Caveat emptor: the pitfalls of programmatic trading

The programmatic concept is brilliant in theory, automating the incredibly complex process of serving digital display advertising and integrating data to drive better response.

The ‘elephant in the room’ is that it is almost completely unregulated, has been hijacked by people often not working in clients’ best interests (and that sometimes includes media agencies,) is overly complicated and can deliver poor levels of response. It’s estimated at least a quarter of spend is wasted because it is never seen, and that’s from the USA’s Association of National Advertisers.

Quoting Bob Hoffman’s must-read recent book;

INSIDE THE BLACK BOX - HOW MARKETERS WASTE BILLIONS ON ONLINE ADVERTISING.

‘In 2024, marketers will spend over $650 billion on online advertising. A substantial proportion of this - perhaps in the hundreds of billions - will be completely wasted.

Between ad fraud, made for advertising sites (MFAs), hidden middleman fees, crooked publishers, unreliable data, unreliable reports, viewability issues, click fraud, false attribution, consumer inattention, and the utter lack of transparency, advertisers are being fucked blind.’

He then goes on to say…

‘According to a study by the Incorporated Society of British Advertisers (ISBA) and PwC, half of programmatic ad money is being siphoned off by adtech middlemen before it pays for a single ad.’

‘According to the ISBA report alluded to above, 80% of the websites that programmatically purchased ads run on are "non-premium" websites. "Non-premium" is a nice British gentlemanly way of saying "crap."’

Why are we highlighting this?

The WARC/AA Expenditure Report shows in 2023 digital display accounted for 35% of all UK ad spend, a staggering £12.9 billion a year, growing at over 11 per cent a year. eMarketer estimated that 95.5 per cent of the UK’s total digital display ad spending in 2023 was programmatic, the largest proportion of any country they track. Because digital display is the most addressable medium by audience and location, it really matters how it’s executed.

The UK based company, Location Sciences, who verify location data, conducted an analysis of 500 million digital location-targeted impressions delivered in the UK and US (in early 2019) and found that 65 per cent of spend was wasted. 29 per cent of impressions delivered outside of the targeted area, whilst 36 per cent ‘may’ have been wasted due to a lack of quality location signals. If this is true, it’s genuinely shocking.

So, if £12.9 billion was spent this way, £8.4 billion was potentially wasted.

To address this, it's imperative to focus on creating engaging, locationally relevant, quality content delivered to known, premium environments. This requires close management and control of publishers and sites used, it can’t be left to a third party, and it needs close monitoring.