Programmatic buying: What do the experts say?
Programmatic buying of digital media is a system for placing digital advertising that is gaining ground in the U.S. and is just becoming known in Latin America.
What do the experts have to say about it? What are the pros and cons of fully computerized media buying? Will it be used in Latin America?
These are some of the questions we posed to Alejandro Campos Carlés, co-director and founder of StartMeApp; Marcelo Montefiore, CEO of Global Mind; Lucio Grimaldi, VP for Latin America at Publicitas; and Juan Pablo Suárez, Business Development Senior Manager, U.S. Media Consulting.
What is programmatic media buying?
Programmatic buying of digital media is a computerized system for buying advertising impressions automatically using data supplied by the advertiser. Programmatic buying is based on algorithms that seek out available global inventories that match what the advertiser is looking for.
The purchase is made via Real Time Bidding (RTB), a concept rarely used in Latin America. RTB is a "digital auction" whereby the computerized platform cranks out bids for desired impressions (based on data provided by the advertiser) in available inventory that matches the advertiser’s requirements. The process is performed constantly in a matter of milliseconds, and the platform then determines which advertiser gets what impressions.
Is this form of digital media buying gaining ground in Latin America?
The automated purchasing of advertising in the region is still in its infancy and agencies, advertisers, and the media are all in the process of understanding this new system.
In fact, programmatic buying has yet to be established in all U.S. markets, although it is quickly moving forward. A study conducted by GLOBAL MAGNA predicts that by 2017 almost half of all digital media buys in the U.S. will be done via programmatic buying.
"Programmatic buying is still slow, as advertisers and agencies are not sharing much information," said Diego Fernández, Director of Media and Digital, North America, for Burger King Corporation, during Portada’s LatAm Summit this year in Miami. "But I think in the next few years it will be very important and good to see more of the same," he added.
"Very few agencies have come forward to ask us about programmatic buying. We have not yet seen any significant inclination towards programmatic buying when it comes to reaching audiences in Latin America and the U.S. Hispanic market," Christopher Stanley, CEO and Founder of Alcance Media, told Portada.
For Lucio Grimaldi, VP Latin America at Publicitas, the development of programmatic buying in Latin America is currently at an early stage but with a clear eye on the future. "I think we are at an early stage, but there will be a very important development in the near future. Programmatic buying in Latin America will no doubt grow significantly in the next few years. Many clients and agencies in Europe and the U.S. began work in this area years ago and it is inevitable that the same phenomenon will occur in Latin America."
Juan Pablo Suárez, Business Development Senior Manager at U.S. Media Consulting, pointed out that "Latin America is going through one of its best periods as an emerging region, where companies of all levels and industries are making investments and the digital world is no exception. We increasingly see new players entering the region and that is helping the concept of programmatic buying to rapidly grow and be adopted, especially in markets where the benefit is immediately apparent, such as in e-commerce. While spending levels [in LatAm] are similar to those seen in the U.S. or Europe about four years ago, the trend is pointing toward double-digit growth for a few years. However, there is still a long ways to go for Latin America to keep up with other regions of the world."
The pros and cons of programmatic buying
While the majority of the executives interviewed by Portada agreed that programmatic buying is a good thing and needs to be implemented to achieve better ROI results, others also expressed some doubts about these new technologies, mainly about the way they measure results.
At this year's Portada LatAm Summit, Axel Steinman of Microsoft said that new technologies do not solve the larger, more structural problem in the industry—a lack of consensus on how to use data and metrics smartly. "It would be wonderful if we could sit down as an industry and agree on something," said Steinman during the LatAm Summit. "Many of us acquire bad impressions by doing the wrong thing and that's a big problem," he added. "Microsoft, which invests 50 percent of its advertising resources in digital media, is still going through a learning process."
Marcelo Montefiore, CEO of Global Mind, also said in an interview with Portada that "measuring everything is essential," and thinks that programmatic buying provides just that. "Metrics is what allows us to make adjustments and makes change possible."
Experts critical of programmatic buying claim it is a complex operation that can hinder growth if the human hand is completely taken out of the process.
But for Juan Pablo Suárez of U.S. Media Consulting, human intervention will never disappear, because "defining parameters is essential for programmatic buying to work and today that is only possible with human intervention." But at the same time, "it is possible today to have an electronic market for digital advertising where a significant percentage of available inventories are interconnected with all relevant suppliers globally. Optimization cycles go beyond what is humanly possible, both in recurrence as well as the number of variables that are taken into account when assessing what value to offer in a bid," he added.
Grimaldi of Publicitas agrees that programmatic buying is a good thing for the industry and suggests that programmatic buying will not replace traditional media buying. "I don’t think that programmatic buying will replace traditional media buying, as each has different functions and goals, in my opinion. Traditional [media] buying always requires a human factor, while programmatic buying is primarily based on remaining inventories," said Grimaldi.
Alejandro Campos Carlés, co-director and founder of StartMeApp, also believes that programmatic buying is a positive for the industry: "If you look at it from the perspective of the advertiser, it allows you to know the value and quality of the impression before buying it, which lets you achieve much greater [target] relevance. The impression is important because you are reaching the audience in real time. Both advertiser and audience are connecting in real time and that makes all the difference. And it does away with [the need for] targeting, behavior studies, etc."
"Publishers can also achieve greater efficiencies, as the medium is always effectively monetized. For mobile advertising, it was understood this was something that had to be implemented from the get-go," added Campos Carlés.
Marcelo Montefiore, CEO of Global Mind, believes that "in a few years, executing online campaigns will be much more about pushing buttons than about negotiating with a person and doing [media] planning by hand."
"Agencies will soon be doing their buying with just a push of a button" - Marcelo Montefiore, CEO, Global Mind.
Lucio Grimaldi, Publicitas, expects that about 20% of all digital media buying will be done through programmatic buying in the near future.
"There are many players who are not going to join this type of buying now, but will be forced to do so," claimed Campos Carlés, of StartMeApp. "Google, Millennial Media (USA), and Exchanges-Interactive (which bought Nokia), already use RTB. We joined the RTB bandwagon not because we wanted to be innovative, but because media can be bought more efficiently this way and we can achieve better results."
Juan Pablo Suárez, U.S. Media Consulting, added: "Programmatic buying enhances and accelerates the traditional process—it is a natural evolution. For the past 15 years, digital advertising went through cycles in which inventory and demand aggregators emerged in different layers (sites, AdNetworks, AdExchanges, and DSPs), each integrating the previous layer’s supply, limited only by the technology and processing power available."
Media buys vs. audience buys
Traditional media buying involves analyzing the digital media where we want to place our advertising. Among other things, the analysis includes thinking about media identity, its audience, number of unique visitors, etc. With the advent of programmatic buying, the very concept of buying will change for some experts. It will no longer mean buying "media," but rather buying "audiences."
But the conception of audience will also change in this sense. The audience will no longer be segmented by traditional categories such as sex, age, and socio-economic group, but will instead have as many categories as the advertiser desires. In other words, we can create audiences in highly defined categories, for example: those who have searched for price quotes on microwave ovens, those who have visited this site or that one, etc.