How Programmatic Video Will Shape the Future of Advertising

Joseph Hirsch

Feb 24, 20163 min read
How Programmatic Video Will Shape the Future of Advertising

In March 2014, a study released by the Association of National Advertisers and Forrester reported that only 23 percent of marketers knew what programmatic advertising was, while 12 percent had never even heard of it. Luckily, the picture has changed dramatically in the time since that survey was published.

Programmatic digital video ad spending has grown exponentially this year, according to eMarketer. Where total programmatic digital display spending in 2014 was around $630 million, it has now reached $2.91 billion and is expected to hit $7.43 billion by 2017, constituting 65 percent of total digital video ad spending.

If you’re still among the uninitiated, you’ll need to catch up on the ins and outs of programmatic video before you’re left behind.

What Is Programmatic Video?

Simply put, programmatic video is the process by which a media buyer can instantly and easily target and purchase any video inventory on the Internet.

Just as programmatic display did away with insertion orders, direct salespeople, and guaranteed rates and inventory, programmatic video represents the dissolution of the old guard of media buying.

Suppose that you’re targeting males in the 18-25 age range who are earning good money, and you want to run a spot on YouTube. You can use programmatic advertising to target this audience in your demographic without interacting with a salesperson.

Buyers and planners want liquidity and access to inventory on demand, and this is what programmatic video offers. Demand-side platforms and supply-side platforms can buy and sell advertising without the need for human input, which slows price increases. This development is the inevitable conclusion of 20 years of ad tech. Since the first video ad was served, our ecosystem has hurtled toward this evolutionary zenith.

The Multiscreen Ad Experience

Programmatic video isn’t just shaking up websites like YouTube, either. It also allows for the simultaneous messaging of users across every screen.

Imagine watching the Super Bowl. You see an ad for GoDaddy, and when you check the Facebook app a minute later, you see the same commercial. You switch to YouTube, and there it is again.

Programmatic advertising offers this possibility. From cable TV to desktops, tablets, and smartphones, programmatic advertising will allow marketers to completely control messaging and branding at every moment.

It may not have gone mainstream with cable TV yet, but Newsy is making waves with its programmatic ad sales, and research firm Strategy Analytics predicts that programmatic video will account for 20 percent of TV ad spend by 2018, with major buy-side players already dipping their toes in the water.

The Evolution to Come

Of course, when robots buy media, there are bound to be a few concerns. The negative side of programmatic advertising is that it can be gamed to exploit the buyer for maximum value. Whether it’s an ad network, a publisher, a bot site, or a foreign entity whose sole objective is profit, there are plenty of bad actors out there seeking to exploit new technology.

Fortunately, our ecosystem is excellent at weeding them out. Some dollars may get wasted, but in the long run, programmatic advertising will prove to be of great benefit to our industry.

It will facilitate imaginative executions that were once impossible to pull off, allowing brands and agencies to scale to specific audiences across multiple devices and planners to forecast availability for media planning.

These advantages will continue as programmatic video evolves. Here are my three predictions for the future:

1. Dollar Migration

As programmatic advertising continues to grow in profile, you can expect to see more dollars migrating from traditional video buying to programmatic video buying. The “upfront” will still exist, but expect to see quarter-on-quarter double-digit growth for at least the next 36 months.

2. Falling Costs per Million

Programmatic flattens the playing field. It cuts out middlemen like sales houses and sales executives; this will, in turn, reduce the cost for advertisers. More of their money can thus be spent directly on the ads.

3. Improved Yield

With marketers’ improved ability to target ads, they will face fewer risks and be more willing to spend their marketing budgets. The absence of middlemen means this should prove a real boon for publishers. They can expect to see improved yields on their supply as brand-dollar liquidity increases.

While the advertising industry may continue to experience boom-and-bust cycles like the rest of the economy, these macro trends continue to play out. Direct access, transparency, and consolidation are the future.

The floodgates are opening, and a new and integrated marketplace is coming, creating a seamless cross-platform digital advertising experience. Programmatic video is at the heart of these developments, and it serves to benefit everybody, from consumers who no longer have to watch irrelevant ads to publishers and marketers who can expect to see declining costs and more customers.

Joseph Hirsch is CEO of YellowHammer, a New York City-based performance trading platform that provides programmatic video buying solutions for advertisers and agencies demanding a tangible return on their advertising dollars. As CEO, Joe is responsible for corporate partnerships with key SSPs, data providers, and advertisers.

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