Programmatic Ads: The Pros & Cons

September 23, 2015
pros and cons of programmatic advertising

by Benjamin Potter | Creative Director, CLICKON

Ad Age just published a damning report on programmatic ads, warning marketers on the hidden costs behind automation. We weigh the pros and cons of programmatic ad-tech. 

THE ARGUMENT FOR

Let’s start with the positives before we tear programmatic advertising to shreds in part 2. Automated ad buying means cost-efficient spending, in theory. Software scouts websites that have the cheapest ad space from the target audience’s page visits. Advertisers are technically getting the best bang for their buck.

There’s no denying that programmatic ads offer enormous reach. Rather than limiting an ad to a specific site, an programmatic ad can appear on literally thousands of websites at any given moment.

Perhaps what really draws clients in to programmatic ads is targeting. With advanced analytics that refine targets based on value-assigned activities, programmatic advertising allows brands to optimize the effectiveness of their ads by ensuring it doesn’t reach a less-than-ideal audience.

THE ARGUMENT AGAINST

Clients are starting to realize that their programmatic campaigns are costing them a lot of money. How can this possibly be when their purpose was to make advertising  more affordable and efficient?

Programmatic ad buying – which uses machines to purchase digital advertising – is catching clients out almost universally. Marketers expect these ads to be around 10 times cheaper than traditional ads because they consider only the ad inventory and forget the insane expenses that surround them such as intermediary tax, data-management platforms and engineers (to name just a few).

Furthermore, they are an advertising agency’s worst nightmare in many ways. Agencies have to hire more expensive people to work on smaller buys. Whereas agencies only need 1% commission to break even on a $100 million TV spend, they would need a staggering 10-12% commission to break even for a programmatic ad of this amount.

Okay, so they are not as cheap as everyone thought, but there’s more. Programmatic ads can easily be displayed on the wrong sites, and in my opinion, context is everything when it comes to advertising. Having an ad show up on the wrong kind of website can seriously harm a client’s brand.

CONCLUSIONS

to sum up

Programmatic advertising isn’t going anywhere. In fact, they accounted for $10.1 billion of the internet’s $49.5 billion ad revenue in 2014 so it’s hard to be too critical. If you can gain better insights into the total costs of running programmatic ads, they can be extremely effective in reaching massive volumes of people across the internet.

For brands that continue to buy them on their own, lay all the costs out on the table and sit down with your team to assess the ROI of programmatic ads. For some, these insights will make you realize the importance of working with agencies. Others will continue to let computers buy ad space, convincing themselves and their team that automation is the future, and that costs will inevitably come down. And some will no doubt switch between ad-tech buying and traditional media buying.

A final stat to end things. 55% of that $10.1 billion went to ad-tech interventions last year. 45% reached publishers. It’s not surprising that Ad Age weren’t so thrilled about programmatic advertising.