In this exclusive article written for ExchangeWire, Stephen Byrne (pictured below), regional VP at smartclip, discusses whether programmatic advertising currently has a targeting problem, despite it supposedly being the primary advantage to the channel.

Successful digital video advertising is based on many factors: creative ideas, high-quality environments and innovative formats are all equally important. But the first question should always be: Who do I want to reach? Based on data and automated targeting, this is where Programmatic Advertising thrives – at least it should.

However, recent numbers show advertisers and agencies in the video sector are scaling back their programmatic bookings. According to the IAB Europe Attitudes to Programmatic Advertising Report 2019, the programmatic share of video bookings by agencies declined in 2019. In 2018, agencies stated that 55% of all video campaigns were booked programmatically, in 2019 it was only 50%. Especially for campaigns with large budgets and granular target groups, many agencies rely on direct booking. Why is this? Is it a force of habit, or are there other factors at play?

Stephen Byrne, regional VP, smartclip

Looking at how the programmatic ecosystem is structured, it is surprising that agencies and advertisers are so reluctant to make programmatic bookings. Targeting is the supposed strength of the system. The sheer number of available publishers and the enormous data volume DSPs and DMPs accumulate for programmatic booking processes, should be a substantial advantage over direct campaigns. Be it first, second and third-party data or with the help of AI-supported contextual and environmental targeting.

This will not change when Google blocks third-party cookies within Chrome in the near future either. The data basis for programmatic advertising will just shift in favour of contextual and environmental targeting. DSPs and DMPs will continue to aggregate data from a range of SSPs and publishers. While cookies will not disappear completely, DMPs are already deriving data on user behaviour across publishers and platforms, creating patterns and predictions – supported by AI and entirely without cookies.

Analytics providers such as Nielsen, however repeatedly fail to support the supposed advantages. Reports confirm that campaigns do not use the publisher’s portfolio optimally. Directly booked campaigns within our own ecosystem perform significantly better than programmatic campaigns – despite smaller inventory and data diversity.

According to Nielsen's Digital Ad Ratings for Europe, this is not a one-off problem. In Q3 2018, specific age groups were reached with widely varying success. If all users over 18 years of age were to be reached, the target accuracy was at 93%. However, if a specific age group is addressed, the results become less accurate. In the 18 to 49 age group, a hit rate of 67% was achieved, whereas only 48% of 18 to 34 year-olds were reached within the specific target group. Accuracy declined even more when targeting was not only based on age, but also on gender-specific criteria. If the desired target group was female and between 18 and 34 years of age, just under a third of the users reached were within this parameter. If male users of the same age group were addressed, only 27% of the ads were delivered to this target group.

SSPs and DSPs have the same tools at their disposal to monitor the success of their video campaigns. So both sides – supply and demand – should recognise the problem. Since the corresponding tools do not work in real time, it is hardly possible to influence ongoing campaigns. But in order to deliver programmatically booked campaigns as efficiently as possible, real-time tools for ad and audience verification are necessary. Currently a lack of openness between DSPs and SSPs prohibits a unified solution. As a consequence, SSPs are investing in appropriate tools to meet agency requirements, even if this is originally the DSP's domain. Programmatic advertising is on the rise overall. According to the IAB and their aforementioned report, programmatic revenues grew by 33% year-over-year between 2017 and 2018 – despite the implementation of GDPR regulations during that time. But this growth is only sustainable if the targeting promise is kept.

All parties involved handle their data mix very discreetly, the data that is part of their own mix is a trade secret. This is understandable, but greater transparency is needed to identify and eliminate inefficiencies. In contextual targeting, this can be ensured by providing more insight into the inventory offered. SSPs already ensure this and provide the exact web addresses of bookable inventories in the booking request. It must become easier to understand how target groups are determined. DSPs already have extensive information thanks to data synchronisation through Buyer User IDs – an identification of the DSP that is integrated into the SSP and compares user and target group data. From publishers across DSPs, SSPs, and DMPs to agencies, all providers within the value chain should exchange information more freely in order to eliminate inefficiencies in targeting and enable ad and audience verification in real time. If all parties involved work on this together, programmatic advertising can live up to its targeting promise. Let’s make that a reality. In the meantime, advertisers should look closely where they are getting the best results.