Rebalancing Programmatic and Direct Advertising
Updated: Sep 24, 2019
Looking Beyond Programmatic
There’s no question that the world of programmatic ad tech had seen seismic change in the past five years. Heck, South Park even dedicated an entire season to the Orwellian absurdity of it all. Each year, the annual marketing technology landscape looks more and more like a box of glitter.
And the outcome of all that activity has been the development of some enormously powerful tools for advertisers and marketers, especially when it comes to attribution and calculating return on ad spend (ROAS).
For small to medium size businesses, or businesses with a heavy eCommerce component, this is terrific.
But there’s been another outcome, as well. A lack of balance in how advertisers are approaching their media mix. With programmatic’s market share jumping by leaps and bounds every year (this year its calculated to reach 85% market share), the question isn’t “is programmatic effective?” (of course it is) but rather, “what is being left by the wayside?”
“Balance is key. Balance good, everything good. Balance bad, better pack up. Go home.” - Mr. Miyagi, The Karate Kid.
Traditional Approach to Digital Advertising
The traditional logic for approaching digital advertising looks like this:
Optimize for lowest cost conversions
Account for some fraud/low quality in the mix
Cleverly leverage data partners & analytics
Prove most cost-effective spend
There’s some clear logic to this approach. You can prove you spent $X, and made back $X+$Y. What could possibly be wrong with that?
But the reality is, this approach shifts the fundamental priority of what advertising is supposed to accomplish. The priority shifts from inspiration, to reducing waste. We have developed a lot of different phrases that explain this shift in priority:
“Optimizing Conversions” means we only spend money on the ads we can prove are increasing sales
“Granular Targeting” means we only spend money on an audience we know is likely to buy something
“Minimizing CPMs” means we only spend money on the inventory that we know will be the most affordable.
These are all worthy considerations, but they appear in industry literature far more frequently than terms that relate to the human experience, metrics like “favorability” and “inspiration.”
The Opposite of Skipping Leg Day
The result of this shifting priority is that there is a tremendous amount of buzz and activity happening where programmatic and analytics technology is at its strongest: the bottom of the funnel. And, make no mistake, the bottom of the funnel is getting stronger and more reliable than ever.
Tactics that favor the bottom of the funnel get more attention because it’s easier to prove value at the bottom of the funnel.
But the top of the funnel used to be the whole ballgame when it came to advertising, and that wasn’t just because of technological limitations. What we’ve seen in the past few years – and, if you look at the big buyers in the ad space, they’re seeing this too – is that so much emphasis has been placed on programmatic (85% market share, remember?), the other parts of the customer journey are starting to atropine from lack of attention.
Stronger at the bottom, weaker up top. It’s like the opposite of skipping leg day.
In the process of emphasizing the bottom of the funnel (to the tune of that 85% programmatic market share I mentioned earlier), many advertisers are atropining at the top of the funnel. It’s like the opposite of skipping leg day.
Let’s look at some of the limitations to programmatic: it has less qualitative impact at the awareness/inspiration stage compared to direct. There are also industry-wide challenges regarding brand safety, viewability, and fraud that still need to be worked out.
What’s the number one way advertisers are responding? Shifting more spend to direct and outside the box ad channels.
These challenges have not gone unnoticed by the big boys in town. Some of the biggest buyers in advertising -- the brands with the budget to really experiment and take the risks the rest of the industry can’t -- dramatically rebalanced their programmatic/direct spend in 2018.
PG&E cut $200 million from programmatic spend and 25% increase in direct spend. Unilever increased the number of brands buying direct by 112%. Chase decreased the number of programmatic publishers in its portfolio by 98.75%.
And the result of these shifts was either an increase in reach or YOY growth in sales.
Iceland Tourism also has seen enormous success shifting to a social media direct advertising approach.