Arcalea - What are Programmatic Ads?

You may have heard of programmatic ads, either through talking to sales reps or simply browsing an advertising blog. You might even have heard that it will become an $18.2 billion market by 2018, accounting for 33% of all digital ad sales.

And yet, you may still be wondering…

What are Programmatic Ads?

The short answer: automated ad buying.

The long answer: programmatic ads are automated decisions related to buying digital ads. This usually involves Artificial Intelligence (AI), Machine Learning, and Real-Time Bidding (RTB) to buy ads, instead of using request for proposals (RFPs), human salespeople, and manual insertion orders.

With programmatic ads, you have tireless robots that are programmed to create the best ad by placing the best bids. But of course, this isn’t without its challenges.

A Growing Market

Programmatic ads are no recent fad, but a trend that’s been happening over the past couple of years. In 2013, the top programmatic ad buyers were Criteo, Rocket Fuel, the Rubicon Project and AOL, having spent a combined total of $1.5 billion in global ad revenue. Companies have been taking advantage of the efficiency and convenience that Programmatic Ads can offer.

This year alone, programmatic digital display ad spending will reach $22.10 billion in the US, according to another estimate by eMarketer.

Many marketers believe that mobile and video ads are large drivers of this growth. US mobile programmatic ad spending reached $9.33 billion in 2015. This year, it’s expected to reach $15.45 billion. Compared to eMarketer’s earlier estimate, this means that 69% of all programmatic display ad spend is from mobile programmatic ads. Mobile will overtake programmatic desktop spending for the first time.

With a Few Challenges

Of course, some innovations come with certain obstacles, but there are two big challenges: ad blocking and ad fraud.

Ad Blocking

According to Marketing Land, 200 million users installed some form of adblock software on their computer, allowing them to hide display ads on websites. Ad blocking has resulted in a loss of $21.8 billion in ad revenue.

Global Monthly Active Ad Blocking Software Users (Desktop)

Source

Many people block ads due to the surplus on webpages, and from poor ad experiences in the past. But since ad block means the ad is not served, impressions are not recorded, which means revenue is not collected.

“Just suck up the fact that you’re going to lose 10 to 15% of your ad revenue because people just don’t want to see it,” says Ben Chamlet, head of trading and programmatic at Yahoo7, “I don’t think that’s a particularly proactive approach, but for some publishers, that seems to be the way they’re going.”

Ad Fraud

For each platform, there’s going to be certain groups that try to game the system. On the Internet, not all traffic is from people. Some companies try to set up bots to generate fake impressions, jacking up the prices of certain ads. The Interactive Advertising Bureau estimates that $8.2 billion in ad revenue is wasted through blocked ads every year.

“About 30% of those sites will have sections where the ad fraud is well above 5%,” says Lachlan Brahe, Comscore ANZ vice president, “and they’re the parts that we need to root out and improve the experience – and the value, obviously – from an advertising perspective.”

As the Internet becomes a bigger arena, and as more companies attempt to advertise online, programmatic ads will become even more important. Programmatic Ads will be the solution to organizing the noise, to maximizing your options and getting the best possible ad spot. Make sure to keep an eye on this trend, because it’s only going to get bigger.