The Growing Pains Performance Programmatic Buying is Experiencing Right Now

Olga Bazarova
Jul 25, 2019 · 5 min read

With almost 90% of all mobile display ads expected to be transacted programmatically by 2020, the term programmatic buying is rapidly gaining momentum and, for most of us has already become synonymous with digital advertising. However, despite all the vogue rhetoric about how it’s some kind of “silver bullet” for all your marketing hardships, programmatic buying has its share of pains.

Programmatic Buying: Recap

The term “programmatic buying” refers to various technologies that enable automated advertising trading, including instant bidding, sell and purchase of ad inventory. Modern programmatic software solutions consist of three essential components: a demand-side platform (DSP), supply-side platform (SSP), and ad exchange. This combination makes it possible to streamline the ad buying process and eliminate the human factor from determining where to place ads, how long to run advertising campaigns for, and how much to pay for it.

The introduction of programmatic buying boosted the growth of the advertising ecosystem. The emergence of new ad technologies enhanced the quality and quantity of marketing channels — we now have the choice of running display, video, social, native, in-app and OTT (Over-the-Top) campaigns that can be thoughtfully configured to combine various formats for gaining virtually unlimited reach and performance, while also enabling advanced targeting opportunities.

All that allows advertisers to focus on buying consumer eye-balls up right where they are. The technology involved in programmatic implies the analysis of numerous data points to optimize an impression in an ad campaign and advanced evaluation of all impressions across different sources to ensure you advertise to the people that are interested in your product or service. In other words, programmatic advertising is aimed at allowing us to buy only those impressions that will be seen by a qualified target audience. Or at least, that’s what we hope will happen when we switch to buying programmatically.

Where did all the ads go?

With the number of data sources and the complexity of the technology involved rapidly increasing, it’s only natural that algorithms are increasingly becoming a dominant part of the marketing workflow. While automation greatly contributes to the efficiency of advertising and hence makes it much less time-consuming, having too many layers in the process leads to corrupt transparency. Publishers are often reluctant to share where ads are being placed and who their viewers are.

At best, the ad will be shown to people who are not interested in consuming your product or service. In the worst-case scenario, your ads will be consumed by bots, device farms, or other types of fraud.

Fraud programmatic advertising has long been the worrisome topic for marketing professionals. The poll conducted by research firm Advertiser Perceptions last year has shown that 37% of marketers in the US consider non-human traffic one of the worst aspects of programmatic ad buying.

The main issue of programmatic buying originates from one of its advantages — the ecosystem is open to everyone, meaning that every publisher is free to participate in it. Low entry threshold is what gives programmatic buying a sense of democracy. But it’s, in fact, the double-edged sword that, on the one hand, benefits smaller publishers and advertisers, while on the other hand creates opportunities for fraudsters to join in and bring elaborate hoax along. It’s not unusual to run campaigns that look good from the surface but ultimately wouldn’t drive any results at all. There’s an awful lot of bad ads and fraud across open programmatic networks.

The alternative to “open” programmatic ecosystem, where advertisers can buy ad space from multiple ad networks, is “closed” ad platforms (e.g. Google Ad Exchange or Twitter MoPub), which are a single platform that’s connected to a certain number of websites, and offers inventory for advertisers on those sites. While such ad platforms have their share cons, including decreased competition and increased costs, marketers believe they are fraud-resistant and consider them as “trusted” sources.

However, despite the growing popularity of trusted traffic sources and in spite of their alleged transparency, they also contain fraudulent traffic. According to the recent study by Scalarr, the company that develops fraud-detection solutions, the increase of advertising budgets invested into trusted sources correlates with the rise of fraud in these sources — from just 1,2% in 2018 to the estimated 5% in 2019.

The most obvious way to mitigate the risk of fraudulent traffic in performance advertising is to measure the performance of the ad exchanges and imply advanced anti-fraud measures. That’s exactly what Sergey Zaichenko, the Lead Data Analyst at Scalarr, recommends:

“The main goal of every UA manager is to get the most mileage and money out of performance programmatic buying. It’s no big deal for publishers to trick UA managers into buying under-performing placements. They can easily resell offers to intermediaries who may yield low-quality and even fraudulent traffic. UA managers want to cut off the reselling factor and ensure they advertise to humans only. That’s why I would recommend starting by investigating every publisher and use fraud detection software.”

Conclusion

The performance programmatic buying wave is continuing its wash across the advertising industry and will be only gaining ground in the following years. There’s a good reason for that: if done right, it’s by and large a win-win for both sellers and buyers of ads. However, there’re definitely a few bumps on the road: incrementation issues, lack of transparency and fraud prevent programmatic buying from developing into what it’s supposed to be — an automatic transmission of quality-oriented advertising. The technology is still maturing as marketers increase their spend on buying programmatically.

While common sense suggests that programmatic buying issues should bother only advertisers and marketers, many of them are a pitfall for publishers too. At the end of the day, only through the industry’s combined efforts to tackle these issues, can we make the programmatic ecosystem a better place for everyone.

Scalarr

Scalarr is the Machine Learning-based fraud detection…

Olga Bazarova

Written by

Hi there! I am the Marketing Lead at Scalarr - Machine Learning based anti-fraud solution for mobile app developers and marketing teams.

Scalarr

Scalarr

Scalarr is the Machine Learning-based fraud detection solution to protect against mobile ad fraud and prevent marketing losses.

Olga Bazarova

Written by

Hi there! I am the Marketing Lead at Scalarr - Machine Learning based anti-fraud solution for mobile app developers and marketing teams.

Scalarr

Scalarr

Scalarr is the Machine Learning-based fraud detection solution to protect against mobile ad fraud and prevent marketing losses.

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