A deep dive into the wonder world of programmatic advertising

The programmatic advertising spending market is poised to grow by $314.27 bn during 2022-2026, accelerating at a CAGR of 26.66% during the forecast period, according to a study by ResearchAndMarkets.com. In the days ahead, programmatic advertising will see increased adoption with AdTech companies and agencies coming up with novel ways and means to make entire processes hassle-free and more efficient.

The market, according to the report, is driven by high penetration of digital advertising, growing adoption in South America and APAC, and improved targeting of the audience.

Some of the key players in the programmatic advertising space, according to the report, are: Adobe Inc., Adform AS, Alphabet Inc., Amazon.com Inc., Digilant Inc., Infectious Media Holdings Ltd., IPONWEB Ltd., Magnite Inc., Microsoft Corp., NextRoll Inc., Noboru Consultancy Services, Oracle Corp., Roku Inc., Simplifi Holdings Inc., etc.

The biggest advantage of programmatic advertising, according to Streemfire CEO Niklas Trenkler, is in its transactional nature. This means that the buyer will receive traceability on their advertising for better understanding the results of their ad campaign.

Nikhil Kumar, Vice President, India & SEA, mediasmart, an Affle company, feels that India still has a long way to go in programmatic advertising.

“In 2022, over 90% of all digital display ad dollars in USA were transacted programmatically (e-marketer forecast for 2022). Compare this to India where approximately 40% of the digital advertising spends are transacted programmatically. While the global adoption trends look very encouraging, and shows us how the future will be, India still has a long way to go. Having said that, brands are increasingly seeing the benefits that programmatic advertising offers to them in terms of efficiency and effectiveness over direct buying and hence we are seeing a greater adoption for the same.”

In terms of trends and innovations, says Nikhil Kumar, there are some exciting developments like the rise of CTV advertising, programmatic DOOH, programmatic audio, and the sustained growth of video and gaming which will be interesting to observe in the short term.

Gaurav Singh, Chief Growth Officer at Hashtag Orange, points out the numerous technological advancements in recent years, including post-pandemic changes in consumer behaviour. There is, he adds, little doubt that it has influenced methods of advertising and marketing used to gain new clients. According to him, brands can reach their ideal customers at the right time of day or on the right holiday using programmatic advertising.

“In the future, we hope to project timely advertisements using a more programmatic method, allowing for pinpoint targeting that is always appropriate. New methods of data gathering and targeting are gaining traction as a result of the impending cessation of third-party data collection. Notable examples are the use of digital outdoor ads, audio commercials, and ads on IoT-enabled smart devices in these experiments. Contextual targeting, in which brands offer advertisements based on site content rather than user data, is one trend that is replacing third-party cookies,” says Nikhil Kumar.

Targeting and attribution data collection are rendered unnecessary, he adds. “The likes of Google SandBox and Apple SkadNetwork are just two of the many ideas we have in the works. We anticipate the emergence of similar choices that will enable advertisers to achieve their advertising goals through the use of consent-based data-gathering technologies and other cutting-edge approaches,” he adds.

The Advantages

Why should brands and platforms go for programmatic advertising? What are the advantages of programmatic advertising as against the traditional mode?

Nikhil Kumar says that programmatic advertising has many advantages over direct buying, like the efficiency and effectiveness it brings to the table. Through programmatic advertising, brands can reach and communicate with their target audiences in a personalized manner wherever they are, in the most efficient way, with minimum spillage through a single platform, thus providing a unified view of the entire customer journey from discovery to purchase and to LTV. Data-driven advertising through programmatic has proven to drive marketing ROI for brands in an efficient manner.

Programmatic ads fundamentally automate the bidding processes, letting publishers to sell and the advertiser to buy ads at scale. While seeking to do away with human interference, programmatic advertising enhances efficiency and transparency for the publishers as well as advertisers. Brands and publishers are increasingly realizing the potential of programmatic advertising which is aimed at driving transparency, innovation, and efficiency, for the development of digital advertising. 

All these make it compelling for brands to invest in programmatic advertising. Yes, programmatic advertising connects brands with the right audience.

Programmatic advertising has recently received a lot of attention, points out Gaurav Singh. The benefits of programmatic advertising, he adds, in comparison to more conventional methods of purchasing media have undoubtedly been discussed at length.

