Digital trading continues to develop at pace, and now mobile and video are driving new opportunities for advertisers. Harriet Kingaby explores what’s next for programmatic.
The industry is being shaped by two broad trends: increased spend on mobile advertising and developments in video.
Rates of tablet ownership are increasing exponentially, whilst traditional PC ownership declines; for instance Gartner forecast in January the global tablet market will increase by 47 per cent during 2014. And where consumers go, advertisers follow: according to the IAB’s Mobile Centre of Excellence, global mobile advertising nearly doubled last year – jumping from $10bn to $19.3bn.
The trend is echoed here in the UK, where eMarketer predicts mobile advertising will overtake the newspaper and magazine market next year, and surpass TV ad spend to hit £4.5bn in 2016.
Users carry their mobile handsets and tablets with them, enabling extra layers of data to be collected and allowing more sophisticated ad targeting. Todd Tran, Nexage, managing director, Europe explains: “To get a DeviceID in mobile, which is a unique identifier, you get… the latitude and longitude, and 100 other variables associated with that particular device.
“If you were building a database on the buy side of that device, over time you’d have a beautiful profile of that DeviceID, you’d know whether [the owner] was male or female, you’d know a lot of things about that person: where they work, where they live etc, which would allow you to be really specific about how you target them.”
Alongside improvements in data processing techniques, this means programmatic targeting is advancing well beyond crude retargeting (where users are simply served ads from brands who’s site they previously visited), to prospecting, where patterns of behaviour are used to predict a need and drive users towards sites suited to their needs.
Attribution is making the sector more robust, according to Quantcast managing director Matt White. However, at the moment, 80 per cent of campaigns are still using last touch – which rewards retargeting, rather than prospecting, says White.
“If 50,000 people put their hand up and have been to the British Airways site to look for London to Rome tickets and they don’t buy, it’s easy to retarget them using ads. What’s really hard is finding the right 50,000 people to drive to the site through advertising,” he says.
“If you’re seeing behaviours that are predictive of an outcome, you can put the right ad in front of them at the right time. What’s really interesting is how the models pick up behaviour. It’s like dot-to-dot... the more dots you have, the easier it is to see the pattern.”
The move to mobile is also affecting what is considered ‘premium inventory’. Most digital advertising spend has traditionally focused on desktop search, yet mobile users spend most of their time using apps. These app producers are now considered ‘long tail publishers’ and are commanding ever increasing rates for their ad space.
Nexage’sTran says: “If you think 80 per cent of mobile usage is on mobile apps and you look at the top 100 mobile apps in use today, I bet 80 per cent of them don’t exist on desktop. The big publishers on mobile are apps like Angry Birds and Shazam. Angry Birds has 2.5bn downloads. They are massive global publishers that traditional media buyers aren’t used to – but they’re starting to realise that’s where their audiences are. There’s a lot of work going on by people like us to educate buyers that they need to get comfortable buying on them. I think in 2015, there will be significant changes in the way advertisers think about premium publishing.”
But, like every new industry development, accountability and measurement are key as brand safety remains front of mind for advertisers. Marco Bertozzi, president audience on demand, EMEA and North American client services, VivaKi, says: "Brand safety is a big issue. You don’t want to go fishing in the long tail industry, buy blind inventory or buy on forums. You should also vet the inventory and report on where every ad ran. Some RTB networks will never tell you where their ads appear.”
The rise of programmatic video spend is also currently shaping the industry, with mobile video advertising the fastest-growing digital ad segment on the basis of high click-through and conversion in 2013. This is driven by changes in the way that people consume television content.
“People don’t want to wait for stuff, and watch it when they want to watch it,” says Bertozzi. “It won’t be an advertising pressure, but change in human nature. My son is four and if I say a show isn’t on he’ll ask if it’s on Netflix or iPad.”
Nick Reid, TubeMogul, managing director, UK, says: “The move to digital video is happening and happening now. It’s the consumer that’s driving this change. They don’t think of TV, desktop, mobile – they think ‘how can I interact with this media?’”
However, although mobile video has been around for longer than programmatic media trading itself, it is still seen as an industry in development. There have been a number of acquisitions and IPOs (such as Facebook’s recent acquisition of LiveRail) as the big players jostle to increase their capabilities and expertise.
From a content perspective, the limited screen size of mobile phones, video download times and the need for better creative tailored for the medium are also seen as significant issues to be overcome. There is also a sense that approaches are moving from being dominated by pre-roll, to it being complemented by a richer, more interactive experience.
Rohit Dhawan, director product management, EMEA at Google summarises the problem with pre-roll advertising: “One thing we’re focusing on with YouTube is giving the voice to the consumer. If you don’t want to watch the video, we have technology called Trueview which allows the consumer to skip the ad after five seconds. This often has a positive impact on brand lift (an impact measurement). However, if people are forced to watch the ad, then they may get annoyed which could negatively impact user perception of both YouTube and the brand.”
Steve Filler, chief executive of tech and distribution at Rockabox, says: “The next steps seem to be about agencies looking to deliver mobile, richer non standard formats programmatically. That’s about agency desks looking to expand their offering and publishers looking to provide more inventory.”
However, he sees the future as a complementary mix of both interruptive and interactive advertising. In fact, most of those interviewed cited a need for better creative approaches and digital video advertising to be considered a channel in its own right, rather than a repurposing of TV advertising.
The ability to track users across screens and devices remains a major hurdle in the programmatic media buying of rich media and video. Facebook has gone some way to addressing this problem for its advertisers with the launch of its cross-device reporting last month, but tracking people across devices across the wider web is difficult and is, ultimately holding back some spending in video programmatic.
So as the technology continues to evolve, the wider advertising industry must adapt just as quickly and brands must begin to react accordingly with the guidelines recently released by the World Federation of Advertisers (WFA) to help them better tackle programmatic ad trading issues.
The announcement also unveiled the first-ever WFA programmatic ‘taskforce’, with Coca-Cola, Mastercard and Philips among the inaugural members, indicating how programmatic can no longer be categorised as a niche technology.
Rather, it is a major trend that every tier of the industry must grapple with and with the consumer shift towards mobile media consumption, the pace of change is unlikely to slow down.
This feature was first published in The Drum's 17 September issue.