I’ve been doing the exchange game for a long time: I helped build the rightmedia network, which was sold to yahoo, built the Luna Network sold to Google, and even worked on the DoubleClick Exchange, EngageBDR and a bunch others. I’ve seen the technology come and go, seen exchanged turn to programmatic, seen site-specific buys come and go – and then come and go again.

It’s been a weird, long journey. So, I ask myself now, is Programmatic good for the industry? Is is it bad for advertisers? I want to examine this in a two part piece, start with the negative of the programmatic industry, the faults and what needs to be changed – and then Monday will be going into some of the benefits and forwarding thinking of programmatic.

It seems like these days, everything is automated. You can order your groceries online and have them delivered to your door without ever setting foot in a store. You can schedule your car to pick you up and drop you off without ever touching the steering wheel. So it should come as no surprise that programmatic advertising is huge. Programmatic media buying utilizing data insights and algorithms to serve ads to the right user at the right time, and at the right price. In other words, it takes the guesswork out of advertising. And if there’s one thing that CMOs love, it’s data-driven decision making.

Oh, programmatic. What could have been. We were all so excited about the potential of this new form of advertising. Finally, we would be able to deliver targeted ads to our audience at lightning speed, and we wouldn’t have to rely on those pesky humans to do it!

But, alas, it was not meant to be. As the industry has matured, the experts have noticed some serious failing of programmatic, and why it doesn’t work as well as the pundits predicted. Here are three big reasons why programmatic is failing us.

  1. Lack of Quality Inventory
    To understand why this is such a big problem, you first need to understand how programmatic ad buying works. Advertisers use software to place bids on ad inventory that they want to buy. This inventory is then bought and sold in real-time through programmatic exchanges. The problem is that the vast majority of these exchanges are filled with low-quality inventory, such as pop-ups, clickbait articles, and other non-premium placements. Only a few exchanges like Google have access to the best sites.

    In order for programmatic ad buying to work, advertisers need access to high-quality ad placements on popular websites. However, many website owners are still reluctant to give up control of their ad space to automated systems other than Google and a few large networks. As a result, the pool of available quality inventory is very small, and it’s only getting smaller as more and more advertisers move into the programmatic space.

    The biggest problem with programmatic ad buying is that it’s effectively a blind auction. Advertisers don’t know which websites their ads will end up on, and they have no control over the user experience surrounding their ads. As a result, there’s a growing disconnect between what advertisers want and what they’re actually getting.

    This lack of quality inventory is causing some advertisers to move away from programmatic ad buying altogether. These companies are instead opting for traditional methods of buying ad space, such as direct deals with publishers.. While these methods may be more expensive, they offer guarantee access to premium inventory that programmatic exchanges simply cannot match.
  2. Fraudulent Activity
    Fraudulent activity is a huge problem in the programmatic space. Since programmatic buying relies on complex algorithms to make real-time decisions, it’s easy for bad actors to take advantage of the system. For example, botnets can mimic human behavior and trick advertisers into thinking they’re getting valuable impressions when in reality they’re just wasting their money.
    Anti-fraud solutions do exist, but they’re not perfect. In most cases, they only catch a small percentage of fraudsters while also flagging many legitimate impressions as fraudulent. This creates a big problem for advertisers who are trying to reach their target audiences through programmatic channels.
  3. Viewability is Horrible on Programmatic. CMOs, are you aware of the viewability issue in programmatic advertising? If not, you should be. Briefly, viewability refers to the fact that ads are sometimes displayed on websites in a way that human consumers never see them. In the worst cases, the HTML code of the website renders the ads underneath the website’s actual content to generate impressions without a consumer ever seeing the ad. Google estimates that only 46% of online banner ads are actually viewable by consumers. That means that for every $100 you’re spending on programmatic ads, nearly $54 is going to wasted impressions.

