Programmatic: The Struggle

"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Tom Triscari, co-founder and managing partner at Labmatik.

“For sale: baby shoes, never worn.”

This little vignette comes from the writing genre known as flash fiction, often attributed to Ernest Hemingway after he was challenged in a bet to write the shortest story ever. He nailed it, tragic Greek story arc and all.

The history of programmatic can also be written as flash fiction. Here are several versions I came up with:

  • Programmatic ads: for sale, unknown impact.
  • Programmatic for hire: low working media, unaccounted spend.
  • Programmatic bids: cached twice, undisclosed.

Not only are these examples the shortest op-ed pieces ever written about programmatic, but sadly they are also nonfiction and highlight the programmatic struggle most marketers face today.

The struggle is knowing that programmatic has always been – and still is – a very broken market, yet marketers keep grinding it out believing that substantial change from the entrenched “echosystem” is just around the corner. The struggle is also knowing that the ecosystem cannot afford the changes advertisers need most, yet the money keeps flowing.

Rishad’s challenge

Rishad Tobaccowala put the struggle best in a 2016 college textbook published called “The New Advertising”:

“Let’s start with the first major change. The reality is this: People don’t want to see your brand’s self-aggrandizing message. It’s not about the message anymore. If you think advertising is telling a story about a product without any substance, you’re in trouble. We need to stop ‘advertising’ in a traditional sense, pushing out our prepackaged message to overwhelmed target audience segments, and start offering utilities, services and experiences. We need to think in terms of acts, not ads … And the overarching concept we all have to embrace. Change.”

Now, juxtapose Rishad’s wisdom with programmatic use over the last 10 years. Has it been about pumping money into cheap ads and not knowing much about what comes out the other side? Or, has it been about creatively using programmatic as a productivity tool to generate measurable gains for consumers and incremental value for brands?

Which option sounds like a better way to build a successful business and a better place to build a career?

Looking at the statistical relationship between programmatic and ad blocking growth over the last decade tells the story. The simple regression below shows how programmatic is not necessarily the direct cause of ad blocking, but has no doubt played a supporting role in sending “prepackaged messages to overwhelmed target audience segments.”

Isn’t this outcome the very opposite of what advertising sets out to achieve? If so, then why do marketers continue to double down on programmatic?

Regression Analysis
R2 =97%, t-stat = 16, p-value = 0
Sources: Magna, eMarketer, PageFair

Escalation of commitment, let me count the ways

Escalation of commitment is a normal human behavior in which a group faces a pattern of unsatisfactory outcomes from a past decision or investment but nevertheless continues on rather than altering course.

Doesn’t this clinical definition sound strikingly similar to the observed behavior pattern over the course of programmatic history? For example, programmatic spend went from practically zero in 2008 to an estimated $70 billion in 2018. If you draw a straight line between $0 and $70 billion over the last 10 years, the total comes to $350 billion. That’s a lot of escalated commitment after having been presented with a mountain of unsatisfactory outcomes. Let me count the ways.

I peg the escalating starting point to 2008 when Yahoo acquired Right Media for $680 million, sparking a hype cycle even though “[Right Media] was the most duct-taped system you’ve ever seen” (Disclosure: I used to manage a large Right Media-Yahoo team in Europe and saw the tape firsthand).

Flash forward to December 2014, when Gartner’s Martin Kihn warned marketers:

“There is no reasonable doubt that programmatic advertising, real-time bidding, ad tech in general – that it’s rife from top to bottom with practices very few digital marketers understand or would care to throw their money at if they did. Ad tech is probably just as ‘rigged’ (to use Michael Lewis’ term) as Wall Street. In fact, there are good reasons to think it’s worse.”

It was only a few months later in March 2015 when Jon Mandel alleged widespread kickbacks, followed by a December 2015 IAB report [PDF] warning that fraud was costing advertisers $8.2 billion. All the while, global programmatic spend grew to $38 billion, 181 million ad blockers were installed along the way and fraud is still eating a big share of programmatic dollars today.

Six months later in June 2016 the ANA released the results of its transparency investigation. Centralized agency trading desks were pushed out of fashion, the in-house movement became the strategy du jour and programmatic budgets swelled even more.

As programmatic spend escalated toward $65 billion in 2017, The Guardian sued Rubicon for alleged fee stuffing, YouTube slipped up by showing ads on racist content and AdExchanger reported on nontransparent practices by demand-side platforms. On it went into 2018, with McKinsey’s truth about rebates, Index Exchange fessing up to bid caching-gate and the FBI wanting to learn more about all of it.

How many more signs do CMOs need before they make decisive and fundamental changes? Spending more clearly has not worked.

Breaking away from the struggle

If marketers’ objective is to use programmatic as a fast way to exhaust ad budget, then the current state of programmatic will certainly get the job done. If not, alternatives do exist for the truly open-minded marketers who want to turn programmatic into a tool that creates positives outcomes. Here’s a few action items to consider:

  1. Stop escalating commitment to a broken system.
  2. Listen to Martin Kihn when he says “Ad Tech Needs A Shared ID Solution ASAP” and get it done before spending another penny.
  3. Programmatic is more resource-heavy than anything that came before it, and the best people are not cheap. After cutting your inflated programmatic budget, you can easily afford the best people and self-fund rigorous talent development programs.
  4. Completely break down your disadvantageous programmatic apparatus and build it back up far away from business as usual. When you show stakeholders how you delivered valuable acts and utility to consumers – instead of buying more cheap ads that consumers will continue to reject – they will lean in, ask for the blueprint and want more.

Evolve.

Follow Tom Triscari (@triscari) and AdExchanger (@adexchanger) on Twitter.

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