Major Brands Embrace Programmatic How Will Agencies Adapt?

Jul 14, 2014 by Samuel Prokop in Channels

Over the past six months, I have been hearing a great deal of buzz in mainstream advertising circles about the switch from traditional media buying to programmatic. However, talk is cheap. It often takes years to bridge the gap between “the hot new thing” in advertising and its widespread adoption. A little research on my part revealed this is not the case with programmatic. It’s here to stay.

What is Programmatic?

According to AdAge, Proctor & Gamble plans to buy 70-75% of its U.S. digital media via programmatic channels this year. While this may seem like an isolated statistic, P&G is the world’s biggest media spender, and its ambitious goal represents a tipping point towards automation in how major brands buy media. The shift has many implications for our space, to be addressed in future posts, but the first question that comes to mind is how does this trend affect the agency role?

Question: I Hear Ad Buzzwords All the Time.
Can You Define Programmatic?

Jimmy Kimmel recently referred to “programmatic” as “the gluten of advertising”. One of my favorite definitions came from Joe Zawadzki, CEO of MediaMath, who defined programmatic as “The use of technology to automate processes and the use of math to improve results. It is the future of marketing, available now.” Programmatic has even spawned an event and Twitter hashtag devoted to explaining marketing terms called #WTFPROG. All kidding aside, the term is fairly broad and has come to mean the automated buying, placement, and optimization of advertising. For the purposes of this post, I am specifically addressing programmatic buying that is done through real-time bidding (RTB) on demand-side platforms (DSPs). An excellent primer on DSPs can be found here.

Question: More Automation, Fewer People?

Terms such as ‘programmatic’, ‘self-serve’, and ‘automation’ collectively imply reducing manpower and/or eliminating the middleman, or the agency, from the picture. As DSPs promise easy automation through direct relationships, many advertisers will look to move campaign management to small internal teams.

Question: Should I Fire My Agency and Go Direct?

The answer is not an easy one and depends heavily on your resources, leverage, size, and your internal knowledge base. There are several arguments for why an agency could and should continue to play a key role in ad operations, including the following:

DSPs are self-service. You still need a skilled team to go in and manage and optimize programmatic media buys.
Agencies are able to tailor models based on client need. These range from a private trading desk model to something that still resembles a traditional I/O.
Ad buying. A lot of premium ad buys that are being pitched to brands as programmatic still require a good deal of old-fashioned phone calls and emails to purchase.
Performance-based agencies operating on direct customer acquisition models were made for this. They have both longstanding relationships with DSPs, as well as the technological infrastructure and scalability to leverage ad spend most effectively.

Question: What’s the Bottom Line?

Traditional agencies can remain relevant, even pivotal, to programmatic success, but the client conversation has changed. Transparency, control over data, and an agency payment model that rewards efficiency are key. In a programmatic model, the relationship between agencies and publishers is symbiotic, and there are benefits for both. For agencies, programmatic buying allows them to strategically purchase impressions which are targeted for the right audience, the right place or content category to produce better results and increase campaign ROI.

The shift to programmatic is definitely upon us. It is crucial that brands and agencies ramp up and adapt their processes, skillsets, and technology now, in order to survive, thrive, and leverage the advantages of a shift to customer-centric, omni-channel, programmatic marketing.