    So what can be done about this issue? One potential solution is for ad buyers to only purchase inventory from publishers that guarantee a certain level of viewability. However, this approach has its own set of challenges. For one thing, it’s difficult to find publishers who are willing to make such a guarantee. For another, even if you do find a publisher who’s willing to make the guarantee, there’s no guarantee (no pun intended) that they’ll be able to deliver on it.

    Another potential solution is for ad buyers to work with Demand Side Platforms (DSPs) that have technology in place to measure viewability and only purchase inventory that meets a certain viewability threshold. This approach has its own set of challenges as well. For one thing, not all DSPs have this technology in place yet. For another, even if a DSP does have the technology in place, they may not be sharing data about viewability with their customers (for reasons we’ll get into later).
  4. Lack of Real Transparency. Another issue wreaking havoc in the programmatic ecosystem and having a counterproductive effect is transparency, or rather, a lack thereof, and according to a recent AOL study, it is an issue that brand executives place as the number-one challenge facing programmatic buying. In short, there is a big disconnect between what brand executives want from their programmatic buying experiences and what they are actually getting. And the main area where this disconnect manifests itself is in the issue of transparency. This lack of transparency is preventing brands from getting the full value out of their programmatic spend and is thus becoming a bigger and bigger problem.

    This is weird to me, because in 2006, when I was buying media on the RightMedia exchange, this was just as much as a problem. Networks, many of them still around today under the same or different names (many change names every 5 years to get away from bad reputation) are still around. Those same networks that cheated everyone in 2005,2006 are still pushing the same bad inventory into the ecosystem. No, really — I see some of the same exact people who were exposed as huge scammers placing their newest scams on the ecosystem daily.

    Transparency matters for a number of reasons. First, it allows brands to understand where their ad dollars are going. This is important because it allows brands to hold their programmatic partners accountable for results. Second, transparency helps brands avoid ad fraud. Ad fraud is a big problem in the programmatic ecosystem and it can have a very negative impact on campaigns. By being transparent about where their ads are being placed, brands can avoid sites that are known for ad fraud. Third, transparency helps brands improve the effectiveness of their campaigns. If brands know where their ads are being placed, they can make sure that they are being placed on sites that are relevant to their target audiences.

    The bottom line is this: transparency is important for the health of the programmatic ecosystem. Without it, brands will continue to be frustrated with their programmatic buying experiences and will eventually move away from this form of advertising altogether. This would be a shame because, when done correctly, programmatic buying can be an incredibly effective way to reach and engage with customers.
  5. All the Vanity Metrics are a Bit of a Joke. In the programmatic marketplace, it has become seemingly easy for publishers to game metrics such as click-through rates and view-through conversions. As a result, many in the industry have begun to take these “vanity metrics” with a grain of salt. In this blog post, we’ll take a closer look at some of the most commonly gamed vanity metrics and explain why they shouldn’t be given too much weight.

    Vanity Metric #1: Click-Through Rates
    Click-through rate (CTR) is a metric that measures how often people who see your ad end up clicking on it. A high CTR is generally seen as a good thing, as it means that your ad is relevant and enticing enough to get people to click. However, CTR can be easily inflated by publishers who use low-quality traffic sources or engage in other forms of click fraud. As a result, CTR should not be used as the sole indicator of an ad’s success.
    Vanity Metric #2: View-Through Conversions
    View-through conversion (VTC) is a metric that measures how often people who see your ad end up taking an desired action, such as making a purchase or signing up for a newsletter. VTC is often seen as a more reliable metric than CTR because it captures actual conversions rather than just clicks. However, VTC can also be inflated by publishers who use low-quality traffic sources or engage in other forms of fraud. As a result, VTC should not be used as the sole indicator of an ad’s success. This is highly useful, but often I wonder if it’s just another form of cookie stuffing.

    So what can be done? We believe that the industry must take a step back and reevaluate how it approaches programmatic. There are many ways to make the buying process more transparent and efficient for both buyers and sellers. This will require cooperation from all stakeholders, but we believe it is possible. What do you think? Is there anything you’d like to add? Let us know in the comments below!

What's your opinion?