The 4 Elements Still Missing From Programmatic Advertising — Our Story: Part 1

“Get more insight into programmatic — http://insdprgrmmtc.co/GetInsideInfo”

Most of us wish we had a control centre like this for our business, but marketers trying to use Programmatic crave it even more so. (That’s one of the SpaceX rocket control rooms by the way, jealous much?!)

Having met many people in the industry in past 7 years, I cannot recall a single person who claimed, implied or pretended to feel in control of their programmatic marketing.

Control is vital to executing on any business strategy, yet marketers are forced to accept varying degrees of delegation and less control. But why should they? This was one of the limitations with programmatic marketing that drove us to set up Inside Programmatic.

We drew from a lesson, described in Ashlee Vance’s biography on Elon Musk (amazing read), that explained how SpaceX was started. In short, going to space has always been stupendously expensive, $18bn for a ride to the moon as just one example. So when a private citizen exclaimed he’s starting a private space company the conventional wisdom said he was dillusional.

What Elon Musk was doing though was ignoring a cognitive bias we all commonly express which is reasoning by analogy. We decide subconsciously what’s possible by comparing an idea to other similar things we know to have happened or not, or by another’s activities. This is the foundation of inertia in business. “If they didn’t do it that way, then it’s not possible.”

Instead, Musk approached the problem of costly spaceflight with First Principles, which is where you assess current situations to deduce raw facts before deducing any judgement on viable next steps from facts alone.

He asked for the price of aluminium, steel, liquid oxygen, liquid hydrogen, rent for a warehouse, salaries for some brainiacs and an empty nuclear missile. He added it all up and low and behold the total cost, even with the nuke, came in at 40% of the cost of current rockets… Inertia and “added value” cost 60% in the space industry.

When we looked at the programmatic media world with First Principles, the fact was that the business model being used has stripped control away from the advertiser. That model is percentage (or commission) based fees. Everyone works for their percentage.

The problem is that everyone is therefore incentivised to protect and expand their percentage as much as possible. The easiest way to expand a percentage in any deal is to limit the amount of information your buyer sees in order to increase the added value without doing the extra work. Limiting the information means the buyer / advertiser no longer knows what you’re doing, no more control.

In programmatic media buying, where it is very quick and easy to buy at one price and then sell at another once you “add some value”, arbitrage becomes the norm. It’s a shame this then eats away at the advertiser’s budget and also reduces the quality of the ads (another issue for another post).

It’s no-ones fault that arbitrage has become the norm, it’s just inertia based of human behaviour and media had to evolve fast. Media has always been traded this way so why would it be any different tomorrow? But this is what we’re changing with our transparent business model.

Our hope is that by giving control back to the advertiser through a model that incentivises transparency rather than withholding information, the advertiser will operate their media buying more efficiently and the quality of advertising improves for the general public. After all, we need to make advertising work for everyone meaning the public as well as advertisers. The recent backlash on quality is a symptom that we need to change.

Control is vital, and in Part 2 we’ll touch on more of the elements that are missing and that drive us to help make advertising work for everyone.