Programmatic Buying: The Buzzword Du Jour

No other industry seems to love buzzwords quite like the marketing business.  Ad people who don’t entirely understand their meaning often obnoxiously toss buzzwords around at cocktail parties just to impress. Shrouded in mystery, the buzzword of the moment sparks artificial superiority in those who know (or pretend to know) what it means, and fear or avoidance in others. “Integration.” “Big data.” “Native advertising.” All buzzwords of the past.

Today’s buzzword du jour? “Programmatic buying.”

The topic has sparked mass confusion in our industry. What is programmatic buying? How does it work? How will it affect our business—or my career?

Simply put, programmatic buying refers to the use of software to purchase media, as opposed to the more traditional method of issuing RFPs, negotiating with reps and drafting insertion orders. It takes what has historically been an analog process riddled with human imperfection and emotion and automates it. Today there are four categories of programmatic buying, and they all function differently.

Real Time Bidding

This is really where it all began, and where it first sent a wave of fear through the media buying community. In its infancy, real time bidding (RTB) was associated with unsold inventory, also known as remnant (and potentially less-than-savory) inventory. The idea of their message running in a bad environment sent advertisers running for the hills, and unfortunately set much of the trepidation around programmatic buying into motion.

The good news is that RTB has evolved. It’s now defined as the real-time auctioning of online inventory between buyers and sellers. Most often facilitated by open ad exchanges or supply-side platforms, buyers can buy specific impressions, based on the user that will be exposed to it, in real time. The winning bid earns the impression and the ad is nearly instantly served. If that’s not mind-blowing enough, the whole process can take mere milliseconds from start to finish. With access to the proper setup, RTB allows buyers to quickly cherry-pick the inventory that is most valuable to their brands.

Programmatic Direct

This category is a bit fuzzier. There are two types of programmatic direct buying: guaranteed and non-guaranteed.

Programmatic guaranteed buying, also referred to as automatic guaranteed, is basically an automated means of securing inventory around specific parameters such as run date, targeting and geography. This method tends to take place outside the bidding model and involves more traditional (i.e. human) negotiation. It’s quite possible that many agencies are already in this space without even knowing it. Many online media reps are using a programmatic platform to implement orders.

Programmatic non-guaranteed is similar, but typically offers buyers remnant inventory. It’s a risky game, as ads can appear in ineffective places, such as “below the fold” on a web page. Depending on the media strategy, non-guaranteed buying may have an appropriate place in the plan.

Private Marketplace

As opposed to an open marketplace (where anyone can buy), a private marketplace allows publishers to control who can purchase their inventory. Think of it as the VIP table of RTB programmatic buying, often coming with a higher price tag. Favored advertisers, or those with strong relationships with the publisher, may be given access to the platform. Sometimes premium inventory is offered only through the publisher’s private marketplace.

Private exchanges often operate using the real time bidding model but eliminate much of the concerns over transparency and lower-quality inventory that the open exchanges can cause.

Unreserved Fixed Rate

Think of this as inventory that doesn’t require bidding, but isn’t reserved. This type of inventory carries fixed pricing and is typically sold through an ad exchange. It can be available for immediate purchase and since the cost (CPM, CPC, etc.) is fixed, the bidding process that exists in the RTB model is eliminated.

Many have speculated that programmatic buying will dramatically change the media industry. This prediction, mixed with the lack of understanding around the topic, has sparked fear in the hearts of professionals on both the buying and selling side. So should ad reps and media buyers be scared? Maybe.

The marketing world has seen sea changes such as this in the past. Remember when online advertising became a thing? Media professionals had to grasp a new concept and become experts in the technology that was suddenly at their fingertips. Those that embraced the challenge are still succeeding in the industry, while those that refused to change have been supplanted. The introduction of programmatic buying in our lives today is no different. Sales reps and media buyers alike will need to evolve their roles to fit the new world.

The silver lining here is that programmatic buying will increase efficiencies for both agencies and clients. With less time devoted to paperwork and back-and-forth communications, more time can be spent on strategy. The menial tasks around buying are increasingly becoming automated, but machines will never replace human insights and intelligence.  For those of us who put smart thinking first, this is a welcome innovation.