Luxury brands embrace digital, but still wary of programmatic

Digital is set to be the biggest advertising platform for luxury brands next year

The enormity of the internet poses luxury brands - many of whom rely on limiting their brands to controlled environments as the bedrock of their aspirational status – with a marketing quandary. While no other media is as ubiquitous, and commonly used by their target market, then again none is harder to control. The Drum explores how brands in this sector are wrestling with the issue.

Luxury brands in a digital environment

Luxury jeweller Cartier recently won a High Court case battle where it successfully argued that internet service providers should block websites selling counterfeit versions of its goods.

The case highlights some of the difficulties luxury brands and their marketing teams face when composing an effective digital strategy, especially that given the enormity of the internet, it is almost impossible to police. Yet passing up on its massive potential as a means of communicating with their target audience would be folly.

Natalie Mortimer, a reporter at The Drum who covers the luxury marketing sector, gives further insight into some of the thinking within the marketing departments at luxury brands, explaining that such brands were some of the slowest to adopt digital and social media, with this reluctance driven by a desire to retain control.

Yet, attitudes are beginning to change, according to industry sources consulted by The Drum, even if brands such as Burberry and Hublot remain reticent on just how they are beginning to embrace marketing automation.

A report launched earlier this year by ZenithOptimedia found that luxury goods manufacturers, despite lagging behind the wider advertising market, are starting to take a leaf out of their peers’ book and invest increasing amounts of their ad dollars in digital at the expense of offline channels.

Digital set to become the dominant luxury advertising medium

In fact, the Publicis Groupe media agency forecast that digital will be the largest luxury advertising medium in 2017, overtaking print and TV, accounting for 32.1 per cent of total spend by such brands.

“We expect digital media ad spend by luxury advertisers to increase by $837m between 2015 and 2017. Over this period, television, radio and cinema will increase by a total of $26m between them; outdoor will shrink by $10m; and print will shrink by $150m,” reads the report.

It goes on to forecast that by next year, print will account for 28.6 per cent of total luxury ad spend (compared to 31.9 per cent in 2015), while TV’s share of this market will also decline over the same period, from 32.7 last year, to 30.7 per cent in 2017. By comparison digital’s market‐share will increase from 26.3 per cent in 2015 to 32.1 per cent in 2017.

ZenithOptimedia echoes Mortimer’s point, emphasising luxury brands’ desire to ‘control’ the environment they’re exposed to audience, with the agency noting that glossy print titles – especially glossy magazines – provide “high‐quality, immersive yet relaxed reading experiences, a particularly suitable environment for luxury advertisers wishing to showcase their brand values”.

If digital is the default, what is the view of programmatic?

Given the dual rise of luxury brands embracing digital as part of their wider comms strategies, as well as the rise of automated – or ‘programmatic’ – media buying (60 per cent of digital display ad spend was automated last year), just how trusting are they of such technologies?

Many advertisers that were early adopters of programmatic buying were left red-faced given the (near inevitable) gremlins in the works, with brands’ ads appearing in sometimes embarrassing situations, such as airline ads being served next to news reports of plane crashes. At times ads were also appearing – more detrimentally – on completely nefarious sites (such as those espousing violent extremism).

This is collectively referred to as ‘ad misplacement’, and was explicitly referred to by ISBA president Simon Litherland at the trade body’s annual conference earlier this year.

Media buyers tight-lipped on the role of programmatic within the luxury media mix

The Drum consulted several parties on the ‘buy-side’ of the equation (including Hublot and Michael Kors, plus ZenithOptimedia) for comment on their attitudes towards some of the potential risks of using programmatic media buying technologies, but all declined the opportunity to comment on record.

“The wariness around programmatic is understandable for luxury brands, given their innate need to protect their reputations, which in many cases have been cultivated over the space of centuries,” says The Drum’s Mortimer.

“How fast the adoption of an uncertain medium like programmatic will be remains to be seen, but as the advertising industry makes further digital dives in that direction, luxury brands will need to figure out how to replicate the brand experiences that form their heartland in today’s media landscape.”

