible to say that it’s not going to happen in ad tech.”
Walia adds: “In the history of online marketing, you have a group within a company – whether it’s Facebook or Google or some other big player – that will leave, and say, ‘I think there’s a better way,’ then start up their own company. We’ve seen that happen time and time again. So I wouldn’t be surprised if, in 12 to 18 months, there’s another disruptive force in ad tech.”
Regardless, consolidation looks to be a key theme in 2016. As Osborn points out: “Our president, Michael Rubenstein coined the phrase ‘the ad tech power game’ and what that means is you see companies being acquired, like when Google bought DoubleClick, Yahoo bought Right Media and Microsoft bought aQuantive. That was a big slurping up of ad tech companies. We are in another cycle of consolidation where we are going to see companies going out of business, merging, working aggressively to change their business models, probably to a significant distraction. That is going to be a big deal in 2016.”
Advertisers take programmatic in-house
In the US, Expedia has taken the bulk of its programmatic function in-house, a trend other advertisers are likely to follow in 2016 and beyond. Expedia’s Walia says the decision to go in-house or not will come down to how important programmatic is to specific business models. He says: “We’re an e-commerce company, so it would make sense that we would have marketing activities in-house.”
Other e-commerce companies take note.
Programmatic owns trading
It might not get there in 2016 but industry experts predict programmatic is going to drive 100% of advertising trading execution by 2020. Osborn from AppNexus says: “I would be pretty comfortable saying that.” While real-time bidding certainly is a big part of this, the broader manual, time-consuming elements of buying and selling ad space will soon fall solely to machines. Osborn adds: “That will be true of just about everything we do in the next five years.”
Time to cut out the middle man
Right now, many companies are not, as Expedia’s Walia puts it, “making money programmatically”.
He says: “Our math tells us that for every dollar we spend, 40 cents of it goes to the publisher. That means we are behind the eight ball the day we start advertising. In order for this to become sustainable, the model needs to change and the way it needs to change is through consolidation. Having a data management platform which is separate from your demand-side platform, which is separate from your dynamic optimisation engine, which is separate from your third-party providers – all of these ticky-tacky add-ons really start to make this unsustainable.”
Bringing all of these processes into one makes sense and several players in the space are working to do this but as Walia points out, “The challenge, of course, is when these ecosystems become big, do they become walled gardens, so that’s a washout”.
Osborn from AppNexus believes the issue of ad fraud is “basically solved”. The industry is likely to see the issue evaporate – if not in 2016, fairly soon thereafter. Still, Osborn says that view will vary depending on who you talk to. He says: “You are going to have people who say ‘Oh my god, there is so much fraud, it is making the world hell’.” This is, in part, due to businesses that charge handsomely to detect fraudulent activity.
The answer to eradicating fraud, Osborn says, is to “remove the money and the actors” from the system. He points to big ecosystem players such as Facebook, Google and Yahoo that earlier this year joined forces forging a blacklist to block fake web traffic contributing to advertising fraud.
However, Expedia’s Walia urges caution. He draws a comparison to transactional fraud saying: “We have spent an incredible amount of money and built gates to detect transactional fraud. As we advance our technology, the fraudsters advance their technology. If I take that analogy and I apply it to ad fraud, we’re not going to sit on our laurels and say it’s solved, we can move on. That would be irresponsible.
“While there may a solution today, those who are perpetrating and making money off of ad fraud are not going to simply go away. They’re going to find another solution.”
RocketFuel’s Eastwood says he’s not switching off his bot detectors any time soon. He says: “We work with the leading detection vendors. We’ve also got in-house ad fraud detection. We would only be able to dial down our relationship with those vendors if we thought the issue was solved. Hopefully, it’s solved. If AppNexus has solved it, that’s fantastic. If Google can solve it as well, there are two major exchanges with no ad fraud. That would be amazing for the whole industry.”
The rise and rise and rise of machine learning
Earlier this month we recapped Richard Parker from Edge’s presentation at the 2015 Data Strategy Summit. Parker talked about the intersection of content marketing and programmatic. He debated whether machine learning and Artificial Intelligence (AI) would ever be involved in the creation of content in addition to programmatic curation and distribution.
RocketFuel’s Eastwood says: “You’ve got AI that can write music. You’ve got AI that can beat the best chess player in the world. You’ve got AI that can write stories already. You know that’s happening today. So it’s not too big a leap to create an ad, I would say.”
Rather than usurp the people charged with producing advertising creative, Eastwood sees this sort of content creation as a natural next step. He says: “We currently test multiple ads for our clients and the platform optimises the one that are performing the best. If you’ve got AI building those ads, you could have thousands of variables the machines could test. I don’t think that’s too far-fetched at all.”
Still, there’s some creative output we don’t want to be automated. Osborn says: “I want a director to make me cry or laugh in a movie, I don’t want a robot to make me laugh in a movie.”
Programmatic goes to war on ad blocking
Earlier this month Google’s DoubleClick unveiled native ads that defeat ad blockers and industry experts agree we will be hearing plenty more from big players in the war on ad blocking.
Maxus’ Chanana believes ad blocking presents opportunities for programmatic and beyond. He says: “Display banners are already a thing of the past and we are witnessing the rise of native. Ad blocking simply means the industry needs to keep coming up with new ways to tell stories and use different channels. This also opens opportunity to discuss content strategy at the forefront of media planning with our clients and collaborate with creative partners for more innovate out-of-the-box ideas.”
TV turns programmatic
In the past year, we have seen a number of channels adopt programmatic buying and selling from outdoor to radio. The next frontier to conquer is television. While overseas markets are making great strides in the space, locally there’s some way to go. RocketFuel’s Eastwood says: “In this market, it’s very early days. We’ll certainly see inroads in 2016. What we really need is for someone to come up with a programmatic marketplace. That’s what we don’t have in this market.”
Eastwood refers to the example of a partnership RocketFuel has formed in the US with the Dish Network. He says: “They’ve set up their marketplace pretty well. They’ve got around 80 segments which you can target against. What we really need to see is someone stepping up and building a programmatic marketplace for digital TV or for all TV.”
Trends keep on trending
It doesn’t take an expert to predict the focus on programmatic trends will continue in 2016.
RocketFuel’s Eastwood says: “It’s quite funny how you see trends pop up. You hear a lot of noise then they sort of fizzle off into the background. In my opinion, I don’t think they have been solved.”
Expedia’s Walia adds: “Every six months, or even less, I pop my head up and there is some new technology, whether small or big. There’s something new and interesting and exciting. Whether it’s a way of measuring, a way of collecting data and insights around the consumer or figuring out what content is working. Because of that, it’s hard to predict where things are going because it’s ever changing. We’re not in a space where things have been running on an even keel for a long period of time. Once we get there, that’s when we can start to pave out the future. But right now it’s the wild, wild west. I kind of like that because it is anyone’s game to try and figure out.”
Mark Abay - Content Director, Ashton Media
Mark is Content Director at Ashton Media. It's his job to create interesting and engaging conference programs that stretch the thinking of our attendees. Mark works closely with our industry advisors to ensure the conference content is aligned with the needs and interests of our audiences.