According to him, every step of programmatic advertising is handled mechanically. “It not only aids advertisers in saving them but also lessens the time and energy marketers spend on mundane jobs, freeing up more capital for use in more imaginative endeavors. However, the physical labour involved in producing conventional media is not only more expensive but also slower and more prone to error. You can get your message out to a wide audience through conventional advertising methods. However, you can't be sure that they care about your company, and your ability to gauge campaign performance is limited. Instead, companies may reach specific demographics and interests with programmatic advertising across several digital platforms. When everything is handled automatically and consolidated onto one platform, you have better oversight and more opportunities to optimize your methods for maximizing revenue,” he explains.

Targeted, programmatic advertising allows small, medium-sized companies to run campaigns that would have not been viable with traditional advertising, says Niklas Trenkler. “Especially, the TV will open up an entirely new game in campaigns through programmatic advertising. While the big screen has always been the device for the most premium ad campaigns, ad-supported streaming television will deliver premium advertising with the superiority of programmatic advertising. Looking at the most difficult challenges in programmatic advertising, brand and consumer safety are the ones to put most attention to. It is upon the industry as a whole to solve the known issues – which, if solved, will turn in higher trust by both, advertisers, and viewers,” he says.

In the hyper-connected world, says Nikhil Kumar, brands can leverage programmatic to form deeper connections with their TG and communicate with them with the right personalized message at the right time.

“A programmatic platform today would have multiple data sources at its disposal including 1P & 3P data. By combining relevant online and offline signals about users, a programmatic platform can enable brands to target the right audience in the sharpest way possible, thus allowing advertising to be relevant and engaging for users basis their needs,” he says.

Why should a brand invest in programmatic adverting?

According to Gaurav Singh, programmatic advertising enables advertisers to reach customers more specifically throughout the entire sales funnel, resulting in more valuable conversions.

He says that it allows brands to select their target audience based on users’ preferences and online behavior. This results in personalized and filtered ads.

“We believe it is the best reason for any brand to invest in programmatic advertising. It really works wonders when it comes to connecting the right customer with the right content, product, or service. Today, when people are constantly bombarded with endless information, especially with short videos, it has become essential for brands to offer value to the customer,” he says. 

Key growth drivers

Digitization, huge smartphone penetration, etc. have been key drivers for the increased adoption of programmatic advertising.

As regards the key growth drivers, Nikhil Kumar says that With increasing internet and smartphone penetration, India’s digital consumption including video, audio, news, and gaming is only set to grow even faster.

Along with smartphones, India’s CTV consumption is also growing very rapidly owing to the availability of affordable smart TVs, devices, OTT content, and more and more homes getting wired broadband (over 9 Mn+ homes got connected in the COVID-19 era as per TRAI data). All of this put together resulted in the explosive growth of content consumption on smart devices - be it mobiles or TVs, and most of the content is ad-supported and programmatically enabled. Hence, there is a direct correlation between the growth of digital content and programmatic advertising,” Kumar adds.

Programmatic advertising, says Gaurav Singh, has emerged as a dynamic marketing channel for advertisers. The key reason, according to him, is that it enables companies to tailor their advertisements to each individual customer.

“We believe that two of the most important drivers of its growth are the increasing digitalization of industries and the expansion of the smartphone market. The improved pricing and quality transparency between advertisers and publishers also make a considerable contribution. Following closely behind are programmatic advertising's lower costs, finer-grained controls, and more accurate reporting. Advertisers place a premium on user engagement with their ads for a number of reasons. Plus, real-time performance improvement for businesses is a thing of the past thanks to the advent of programmatic marketing. It has every angle covered, from gauging the campaign's success to utilizing big data to planning for future campaigns. There has been a significant change, however, from third-party data to first- and second-party data. Likely causes include political tensions and economic concerns impacting media strategy. Hence, instead of a hyper-growth or negative outlook, we look forward to fair growth for programmatic advertising in the years ahead,” says Singh.

Brand safety

Despite all the advantages, programmatic advertising has also raised several questions related to brand safety. And, of course, there are the other challenges as well. How can they be addressed?

According to Gaurav Singh, both marketers and publishers need to ensure their brands are safeguarded against possible risks when placing ads online. “The reputation, values, and ESG (environmental, social, and governance) stances of a band are more crucial than ever before in today's market. While there are certain challenges, companies may maintain their brand name by setting high standards. Additionally, businesses should only select offers that provide more tools to target customers, and brand safety, during the campaign's execution. Furthermore, we recommend only working with reliable advertising agencies that will maximize your investment and adhere to the rules of brand fit.”

Brand safety continues to remain a top priority for advertisers, and tech-enabled solutions need to be implemented in order to solve the issues, maintains Nikhil Kumar.

