Enrique Dans
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Enrique Dans

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Advertising and automation: of algorithms and humans

I recently read two excellent articles that discuss the evolution of online advertising and its shift from applying the print model to the screen to one based on mathematics, statistics and analytics. In “How to succeed in advertising (and transform the internet while you’re at it)”, Adrianne Jeffries explores the origins of programmatic advertising, currently in vogue in most markets, and its creation by Right Media in 2005. In “How The Math Men overthrew The Mad Men”, Ken Auletta focuses on the new profiles required to work in an industry where the digital transformation has come. I would say these two articles are essential reading if you want to understand the online advertising landscape, as well as to anticipate the effect of automation, algorithm and machine learning on all industries.

Until very recently, the decision about which media ad campaigns should use was decided by advertising agencies, who belonged to an industry not noted for its openness and that not only makes its living from acting as a middleman between advertisers and media, but also does so in violation of one of the fundamental rules of agency theory: agencies cut deals with publications, demanding a premium or commission from them, and that are agreed in secret. In other words, the advertiser can never know if the media the agency is recommending is the right one to reach the desired target group or if the agency has simply been offered a hefty commission.

All of which means that in a growing number of cases, programmatic advertising is reducing human intervention to deciding the target audience and a series of restrictions, while the platform offers purchase opportunities and assigns them through a real time auction. The first generation of algorithms has more or less made people dispensable in the productive flow of the advertising industry, in the day-to-day decisions of the let’s-launch-this-campaign-here-or there type, with many aspects of the process depending solely on interaction between advertisers and media within an advertising platform.

Not that this has produced an advertising apocalypse: the transformation has occurred in a reasonably orderly manner, with companies hiring — in most cases — or training — to a lesser extent — the people they need: new positions have been created and the role of some intermediaries has been reduced because they are no longer needed. Not that these intermediaries have disappeared completely: some hold on to their jobs thanks to the habits of advertisers who have not yet realized or understood that the world has moved on, or who want to avoid risks, or who prefer to sacrifice profits so they can carry on doing things as they always have. In the meantime, new intermediaries have emerged, not all transparent or honest, ranging from people who control traffic flows to those who manufacture, falsify and sell them, while the industry has changed to the point that if somebody who worked in it 20 years ago had been put into hibernation and woken up today, they would have little idea of what was going on.

All in all, advertising provides an interesting metaphor for other industries undergoing digital transformation: huge markets within which players are changing at very different rates. As the Canadian science fiction writer William Gibson wrote, “the future is already here, it’s just not very evenly distributed. In any event, we’re talking about evolution rather than revolution.

Has the advertising industry changed? Big time. And more change is to come. A major reconversion is underway, and in many cases, admittedly, not all, for the better.

As in all sectors, there are good players, bad players and mediocre players, but the technology has changed and there is now greater transparency. Nevertheless, the widespread adoption of new technology means that it’s possible to set up what we used to call a newspaper overnight and then simulate huge traffic volumes that bear no relation to reality, and even acquire a certain degree of influence based on this fake reality.

Is all this an improvement? That depends. But once again we see that technology cannot be un-invented and ends up being adopted, despite the refusal of some. Change is neither good nor bad, it simply creates new contexts that some are able to adapt to and take advantage of. Life goes on. If you have any doubts about digital transformation and its impact on your industry, take the time to study the evolution of the advertising sector.

(En español, aquí)

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On the effects of technology and innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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Enrique Dans

Enrique Dans

Professor of Innovation at IE Business School and blogger at enriquedans.com

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