Programmatic advertising must handle more complex media-buying decisions, study says

Dive Brief:

Programmatic media buying needs more time and investment to fulfill its promise of providing full automation, according to a study by trade group the 4A's and consulting firm The 614 Group provided to Marketing Dive. The survey found that 90% of media professionals think that advertising automation needs to go beyond replacing manual tasks by using algorithms, machine learning or artificial intelligence (AI) to handle more complex media-buying decisions.
More than half (62%) of executives agreed that programmatic infrastructure underpins all data-driven marketing, while 59% said the most important benefit is finding cost-efficient audiences in biddable marketplaces. About three-fourths (77%) of respondents said the most important priority for programmatic is to provide greater accuracy for cross-device campaigns, ensuring that audiences are being targeted, not just devices.
About 79% of respondents said investing in first-party data has the most significant effect on business. More than half (54%) of executives said the most important benefit of in-housing agency services is marketer control over first-party data, the study revealed. Its findings were based on a survey of 219 executives from ad agencies, marketers, publishers and ad-tech companies, along with 47 one-on-one interviews with senior industry leaders.

Dive Insight:

The 4A's survey of marketing professionals indicates that programmatic advertising, which relies on software for automated media buying and ad placements, is a critical part of the marketing industry but needs more development to realize its full potential.

Annual programmatic ad spending is forecast to grow 36% to $81 billion by 2021 from $59.5 billion this year, half of which goes to digital video, researcher eMarketer estimates. To support that growth, programmatic advertising needs to handle more sophisticated tasks like delivering relevant ads based on better insights into consumer behavior, the 4A's study suggests.

Marketing executives surveyed by the trade body realize the importance of consumer data, with 73% of respondents saying that the creative function of advertising will need to use data to evolve from linear storytelling to more dynamic, personalized messaging. That data-driven approach is reflected in the significant investment by ad agencies in technology and databases to meet client needs.

Some of the most significant data investments by agencies include Publicis' $3.7 billion purchase of Sapient in 2014, Dentsu's $1.5 billion deal for Merkle in 2016, IPG's $2.3 billion acquisition of Acxiom in 2018 and this year's $4.4 billion purchase of Epsilon by Publicis. Agencies have invested more than $12 billion on technology since 2014, Forrester Research revealed in a separate report, cautioning that advertisers and agencies now have too much data and too little insight.

Improvements to automation and data-driven marketing not only will require more investments in technology, but will also boost labor costs — a key concern for marketing executives amid the trend toward in-housing of agency functions.

Programmatic advertising and data-driven marketing require specialized skills that can't be handled by people with generalized IT experience, the 4A's study warned. More than half (58%) of survey respondents said that attracting and retaining the right talent is one of the biggest challenges of in-housing, while 41% said they're concerned that in-house talent won't keep up with the latest developments in ad tech. The 4A's is an industry group representing agencies.