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Why Programmatic Buying May Be Hurting Your ROI

Posted by Jack Gazdik on June 12th, 2013 at 7:19 am

Update 6/13/13: I originally wrote Comscore reported 3 in 10 online ads are never rendered in view. ComScore has recently updated that number to be 54% of online ads are never renedered in view. http://bit.ly/12q7xeS

An ongoing Adweek investigation has made programmatic buying an even hotter topic in digital marketing news. While it is more time-efficient and cheaper than buying premium inventory directly from a publisher, does buying on ad exchanges really improve campaign ROI?

At the moment, I think the answer is no.

Programmat Buying Issues

The problem with ad exchanges is in part an issue with the inventory of the exchanges themselves, and in part with the agencies doing the buying. While Cost Per Thousand Impressions Rates (CPM) and Cost Per Click Rates (CPC) are lower on ad exchanges, the logic that these lower costs make exchanges a better option than direct buys is flawed.

Publishers make ad inventory available to exchanges as a way to sell ad space that otherwise wouldn’t be purchased. This allows advertisers to serve ads to these placements at a lower CPM or CPC than buying direct from the publisher. This means ad exchanges are riddled with less-than-desirable ad placements, especially at the lower CPCs and CPMs. Often these placements are well below the fold on publisher sites and if you’re buying from a less reputable exchange your ads may even be served to bot-generated, foreign, hate and porn sites. ComScore reports 54% of ads are never rendered in-view, and industry insiders have reported up to 20% of ads are served to “dark” corners of the web.

So why are agencies so keen on exchanges? It’s because big agencies, serving millions of ads, don’t have the time or the manpower to buy directly from publishers—it’s simply too inefficient. Instead they take a spray and pray approach to digital media buying, in which they buy 10x the ads on exchanges at 1/10 the cost of premium inventory and hope they achieve the same success. The problem with this approach is that it assumes all clicks are created equal and ignores how much influence a well-placed premium buy, above the fold, on a reputable site can have on brand consideration and purchase intent.

As marketers, we need to stop thinking of clicks as just clicks and start thinking of them as people. The purchase process doesn’t end at a click, and for that reason neither should our measurement of campaign success. What’s important is what happens after the click. Is the person actually in our target market? How long was that person on the site? What did they view on the site? Did they share something? And most importantly, did they purchase something?

As a digital media planner, it’s still important to consider the context of your placement not just the cost. Direct buys of premium inventory may come at a higher price but it is likely they also will have a higher ROI when customers display much higher engagement after the click.

2 Responses to “Why Programmatic Buying May Be Hurting Your ROI”

  1. Andrew Perry says:

    Great article, right on the money when you say digital media planners need to consider the context of placement and not just the cost. Although I wouldn't say Programmatic itself is to blame; especially when you consider the advancements of Programmatic Direct, which provides buyers and sellers the opportunity to sell direct, at scale, by removing inefficiencies from the process.

  2. Andy McNab says:

    Sorry Jack- totally disagree with this, with the surge of some Artificial Intelligence platforms having the ability to look at millions of profiles identifying individuals not segments, in the right context and doing this in milliseconds- programatic buying is anything but spray and pray.

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