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Programmatic buying has become something of a buzzword for advertisers. Its underlying idea is that marketers can enhance their efficiency and effectiveness by relying on technologies that automate key advertising tasks, including purchases, placements, and optimization. Rather than human counterparts negotiating terms, advertisers can set their systems to snap up the ad space they want—not unlike the way consumers might watch eBay, waiting for the exact combination of product and price that they desire.

The concept is still relatively new and growing—it accounts for about 20 percent of digital media buys, and far lower percentages in other advertising channels—but the related terminology seems to be everywhere. That might be because many advertisers remain a little confused about exactly what programmatic buying entails and just how they can best use it. A recent survey suggested that only 26 percent of media professionals understood and had used programmatic buying. And in many cases, advertisers assume, incorrectly, that programmatic buying simply means automated auctions, such that they put in a bid for an ad placement on a particular site or home page. This version represents one form of programmatic buying, but it is not the whole of the notion.

In addition to a lack of understanding, another hurdle to its acceptance is the threat of fraud. Devious actors can set up a fake website, turn on a program to make it look like the site attracts thousands of visitors, and thereby convince automated systems to place, and pay for, advertisements on those false sites. But as the use of programmatic buying expands, more reputable sites and publishers are offering better guarantees against such fraud. In direct programmatic buying deals for example, a publisher such as Conde Nast promises an advertising partner that its advertisements will appear a specified number of times on the homepages of its top websites, for a fixed price.

Programmatic buying also is invading the television market; Hulu uses private, automated auctions to place advertising in its content, and several cable providers are experimenting with automated ad targeting through their on-demand services. As these examples show, programmatic buying depends on some form of digital content, which can be tracked and adjusted on a real-time basis.

Such digital content and channels continue to spread, which suggests that so will programmatic buying. As one practitioner promises, “What you’re seeing is a fundamental shift in not just how media is bought, but how advertisers can engage with consumers more effectively.” Global advertising firms are predicting that half their ad buys will rely on programmatic technologies within a few years, and American Express even produced a sort of theoretical white paper, imaging whether it could transform its buying into a completely programmatic exercise. This shift, both real and anticipated, represents a serious requirement for advertising professionals: Get to know programmatic buying well and soon. It’s coming, whether you understand it or not.

Source: Tim Peterson and Alex Kantrowitz, “The CMO’s Guide to Programmatic Buying,” Advertising Age, May 19, 2014, https://adage.com

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