By Kerry Bianchi
As spending on digital advertising grows from $87.4 billion in 2011 to an estimated $144.8 billion in 2016, a compound annual growth rate (CAGR) of 10.6 percent (Karsten Weide, “Worldwide and U.S. Internet Advertising 2012–2016 Forecast and Analysis,” June 2012), the stakes for smart digital spending rise quarterly. Digital is no longer a supplement to a media plan or marketing effort, it’s now often the foundation of the effort to reach consumers and prompt a response.
With so many advertising service providers offering lower costs, larger scale, faster speed to market, more granular targeting, and so on, the dizzying array of options to engineer targeted, efficient and scalable strategies is growing daily. No wonder chief marketing officers (CMOs) are finding themselves uncertain of which service provider to believe, and which ad strategy to follow.
Promising opportunities abound. From Real-time Bidding that automates both the targeting and buying of digital ads, and Convergence Buys that brings efficiency across screens, to Pay for Performance (PFP) buys where advertisers only pay when certain metrics are achieved. What information does the CMO need to know to adopt the right strategy?
To understand the potential of the new advertising opportunities and highlight some of the issues CMOs need to consider before investing, let’s take a closer look at three popular digital ad buying models.
1. Real-time Bidding (RTB)
RTB, or Programmatic Buying, are catchall terms to describe the growing use of automated tools to procure online advertising, one impression at a time, at scale, based on the unique characteristics of the ad’s recipient. RTB uses numerous technologies—demand-side platforms (DSPs), data management platforms (DMPs), ad exchanges and agency trading desks (buying platforms set up and owned by ad agency holding companies using DMP/DSP technologies).
RTB is fast-maturing and will soon comprise significant shares of digital ad budgets in most global markets. Worldwide RTB-based spending is expected to grow from US $1.4 billion in 2011 to US $13.9 billion in 2016, a 59.2 percent CAGR (Karsten Weide, op cit). Since RTB provides access to mass volumes of display inventory which can be targeted using a variety of demographic and geographic overlays, it allows advertisers to place efficient buys across fragmented display channels and target specific customer segments. This granularity of targeting is not yet possible in the mostly demographically-driven buying segments of traditional media.
Providers of RTB services suggest that, apart from potentially bringing lower prices, this model automates the process of buying and selling digital media, freeing up talent to explore new advertising opportunities. It is also argued that consumers benefit by seeing more targeted, relevant messages, bringing them an overall better Web experience.
While some of the promise of RTB may come to fruition, there are also issues that need to be considered. In most cases, advertisers using RTB lack detailed knowledge about their ad placement—which URL it will appear on, where on the Web page it will be, and whether or not the ad will be visible to users when the page loads. Improper ad delivery can result in wasted budget or brand erosion caused by appearing adjacent to irrelevant or inappropriate content.
Additionally, RTB platforms, especially agency-owned trading desks, rarely share the actual price paid for impressions at auction. As a result, advertisers have no basis to verify the accuracy of media invoices.
2. Convergence Buys
Convergence buying provides advertisers with the opportunity to purchase media packages that consist of combined inventory from both traditional and digital channels. Through a single ad buy a company can span a combination of offline and online media— television, radio, print, out-of home, Web and mobile. This may be for a single or combined cost per thousand (CPM) inventory depending on the package bought. Increasingly popular are the convergence buys for video across multiple screens and properties from one media owner, often on the assumption that impressions are of equal value, no matter which screen they appear on.
Negotiating with one media owner rather than several different media publishers has benefits—helping to bring cost efficiencies and greater integration, synergy or consistency. Advertisers can achieve economies of scale, reaching their target audience across the entire media owner’s properties in one go. There is also the opportunity to shift inventory relatively easily between channels to meet delivery goals and accommodate changes.
Some packages are currently sold for one price across screens. For instance, a 30 second ad on a media owner’s television network could be assigned the same CPM and value as a 30 second pre-roll online video running on the same media owner’s website. Investigation is needed to understand if the target audience is reached equally well on each screen to assess whether valuing the screens equally is warranted. Given the relative scarcity of quality online video inventory, advertisers need to plan ahead so they are not left with underperforming ad placements.
3. Pay for Performance (PFP)
PFP buying began with pay per click (PPC) and pay per action (PPA) and is evolving, allowing marketers to buy not just ‘eyeballs’, but visits, leads, quotes, and even bookings. This media buy is ideal for advertisers looking for specific results or a conversion from a campaign. These buys tend to rely on specific buyer-seller matching, often at the geographic level, and are making inroads in local advertising markets.
PFP buys are attractive as converting an impression to an action is borne by the PFP network. The network takes on responsibility for generating traffic and helping confirm that appropriate matches are made between buyer’s requirements and seller’s offerings in order to meet a predetermined performance goal.
A number of transaction based networks are already focusing on the “Cost per X” acquisition models. However, to know if conversion buying is cost-effective, advertisers should evaluate whether direct cost per action (CPA) from a performance network is delivering better results than buying media through more standard models like CPM. Many PFP networks are category-specific and regionally fragmented, which may be less beneficial for national advertisers.
Look before you leap
Irrespective of the type of media buy there is a need for rigorous analytics and independent verification that the ads ran according to the promise made to the advertiser. Tracking and verification technologies can help assess buy performance, influence changes to the online display strategy, and revise media buying parameters to improve targeting and efficiency.
Digital technology can be empowering. It can enable media providers to offer more compelling, targeted and efficient ways for advertisers to purchase inventory. Moreover, with analytics and its resulting insights, advertisers can determine which new buying model is proving to be most effective. This is why the new digital media buying models are gaining in popularity. In the not too distant future, TV and other ad placements may be more commonly bought and sold in the same way as digital media— all tied to even more rigorous targeting and delivery analytics. Daunting or confusing as the current digital media buy may now appear, advertisers can leverage them to their advantage by asking pertinent questions and having the right tools in place to verify if a particular deal is right for their business.
About the author
Kerry Bianchi leads Acce
nture Interactive’s global Media Management practice. Media Management provides the CMO with several proprietary tools and services to garner the most return from their marketing investments, including: benchmarking of media cost and quality, agency pitch management, contract and fee consultation, live campaign monitoring, and marketing organizational design. As part of Accenture Interactive, her team leverages a digital consulting toolkit that includes market-leading solutions for digital measurement, competitive analysis, and analytics.
About the company
Accenture Interactive helps the world’s leading brands drive superior marketing performance across the full multichannel customer experience. Working with over 5,000 Accenture professionals dedicated to serving the marketing function, Accenture Interactive offers integrated, industrialised and industry-driven digital transformation and marketing solutions.