Lisa Barnard, chief executive of Luxury Content Network (an ad network selling native ad units), explains her view that there is “a move away from programmatic” given that luxury brands want to have control both on the sites they appear on and how they appear.

"Obviously all marketers are wary of horror stories around programmatic and brand safety, but in our experience luxury marketers are concerned not only where their ad is served but what advertisers it appears alongside,” she says.

“I have recently seen examples ads being served from the likes of Matalan and KFC on major luxury magazine sites. It’s not about where you go, but the company you keep. If you are a luxury brand or media site and you accept programmatic advertising, it will kill your brand equity. A very short-term win for a long-term lose.”

Premium media owners move to build trust with programmatic

However, media owners (many of whom accept the necessity such technologies will play in facing down the disruption the internet poses to their traditional business models) are more upbeat in their assessment.

Jacqui Cave, group publishing director at Elle magazine (which works with ad tech outfit Exponential to deliver behaviourally targeted ads) reports that while a large proportion of its advertisers are buying online media directly, an increasing number are beginning to automate this process.

“I think it is like every sector – some are very developed in terms of their digital strategy like Burberry, and then you have some advertisers that don’t even advertise on a website let alone do social or programmatic,” she adds.

New trading models winning over advertisers

Similarly, Emma Winchurch-Beale, Bloomberg’s client sales director for EMEA, also cites luxury fashion brand Burberry as an enthusiastic participant when trialling such new technologies. Additionally, she reports that improvements in viewability, plus advancements in billing models (such as a cost-per second model) are improving brands' willingness to invest in such tech.

“What you are seeing with the evolution of video, with the changes in measurement of ad space such as moving metrics to viewability, that brands are able to do more branded campaigns than they were previously and actually get a measure of that; it's not just always about picturing,” she adds.

Meanwhile, speaking recently with The Drum, Elli Papadaki, the FT's global head of programmatic, described how brands are now looking to have more direct conversations about what programmatic means and how they should be using it. Publishers across the board are seeing an increase in PMP activity, a testament to the increasing need for brands to know they're featuring against the right audiences and critically against the right environment.

According to Papadaki, the FT's aim is: "To show brands that programmatic can and should be used intelligently as a tool that helps them understand their audiences and activate them in real time through premium publishers. There's a lot of efficiencies to be derived from the use of technology and data".

Luxury brands mulling an in-house model?

“Brands are becoming increasingly aware of the importance of collecting, organising and activating their data via automation,” she adds, adding that many luxury brands are beginning to explore taking such capabilities in-house, but that staffing is still proving a barrier to a more rapid rollout of such a strategy in many cases.

“At this point in time, a lot of them are looking for people that have either worked on the tech side, or they have worked on a publisher side, and understand programmatic. It’s probably still too early to tell if some of them will move to using a DSP themselves [demand-side platform that enables them to bid on media placements, and audiences across a number of different sites],” she says.

“Although, I have had clients ask me for advice, so certainly while many are still quite green, there’s certainly an appetite to understand a bit more.”

Further assurances needed

Speaking as to whether or not the rise of more closed trading environments such as PMPs (as opposed to open ad exchanges that are more exposed to nefarious players) could offer more control, Nigel Gwilliam, a digital consultant at the IPA, says they do have the potential to offer more control and better quality inventory (albeit they are nascent in the UK, compared to the US).

Discussing high end media owners’ increasing experimentation with programmatic, Gwilliam also warns of the importance of providing advertisers with guarantees over traffic quality, particularly when it comes to employing methods such as audience extension (ie where they sell its readers on third-party websites).

“Many premium publishers package off-site inventory into their deals. There is nothing wrong with this in principle, however publishers need to: A) be clear to buyers this is taking place; and B) ensure brand safety measures are in place,” he says.

Premium publishers should sign up to the Digital Trading Standards Group’s Good Practice Principles and have their brand safety policies and processes independently verified, if they are to continue to win over the trust of luxury advertisers, but “to date, none have ,” he exclaims.

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