“Goldilocks asleep” by in pastel is licensed under CC BY 2.0
The third wave of programmatic is beginning to feel like Goldilocks when she found the right bed: "It's just right." PHOTO: in pastel

Programmatic. So much promise. Such a dubious reputation.

Is it killing the industry it was supposed to revitalize? Or simply a great partial solution in need of further refinement?

Love it or hate it, programmatic isn’t going anywhere. In fact, the latest estimates from Zenith’s Programmatic Marketing Forecasts project a 31 percent rise in programmatic spending by advertisers in 2017.

A Time for Change

If that means more of the same, we should expect more unhappy ad tech news. Let’s be honest. The programmatic marketplace of 2017 looks a lot different from programmatic at its start a decade ago.

In hindsight, it seems obvious that the fundamental economic model of programmatic real-time bidding (RTB) exchanges is largely a race to the bottom.

RTB produced of cash flow for ad tech firms but generated little real value for advertisers or publishers, turning consumers off and delivering many wasted impressions. In short, programmatic buying and selling, to the degree it is based on legacy direct response technology funneling spend in open markets, is not working — least of all, for brand advertisers.

The 3rd Wave of Programmatic

I believe we are moving into the third wave of programmatic, which is less about buying on price and reach in RTB and more about buying value within private marketplaces and direct publisher deals.

This type of environment puts the publisher and advertiser on a value based footing, helping to align priorities and to enable a true, mutually advantageous partnership between the publisher and the brand. Publishers can realize real value from maximizing their audience data and advertisers gain an improved ability to meet their brand goals.

The third wave of programmatic offers insights and efficiencies that RTB promised but abandons the pell mell rush to splash inventory anywhere it can be attained cheaply. The third wave brings back the science of understanding the target, reaching them in ways that they find engaging, thereby driving value.

Looking Back at Programmatic

If this is the third wave, what were the first two and what went wrong? The first wave primarily centered on direct response campaigns. It was effective in establishing the programmatic marketplace and introducing a new lexicon to the advertising industry with artificial intelligence and machine learning.

But the reality is that the business model surrounding direct response could only thrive at the bottom of the sales funnel and did little to help buying at scale at the top of the funnel. In the second wave of programmatic marketers tried to tease brand results out of new in-banner video ad units.

However enticing this promise was, my contention is that it failed to focus on and deliver real, measurable lift on upper funnel brand metrics. The ad units were too small and often not even visible.

The third wave of programmatic is beginning to feel like Goldilocks when she found the right bed. We may have found something “just right” — an optimal blend of value for both publisher and brand.

Rise of Private Marketplaces

For video in particular, I’ve seen a progressive shift toward private marketplaces -- where both the publisher and the advertiser enjoy more control.

As the head of media and consumer engagement for a major consumer packaged goods brand said publicly, “With video, we’re seeing it move quickly toward more private marketplaces and guaranteed buys. Brands like Kraft Foods want to have more control over some of these relationships than what you’d find on a video exchange.”

On some level, we should not be surprised that the automation of RTB should find its natural place as the online equivalent of spam.

Neither should we be surprised that video advertising has quickly begun shedding the shackles of mindless RTB and moving toward a smarter use of programmatic technology.

Brands are discovering how to reimagine video advertising for highly targeted online engagements that are made possible by the far more attractive economics of curated publisher content with video and display advertising sold via private marketplaces.

Compelling Brand Advertising

The third wave of programmatic marries compelling brand advertising — the kind of video the most creative minds at agencies have created for decades — with the efficiency of programmatic.

In a world now entirely untethered from place and time, these creative brand advertisers are exploring increasingly sophisticated ways to engage via video, including innovative formats like VR, augmented reality, 360-degree video and new platforms like Connected Television.

The third wave of programmatic helps to solve the online advertising dilemma of brands by reintegrating human creativity with the targeting efficiencies of the online world — but in private markets rich with first-party data and consumers happily engaged with brands that excite them.