AdTech: The End of Mad Men?

Gone are the days of the “three and out” era for the Ad man where agencies would be commissioned to produce three ads for print, TV and outdoor and get paid handsomely. The Advertising industry has been turned on its head thanks in part to the sheer scale of the Internet and it doesn’t look like the change is going to stop anytime soon.

Several commentators think the industry is going through a similar change to the automation of the financial markets in the 80s-it’s making advertising more precise and personalised.

What’s really started to shake things up is Real-time bidding (RTB) and more recently Programmatic Buying. Programmatic Buying is when artificial intelligence and big data are used to bid on an advertising inventory (e.g. a YouTube pre-roll video) through an advertising exchange, where potential ad buyers send their bids in real-time for the opportunity to show an ad to a consumer in one context on a particular device.

However, this phenomena of real-time bidding has been out there for a while: Google has used it for search ads for a long time but over the past 18 months it has spread across the web.

This AdTech industry has added a plethora of opportunities for new companies: There are ad exchanges, the marketplaces for ads, SSPs (supply-side platforms), where publishers sell their ad inventory, and DSPs (demand-side platform), where ad buyers access them. They also have DMPs (data management platforms) to store and buy information about users and other audience management and retargeting platforms. See a more thorough explanation here.

Around 20% of online display advertisements in America are now sold this way and by 2018 that figure is likely to rise to 50%. According to an AOL survey, 90% of businesses plan to grow their use of programmatic buying of ads by more than 50% in the next 6 months.

So why is everyone moving to programmatic?

Marketers see it as a more efficient, more automated way to buy their ads and it allows them to know so much more about their audience. The liquidity of the buying also optimises pricing which benefits publishers and advertisers. Another real advantage of programmatic buying is the way in which it enables impression-by-impression targeting i.e. it allows marketers to target consumers with specific traits across all devices.

But is it really the death of the ad agency ?

Yes, they may need to hire algorithmic traders and “Math Men” instead of “Mad Men” but the complexity of the ad tech business has actually helped rather than hindered them as clients may want to hold on to agencies for advice and creative services. The technology also hasn’t reached its optimum ability and marketers are still waiting for programmatic buying to become more efficient and transparent. It still cannot support skippable and mutable ads. So it’s not yet over for the Ad men of Madison Avenue but to even have a chance of surviving they must learn how to adapt in this new tech-focused world.