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The Evolution of Ad Tech
Going from Mad Men to Math Men. How technology has fundamentally changed the art and science of advertising.
In partnership withDigilant
Once upon a time the marriage of advertising to media was a simple party for two. And even when the traditional media landscape expanded to online, marketers continued to work directly with publishers’ sales teams to buy advertising space. After all, the golden rule was “media as proxy for audience.”
But then the scale of the Internet exploded exponentially. One hundred billion ad impressions (each time an online ad is displayed is an impression) reach the market every single day, presenting 100 billion opportunities to place those ads. According to comScore, that added up to nearly 6 trillion display ad impressions delivered in 2012.
Something else happened as a result of the Internet’s growth: voluminous amounts of data appeared and so did the opportunity to use it for finding and targeting specific online consumers. At last, marketers delighted; the right ads could be delivered to the “right” people, anywhere they appeared online. To do this, marketers would analyze the data to determine patterns of consumer behavior and pinpoint what products or services the user was most likely to respond to in order to influence sales.
With all this new online advertising inventory inevitably came unsold ad space, so called “remnant inventory.” Around 2001 ad networks emerged to help facilitate the purchase of that remnant space in bulk from publishers, and the sale of that space to marketers. But there were problems. The networks did not allow much room for transparency upfront, making it harder for marketers to determine who was really seeing their ads. When some of the weaknesses of the network model started to become exposed, the marketplace reacted by introducing ad exchanges and real-time bidding (RTB) in 2007. Ad exchanges and RTB allowed advertisers to bid for advertising space via an auction model and deliver the ad impressions that were won in milliseconds—all behind the screens during the time it took for the online user to download a webpage. It also created new opportunities for targeting, as more data about the audience viewing the ad was being shared with the marketer in order to create demand and thus determine a fair market price for the ad space.
The big promise of real-time bidding in online advertising is increased efficiency, increased effectiveness, and ultimately, increased profits for the advertiser and a tidy sum for the publisher as well. And it’s that promise that has poured so much cash and attention into the ad tech space.
“It’s about getting marketers closer to their customers. The ability to give them more information about their audience so they can make more informed decisions, both with regard to when and where they deliver their message, and at what price,” said Edward Montes, CEO of Digilant.
Kirk McDonald, President of Pubmatic, added, “It’s not art or science or going from ‘Mad Men’ to ‘Math Men’. It’s about balancing art and science for balanced decisions.”
Both Pubmatic and Digilant are players in the complex new system of ad tech companies facilitating RTB. With the scale of online advertising and the volume of data growing so dramatically, it’s becoming a technically intensive game to compete with one another. Companies require better, faster machine learning, smarter people, and a solid backing of cash to get up and running. However, beckoned by potential opportunity, new companies are entering an increasingly crowded field, eager to take part of the roughly $2 billion and growing annual pie.
“The difficulty is everyone jumping on the bandwagon at the same time. There is a beguiling set of companies you have to be familiar with,” said Jon Slade, Commercial Director for Digital Advertising at The Financial Times.
The competition “is almost like an arms race,” said Scott Neville, Chief Marketing Officer at IPONWEB.
In a new industry with little in the way of standards and great variation among companies supposedly in the same category, a clear picture of the space can be elusive. In particular what can get lost is who gets paid for what, who does what, and which are the most effective and honest players currently operating in the market.
Tom Hespos, founder of Underscore Marketing and among the more critical voices of the industry, said, “For many, digital advertising has become a black box where they dump money and hope for the best.”
And with so many hands trying to get a cut of the industry, there are growing calls for more consolidation and more transparency.
Historically, trends tend to swing from one extreme to the other before settling back in the middle. At this time the industry is still swinging towards the machines. But, there is a drag on the pendulum back to requiring humans to interpret data, as ultimately ad placement is still not about machines selling to machines, but about humans selling products to humans.