“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today's column is written by David Kohl, president and CEO at TrustX.
News flash: The shiny new object is no longer shiny – or new.
Programmatic advertising – the industry’s perpetually new thing – is roughly a decade old. Early ad networks and exchanges such as Google AdX, AppNexus, PubMatic and Rubicon Project started deploying programmatic RTB software between 2007 and 2010. Growth in the sector has been staggering. Since programmatic advertising went mainstream, digital media spend climbed from $32 billion in 2011 to $90.4 billion in 2017, and a whopping 85% of digital display advertising will be traded programmatically by the end of 2019, according to eMarketer.
But here’s the rub: The advertisers who foot the bill are getting too little in return.
The Association of National Advertisers (ANA) reports that over the past few years, advertisers have increased their digital media spend by 15% or more. And yet “growth sucks,” admitted ANA CEO Bob Liodice. Last fall, the ANA cited figures showing that more than half of the Fortune 500 – 259, to be exact – suffered declining revenues in the face of increasing media spend. And the lack of growth across so many leading brands strongly suggests that their collective advertising investment is generating negligible returns. Digital advertising, it seems, has simply not kept its promise.
Yep, growth sucks, especially when you are spending more and getting less.
I’d argue we’re witnessing the perfect storm of three interwoven factors that make it nearly impossible to close the gap between advertising investment and returns: the dismal ratio between digital media budgets and their actual media buying power, an overreliance on audience targeting and the near complete disregard for the content environment perpetuated by marketers’ love affair with too-cheap-to-be-true programmatic advertising CPMs.
Digital media spend isn’t really media spend
After all of our own hype about data-driven targeting, automation and digital media efficiency, it’s time we faced up to some basic math.
We have produced a dizzyingly complex and costly machine that has created – rather than filled – a chasm. It is a gap between investment and results that starts with the reality that only 30 to 40 cents of every programmatic media investment dollar actually fund the ads on the page.
Growth sucks because media buying power sucks. The lion’s share of media budgets has been commandeered by the still-shiny new objects of data and precision targeting, driven by ad tech layers that promise to find audiences at so-called scale across thousands of digital destinations for penny CPMs. The rub is that each ad tech vendor commands its discrete ad tech tax, which creates an insidious upside-down world of digital media spend that doesn’t really mean media spend.
With all due respect, major marketers have largely abdicated media-buying responsibilities to this complex maze of nontransparent ad tech tax collectors. Accountable CMOs must, instead, take back control by first simply knowing where their digital media investments are spent. Marketers must rationalize the value of every penny through every turn in the supply chain. As long as the lion’s share of digital media budgets is funding data and technology, rather than media, it will be next to impossible to generate meaningful marketing returns.
Buying impressions is not the same as buying attention
Smart shoppers love deals. We hunt for sales. We derive great satisfaction from getting more for less.
Marketers consider themselves smart shoppers, too, and so it should be no surprise that they are fascinated with the promise of low-cost audiences at scale. What could be better than getting millions of eyeballs for less than I paid last year? What a bargain!
In programmatic advertising, the “get what you paid for” adage is absolutely a truism. Ad technology finds scale by scattering ads across untrackable, unaccountable and sometimes unacceptable content. It finds people that may not actually be people and registers impressions that may never have had the opportunity to be seen. Human and viewable advertising must be table stakes. And content and context must matter.
In July 2016, comScore examined the branding effectiveness of advertising appearing adjacent to content generally considered to be premium. Its research demonstrated a 67% higher brand lift, which it attributed to a halo effect of the contextual environment in which ads are seen. And on mid-funnel metrics, such as favorability, consideration and intent to recommend, advertising performed three times better compared to ads appearing adjacent to nonpremium content.
Research like this strongly suggest that marketers must insist on making context matter. Buying impressions is not the same as buying attention. Attention is built on a viewer’s trust of the environments in which ads are seen. Premium, professional content is an environment where attention is greater, dwell times are longer and trust in ad messages is highest.
Closing the gap
The good news is that the conversation is changing. In the past 12 months, advertisers have recognized that they need to take more direct responsibility for their digital spend. The ANA found that 35% of marketers expanded their in-house programmatic buying in 2017, which doubled from 2016, and the trend toward in-housing continues. Marketers appear to be more engaged with their agency buying teams, and buyer attention to brand safety and transparency is on the rise.
So how can marketers take command of closing the gap? Certainly I do not recommend a retreat from digital, nor am I advocating for the elimination of programmatic media buying. Programmatic technology is not the problem. The gap – in trust, in effectiveness and in ROI – grew from how and where the technology was applied. Thus, closing the gap means targeting context and audience with equal weighting. Closing the gap requires a full accounting of both working media and nonmedia costs, with scrutiny of every penny that diminishes media-buying power.
Premium content companies have delivered marketing results successfully to the world’s most iconic consumer brands for the last half-century. Advertising has proven time and again to work in these environments. In the last decade, the industry became enamored with the shiny new object of programmatic advertising and summarily forgot some of the basics that drive returns on marketing investment. Advertisers turned a blind eye toward unrealistic CPMs and lost track of the tech taxes eating away at their working media dollars.
It’s time to take back control. Marketers must mind the sizable gap between spend and results. And they need to remember what they already know about brand dynamics: That gap can only be filled by taking responsibility for content, context, accountability and trust.