“The Struggle” is a trade-off between an Ability to Pace Ad Budget while also buying high Ad Quality in return.
On one hand, the entire programmatic supply chain — which is usually led by a large media agency — is incentivized to make sure all ad budget gets spent on time. Although practitioners usually refer to this myopic goal as "pacing", you'll also hear people say things like "the campaign is not scaling", which then leads to other proclamations such as "we need to heavy up".
On the other hand, the buyer — or agent of the buyer — can aim to buy the most ad quality possible as they spend the budget, but will likely struggle to spend earmarked budgets on time. That's why programmatic advertising is essentially a trade-off.
Programmatic is a Trade-off Curve
spend it all
ABILITY TO SPEND AD BUDGET
struggle to spend
AD QUALITY OUTCOMES
The area of economics known as microeconomics studies how individuals and firms make decisions in a world of scarcity. With a scarce amount of high-quality ad inventory on offer in ad exchanges and an abundance of lower quality "remnant" inventory, all the players in the supply chain will try to make themselves as well-off as possible while being constantly constrained to make sure all the ad budget always paces on time.
Given the trade-offs, Lemonade Projects examines how to do programmatic buyers — and the various agents of buyers —make decisions?
This is precisely why economics is known as the "dismal science". When buyers choose one decision over another, they ultimately end up having to give up something else. That means every decision has what is known as an opportunity cost.
For example, when buyers decide to sacrifice ad quality with the overriding need to pace budget, the cost is having to deal with skepticism, investigations, negative heads, buyer-agent trust, and a host of related issues that keep programmatic from reaching its potential as an advertising tool instead of spending tool.
Let's start with the first constraint — the ability to spend ad budget. A buyer can either spend all the budget or struggle to spend the budget.
The second constraint for the buyer is an option to either work smart and buy the best ad quality or take the lazy "easy-button" approach and buy low ad quality.
What is the best ad quality?
Imagine the following scenario that happens billions of times every day. When a DSP wins an auctioned impression, a sequence of ad quality probabilities come into play.
Is the user behind the ad impression a human or bot?
Is the as served on a legit site?
Did the ad actually render on the page or in the app?
Was the ad viewable?
The Purpose of Advertising
As you can see, the odds of making it all the way through this minefield of programmatic ad quality is certainly not easy. And when think about the idea of buying millions and billion of impressions, how many of them never have a chance to make it out alive and turn into what the likes of David Ogilvy or Mary Wells Lawrence would call an advertisement?
The reason why "impression survival" in programmatic is so monumentally important is that it gets at the heart of advertising's purpose.
Check out this fun 2-minute video called
Chances of Programmatic Success
The Trailer Version
if you increase your chances of buying high ad quality.
then you increase your chances of buying attention.
then you increase your chances of incremental gains.
Let's start at Point A in the trade-off curve. In this case, the buyer decides to relax the need to buy high-quality ads which makes it easy to spend pace budget. The more buyers spend, the more fees the supply chain earns.
Unfortunately, this decision has a really big opportunity cost as there is little chance of capturing a consumer's attention and driving ROI unless the ads a viewed by real humans.
At Point B, the buyer takes the opposite approach aiming for the best ad quality but ends up struggling to pace earmarked budget in line with the media plan.
For example, let's with the"easy button" approach you have enough budget to buy 10 ads and you buy all 10 with various ad quality from bad to great. The great buys translate into meaningful advertising and the bad ads are no chance of getting the desired outcome. If instead, you aim to bid on only the best quality in programmatic auctions, you might end up buying just 5 ads leaving you with half your budget unspent.
Point C "Programmatic Magic"
What if there was a magical way to spend all the budget time after time and create the perception of ad quality. In a business where buyer agents face "the struggle" every day, but are also constrained to look good for clients and hit their own profit goals,
a trade that is not supposed to exist magically happens.
the entire ad budget gets spent as promised……and the campaign reporting says the ad quality was the best.
the true ad quality was not so great in reality…
…but the money did get spent.
and everyone in the supply chain was paid fees for the pleasure.
you’re made to believe in good outcomes…peaches…but you actually bought a terrible outcome....lemons
you’re caught up in a “lemon market”
you buy bad quality.
because it is sold as good quality.