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Programmatic Advertising: The Potential and Pitfalls

programmatic advertisingImagine being able to target people in their sixties who are planning to retire and spend their winters in Arizona. Or work-at-home moms who have a child with a disability. That’s the kind of pinpoint targeting your advertisers want — and with programmatic ads, advertisers can get as granular as they want. But just because you can utilize programmatic advertising, doesn’t always mean you should. Here’s an overview of the possibilities and pitfalls.

Programmatic advertising basics

Programmatic advertising or marketing is simply a way for brands to choose what types of audiences they want to market their products and services to. They can target audiences that encompass a certain gender, age, social or financial standing, and/or those living in a certain geographic area. They can choose the frequency and time of day and even which publications they want their ads to appear on.

Programmatic advertising differs from traditional ad buying, in which an advertiser buys a certain number of ads from a publisher and is locked into that contract. With programmatic marketing, advertisers are paying only for ads delivered to the right people at the right time in the right context, thus maximizing the amount they spend on ads.

To do this, the brand uses the data and insight it collects about its target audience and buys ad space, either through Real-Time Bidding (RTB) or Programmatic Direct. With RTB, advertisers buy ad impressions from an online auction place called an ad exchange. The auction takes place in the time it takes a webpage to load. With Programmatic Direct, ads are purchased in advance, based on a specific number of required impressions. The process uses artificial intelligence (AI), algorithms, and software to automate the process so there is no manual placement or optimization required.

Programmatic marketing also provides valuable insight and feedback. Machine learning technologies like AI can provide information about how the audience engages with the ad, which demographic performs best, or what time of the day produces the most impressions. Advertisers can use this information to constantly adjust their targeting.

Challenges and pitfalls of programmatic advertising

Although programmatic advertising is quickly becoming the predominant form of advertising, it has its pitfalls. Three of the biggest ones are click fraud, ad fraud, and brand safety.

Click fraud uses bot traffic (or click farms where people are hired to click on ads) to generate fake ad impressions and fake clicks, which deceive advertisers (and publishers) into thinking their ads are getting legitimate traffic. An article in Business Insider reports that click fraud will cost advertisers more than $50 billion by 2025.

Ad fraud can occur because of domain spoofing or ad viewability issues. Domain spoofing occurs when a scammer or fraudulent publisher identifies their domain as a legitimate popular media outlet in an ad exchange, but the ad is actually served on a fraudulent site with little or no legitimate traffic. Some disreputable publishers use techniques such as ad stacking, in which ads are placed on top of each other and generate impressions, but only the top ad is actually seen.

Brand safety is also a concern. Sometimes ads will be served on sites with inappropriate content, damaging their brand’s reputation. A recent study found that seeing an ad next to content that is lewd, racist, illegal, or otherwise offensive made customers seven times less likely to consider the company to be reputable or high quality. And this can also tarnish the publisher’s reputation.

How brands and publishers can combat programmatic fraud

your ad hereAn article in ExchangeWire reports that more than 40% of advertisers say they’ve lost trust in programmatic advertising because of fraud and have reduced their ad spend. Some have brought their programmatic marketing in-house. But they are finding that it takes a great deal of time and technical expertise. Others are going with a hybrid approach — doing whatever work they can in-house, and outsourcing much of the technological infrastructure and expertise to third parties with more experience combatting fraud.

Knowledge is the best tool for combatting ad fraud, and as brands are becoming more aware of ad fraud, they are demanding more transparency from publishers. Don’t consider that a bad thing. Publishers are often involved in various types of programmatic fraud, either intentionally or unintentionally. Transparency can help you stand above those publishers that deliberately defraud ad buyers. Use practices and tools that allow you to show legitimate traffic, avoid ad visibility problems, and ensure that ads don’t appear next to questionable content.

One tool that is helping to combat ad fraud is ADS.txt, where ADS stands for Authorized Digital Sellers. Publishers post a list of what sites are authorized to sell their inventory. Ad buyers crawl the web searching for the publisher’s ads.txt files to create a list of authorized sellers. AI is also being used to identify fraudulent behaviors so that publishers can minimize problems and alert advertisers.

As technologies to fight programmatic fraud evolve, publishers and brands need to stay up to date and work together to combat it. Without due diligence, programmatic advertising will never live up to its potential. The potential of highly targeted advertising is a no-brainer for the publisher, brand, and even the consumer.

Contact your Sheridan representative or visit our contact page to ask how we can help you streamline your publishing processes, reduce costs, and keep up with changes in print and publishing strategies.

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