“Increasingly, brands understand the need to balance personalization vs privacy, and hence, many brands are attempting to build their own CDPs using a privacy-first approach by minimizing the data collection and leveraging data which is willingly shared by customers (zero party data),” he says.

ML and AI

The ResearchAndMarkets.com study identifies the high penetration of augmented reality (AR) technology in the advertising sector as a prime trigger for the growth of the programmatic advertising spending market during in the days ahead. The demand, going forward, will be spurred by the introduction of artificial intelligence (AI) in the programmatic advertising market and a spurt in the number of ad-exchange platforms.

How machine learning, AI, etc. will shape up the future areas such as contextual targeting, personalization, etc.?

Machine Learning and AI are at the heart of programmatic even today, maintains Nikhil Kumar.

“Aggregated learnings from billions of bid requests, ads served, clicks, interactions, and events help brands target the right user and answer questions like where to target the user, which ad format is preferred by the user, is the user already overexposed or under-exposed to ads at this point in time, what is the user likely to do post clicking/viewing the ad, how to target more such users with relevant attributes, how to optimize the campaign towards specific goals, which creative will get the most impact, etc. All these questions and challenges are being solved by programmatic platforms every day, using Machine Learning and AI. As the learning dataset grows, the accuracy and precision will grow further in the future allowing for better personalization and contextual targeting,” Nikhil Kumar explains. 

Customers' growing mistrust and tightening privacy concerns are hastening the end of hyper-personalized marketing, says Gaurav Singh. “Since the implementation of GDPR, customers have been looking much more closely at the data shared with third parties. As a result, AI is maturing into greater sophistication. AI and ML have a chance to take over and streamline the process of data collection and analysis for firms to use in their targeted advertising efforts,” he adds.

According to him, instead of following a customer's cookie trail throughout the web, businesses are starting to pay more attention to the circumstances that influence their behavior and the products they ultimately buy. “There is little reliance on users' private data; and yet publishers have begun using a plethora of data in ways that are not GDPR-compliant. This is now doable thanks to Artificial Intelligence. Brands can now precisely target their consumers in real-time thanks to data that contains not just keywords but also media channels, page types, and other information. In addition, they will be able to learn about the ideal places to put their ads to maximize their campaign's effectiveness and return on investment,” he says.

Personalisation

Personalisation often can trespass into unchartered personal territory. So, it is a tricky territory as brands need to draw that important line when it comes to personalisation.

Gaurav Singh feels that brands should implement best data practices in line with privacy regulations to safeguard customer privacy. 

Today, points out Singh, most businesses rely on data-driven insights to make their business decisions, including understanding the behavior of their consumers.

He points to the example of e-commerce marketplaces and shopping apps which leverage data to predict what customers want and offer suggestions before they even open the app.

“Studies have also shown that people appreciate it when brands know their preferences and provide personalized recommendations. It gives them the convenience of a curated experience. However, there is a fine line between personalization and privacy. As user profiles become more specific and personal, there is always a risk of security breaches and manipulation. While governments worldwide and customers have started to take these challenges seriously, it is time brands also realized this. Only because personalization is possible does not mean it will always be appreciated. Our opinion on this is to be transparent about customer data and keep it secure. By implementing best data practices in line with privacy regulations, businesses will be able to use behavioral data to offer personalized service to their customers while also earning their trust,” he adds.

Cookieless advertising

With the world moving towards regulations like GDPR (The General Data Protection Regulation) and enhanced user privacy, looks like we are heading towards a world of cookieless advertising.

According to Gaurav Singh, major shifts in data privacy are occurring, with cookies being phased out entirely by next year. Campaign management, he says, will become increasingly challenging and expensive as the usefulness of cookieless ads declines.

“When we talk about brands going "cookieless," we're referring to their efforts to strike a balance between protecting users' privacy and avoiding the kind of data tracking that has been called "cyberstalking." What we're talking about is a future where companies are more open about how they use customers' personal information. The majority of this bad news is being absorbed by Google, which is bad for marketers and companies. Nonetheless, we think it was essential in the big picture. The need for privacy protection has been on the rise for some time, and it's best if companies adapt to this. The time has come for us to enter a new era of digital marketing and accept this future as quickly as possible,” he concludes. 

India is a mobile-first market being driven by mobile internet consumption and the app economy will not be impacted too much by the phasing out of third-party cookies anyway, says Nikhil Kumar. Despite this, he adds, many brands are already taking steps towards a cookieless future by creating CDPs and building their own first party data considering the enhanced focus on user privacy. This will be an important area of focus for more brands moving forward.