Commissioned News Story (Source: Keyword Digital)

Programmatic advertising is still in its early days, but many industry insiders already agree that it’s going to be huge. It’s just getting off to a slightly slow start because many people are still struggling to understand just what it entails. This is mostly because so many descriptions and definitions have been flying around the Internet in recent months.

So what is programmatic advertising exactly, and why are people so confused by it? Ultimately, it just means automated ad buying. This encompasses various ad technologies, including – but not limited to – real-time bidding.

Steve Danson, Montreal advertising entrepreneur and President at Keyword Digital, expects programmatic advertising to take the future of online advertising to the next level. Since 1999, Danson has worked directly in the areas of pay-per-click, search targeted, display, and mobile advertising. He has started many successful businesses and pioneered full segments of the industry, in both PPC search and shopper targeted online advertising.

“Programmatic advertising has become a major segment of the industry,” Danson says. “As with many technological advancements, ad exchanges remove the buyer’s need to interact with the person directly. An ad exchange provides these elements by allowing publishers on the supply side and advertisers on the demand side to opt in and connect directly through supply and demand side platforms. This significantly reduces the human factor.”

As he continues, “Programmatic advertising brings this to a new level by utilizing the basic advantages of an ad exchange while providing advanced features that incorporate elements such as retargeting. It allows advertisers and agencies to spend significantly less time coordinating their buys to reach their targeted user, while considering many factors at the same time through complex algorithms. ”

These complex algorithms, Danson explains, cross-reference mass amounts of data that allow buyers to target a very specific user at the price they are willing to pay, and automatically bid on that user’s ad impression in real time. This occurs across a vast number of publishers directly through a demand side platform.

“All direct buyers and agencies may be quickly adapting to programmatic advertising,” he adds. “However, we may also see a shift, whereby major buyers move from public to private exchanges. As an example, [British multinational advertising and public relations company] WPP, through their GroupM media buying division, has built their own exchange that allows publishers of their choice to opt in to their proprietary private exchange. This is because ad exchanges may limit their ability to decrease misplaced media. There has been a growing concern in the industry that some ads that they are charged for through exchanges may not have been seen by the end user. When the largest worldwide agency conglomerate facilitates a move like this, it says something about the possible direction buyers will gravitate to in the future.”

There have been a number of high profile programmatic advertising announcements made this year by the Internet giants, as well.

AOL launched its One platform, for instance. Meanwhile, Google started letting marketers conduct real-time bidding on the DoubleClick Ad Exchange right from the Google Cloud Platform. Twitter made a big deal with Omnicom to integrate its programmatic network, Accuen, with Twitter’s MoPub Exchange. Facebook made a similar deal with Publicis.

Clearly, a lot of people and companies expect big things from programmatic advertising, but it currently only accounts for an estimated 20% of the digital ad market in the U.S. As mentioned, the problem seems to lie in a general lack of understanding what it’s all about.

According to a survey from the Association of National Advertisers, as reported by AdAge, only 26% of marketers said they knew what programmatic buying was, and have actually used it, with the rest of the respondents either not knowing anything about it or not knowing enough about it to use it.

Similarly, the Wall Street Journal found that only 23% of CMOs understood programmatic buying enough to use it, while 12% were not aware of what it was.

“Although programmatic advertising is in the early phases of acceptance, we will continue to see a rapid acceleration of its adaptation by the industry”, predicts Steve Danson. Programmatic removes friction from the buying process and frees up more company resources, which allows humans to spend their valuable time doing something more constructive than worrying about campaign elements that can be handled just as well – or better – by machines.

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