Programmatic’s next challenge: The need for more transparency

by Alex Chatfield, VP sales & account management, AppNexus

At first glance, the future of programmatic advertising looks bright. Advertisers this year are set to spend a whopping $33 billion on the channel – nearly 80 percent  of all display spending. But most of that money goes to private marketplaces and programmatic direct deals, suggesting that marketers remain wary of buying real-time inventory on the open internet.

Their skepticism is not unfounded. While programmatic advertising is effective and growing rapidly, marketers still have legitimate concerns about its benefits.  And nearly all of those concerns boil down to lack of transparency.

Think about it in financial terms. If a CMO were to spend $100,000 on a programmatic campaign, his or her view of how much of that investment results in an ad being seen by a human being and how much ends up in the hands of the publisher would be obscured. Marketers can expect that roughly half of the ads they get will be viewable. It’s also not unusual for around 25 percent of their spend to go to programmatic intermediaries, but it’s difficult to measure and account for. And of course, some advertisers end up paying for invalid traffic or having their ads placed on disreputable websites. As a result, perhaps only $37,500 of that original investment is spent on viewed advertising.

All of these problems – viewability, fraud protection, brand safety – are caused by the opacity of the programmatic supply chain. Advertisers increasingly steer spending to closed platforms like Facebook and Google because, theoretically, they can more systematically enforce inventory quality standards. But this isn’t a long-term solution for many reasons:

1. Both Facebook and Google have had serious brand safety concerns of their own in recent years, an issue that is particularly challenging for their platforms given the constant stream of user-generated content.

2. It’s not sustainable to keep increasing spending on these two platforms. At some point, Facebook will run out of real estate on its newsfeed, and advertisers will start to see diminishing returns there. Google, meanwhile, is bestowing an ever-diminishing share of advertising revenue to publisher partners even as the total pot grows. That raises serious questions about its willingness to support content creators in a sustainable manner.

3. As dominant as Facebook and Google are, users still spend the majority of their time on the open internet – the vast ecosystem of apps, media, and gaming sites that are struggling to achieve a fair share of digital advertising, despite their investments in quality content.

That last point is especially important for advertisers looking to meet their audiences where they are. If they’re on the open internet, then programmatic advertising is the most effective way to reach them. But for marketers to trust the channel, it must transparently demonstrate return on investment.

That’s the central problem we are solving for advertisers at AppNexus. By investing heavily in machine learning and inventory quality, we are building an internet on which advertisers pay only for viewable impressions, get full visibility into where every dollar of each campaign ends up, and where at least 80 percent of advertiser spend ends up in publishers’ hands.

It’s an ambitious goal, but not an unrealistic one. We expect viewability to emerge as the default currency of the open internet. Advertisers can achieve much better results if they’re paying for views rather than impressions.

As the ad tech industry continues to consolidate, the supply chain will become clearer and less complicated, which will also make it easier to establish payment accountability. Marketplaces like AppNexus’ should determine and direct spend across the most efficient path to supply. Marketers can also supplement this increased efficiency with supply chain transparency platforms like Amino Payments, which can give them end-to-end visibility into where their programmatic campaign budgets end up. All of that sets the stage for a more transparent, liquid marketplace.

AppNexus is fully committed to building this future, but we can’t go it alone. This has to be a collaborative effort of partners, and we encourage the rest of the industry to join us in building a better internet that works for advertisers, publishers, and users alike.

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