It’s been 21 years since the first banner ad appeared on the web. It ran on a site called HotWired.com, the original website of Wired Magazine, and it asked, “Have you ever clicked your mouse right HERE?” An arrow pointed to an ominous-sounding prediction, which was spelled out in all caps, and read: “YOU WILL.” It was part of a campaign that aimed to visualize the digital future brought to you by AT&T. The vignettes were prescient in just about every instance except for a much-parodied TV spot that asked, “Have you ever sent a fax from the beach? YOU WILL.”
Who knew that it was the dawn of a new era not just for advertising, but for all of marketing? In the ensuing years, the technology ecosystem enabling the new ad medium would steadily unfold, while digital devices proliferated and network connectivity became ubiquitous. Now, many ads are served up by software systems targeting any digital device—from your smartphone and TV today, to the dashboard of your car and the thermostat in your home tomorrow. Soon, every display will be an addressable medium—that is, each will be individually targetable by device and, in many cases, down to a specific user; and interactive displays will not only deliver ad messages but also track consumer response. The result is a new era of marketing accountability, in which advertising “budgets” will have turned into marketing “investments.” This sea change in mindset will transform marketing forever.
How did we get here? Back for a moment to that first banner ad:
At the time, online advertising hardly represented a radical departure from Madison Avenue’s traditional practices. After all, the shift from print to electronic media had already taken hold, as advertising extended from newspapers and magazines to radio and television. The early buying and selling of online ads was not so different from what had come before. The same white tablecloth lunches served to negotiate deals, and the resulting insertion orders still, more often than not, were sent via fax. Yes, industry pioneers like Doubleclick were building technology systems to manage online ad serving, but the change was a matter of degree, not of kind.
It’s only recently that a true revolution in advertising has become evident. Fueled by the rise of ad-tech, or advertising technology, the buying and selling of digital advertising is evolving at a mind-bending pace.
The shift to advertising automation is quickly becoming an imperative. In 1977, advertisers vied for space (or time) from only a few hundred “publishers” (Web-speak for any digital media vehicle that delivers content). By 2012 the number of publishers, thanks to online media, had ballooned into the millions.
For advertisers, publisher proliferation signaled both good news and bad. On the positive side, brands now had an incredible array of options to reach precisely targeted sets of customers, which increased advertising efficacy. On the negative side, having millions of publishers implied extraordinary complexity and demanded Herculean administrative effort, which, in the absence of new methods, would dramatically decrease advertising efficiency.
The result? It’s become hard to do business in the same old ways: try negotiating over lunch with millions of publishers or sending insertion orders to thousands of them using a fax machine. Advertising automation is the inevitable solution to an otherwise insurmountable problem.
Beginning in 2007, the advertising ecosystem gradually became crowded with new players aspiring to fuel the programmatic placement of advertising. It was a change akin to what happened in the capital markets, as trading shifted from open-outcry exchanges to electronic trading on fully automated exchanges. Advertising was ripe for this shift, because large swathes of ad dollars were already buying digital inventory. Digital, today, accounts for one in four of ad dollars spent.
Of course, electronic markets operate in real time, or near to it. That suits online media just fine, because web pages, like smartphone screens, are also served up in real time in response to user queries. Today’s ad exchanges enable so-called real-time bidding (or RTB) on inventory that is bought and sold in 100 milliseconds per transaction—faster than the blink of an eye.
With increasing velocity has come expansion in scale and reach. While traditional media planners may analyze 10 to 20 ad buying opportunities a week, automated buyers of online advertising often analyze millions of ad buying opportunities a second.
The world’s digital ad markets already make available 100 billion impressions a day. Each of these impressions is qualified by as many as 100 variables, such as specific publisher sites, pages on site, dimensions of ad unit, device types, and so forth. In addition, each variable may have appended up to 100 different values, such as time of day, day of week, device location, local weather, regional sentiment, and so on.
If you calculate the daily number of permutations bidders on ad exchanges might consider in analyzing whether to buy specific impressions, and calculating what to bid for each of them, the answer comes to a staggering 1 with 15 zeroes behind it. That’s a quadrillion—a million billion possibilities. Only a machine could think through such complexity.
And that’s with only 20% of digital advertising already gone programmatic.
As every medium becomes addressable (programmatic ad buying has already extended its precision targeting to mobile devices, digital out-of-home displays, and even print), this kind of advertising automation will only become more mainstream.
As this drama plays out, it’s worth asking: Is advertising a bellwether for all of marketing? If so, we will soon see a comprehensive array of marketing functions transformed by programmatic techniques, enabled by enterprise software that goes beyond ad-tech. What Salesforce.com did for sales management and NetSuite did for financial management, software-as-a-service providers will do for marketing, by automating much of what marketers do every day. Such solutions are already known as mar-tech—or marketing technology—and they are just starting to take hold.
When that happens, software systems will make it possible to manage ROMI, or return on marketing investment, with a new level of rigor. Instead of setting advertising budgets on quarterly cycles, marketers will launch ad initiatives whenever opportunities emerge, and they will optimize them for efficiency and effectiveness on the fly. Bidding on ad exchanges already happens in real time; enhancements in media placement and creative execution (for example, what image goes with what copy for a given recipient) will occur with similar speed. The “budget cycle” is already a quaint idea. It will soon be a thing of the past.
When this happens, CMOs and CFOs will join forces as never before. Together, they will enable a new marketing model that blends art and science—the power of human creativity married with the split-second precision, and profit potential, of marketing automation. This will signal a brave new world for marketers—at least, for those who face the fact that it’s do or die. My bet is: it’s embrace the future, or say a not-so-long goodbye.