PROGRAMMATIC BUYING ROUNDUP

September 2015 PROGRAMMATIC BUYING ROUNDUP This year, 55% of US digital display ad spending will go toward programmatic ads. Whether you re on the buy or sell side of display ads, programmatic has become a big part of your world. emarketer has compiled this Roundup of key trends, insights and interviews around programmatic to help you understand how the fast-growing ecosystem is shaping up. presented by

PROGRAMMATIC BUYING ROUNDUP Overview US advertisers will spend $14.88 billion on programmatic digital display advertising in 2015, a 47.9% gain from 2014. Investments will rise by 37.6% next year to $20.41 billion or 63. of all US digital display ad spending, emarketer predicts. Digital video is the fastest-growing area of programmatic investment it will grow 204.3% this year but overall, programmatically traded dollars will account for just 28. of all US digital video ad spending in 2015, according to a new emarketer report, Digital Display Advertising: Nine Things to Know for 2015. In spite of heavy demand for premium programmatic video ad inventory, many of the bigger networks and publishers in possession of such high-quality content and advertising spots continue to eschew participation in programmatic, because they have little incentive to do otherwise. US Programmatic Digital Video Ad Spending, 2013-2016 billions, % change and % of total digital video ad spending 5. $0.19 2013 274.4% $0.71 12. 2014 204.3% $2.18 28. 2015 Programmatic digital video ad spending % change % of total digital video ad spending $3.84 76.4% 40. 2016 Note: digital video ads transacted via an API, including everything from publisher-erected APIs to more standardized RTB technology; includes advertising that appears on desktop/laptop computers as well as mobile phones and tablets; includes in-banner, in-stream and in-text Source: emarketer, Oct 2014 180370 www.emarketer.com While emarketer isn t optimistic these suppliers will completely change their minds in the next 12 months, it does expect to see connected TV and other over-the-top (OTT) video sources begin to funnel new inventory and advertising opportunities into programmatic. Though many lump set-top boxes such as Roku, Apple TV or other IPTV-enabling devices such as Google s Chromecast and Amazon s Fire TV Stick into the programmatic TV category, they are technically considered sources of digital video given that their content is powered via the internet, though it is ultimately viewed on the larger screen. With significant demand driving programmatic TV forward this year, such a distinction is noteworthy since many believe these addressable set-top boxes the first frontier for its implementation. Today, advertising options available through these devices are limited in general let alone in programmatic. But emarketer anticipates that will begin to change this year. And with the momentum behind the allure of reaching an addressable TV audience, we expect the majority of that inventory will be made available programmatically. Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 2

Programmatic Buyers, Sellers Disagree on What s Valuable Publishers and advertisers emphasize different types of targeting Are you on the buy side or sell side of the programmatic equation? How you answer that question likely determines what you think are the most valuable programmatic offerings, according to research. In July 2015, Technorati surveyed US buy-side and sellside advertising professionals about their programmatic advertising experiences. When each group was asked to choose their top three most valuable types of targeting, there was little consensus. On the sell side, advertising professionals felt the most valuable or desired form of programmatic targeting was first-look or exclusive access, the clear winner at 68.2% of respondents. Just over half of respondents said contextual targeting was valuable, and 49.7% said the same of the ability to target specific sizes or formats. But on the buy side, targeting ad sizes and formats was the least valued option, with just 23.2. First-look or exclusive access performed better, with more than half of buy-side advertising professionals citing it in their top three, but it was first-party data segments that won out among nearly seven in 10. Viewability was No. 2 on the buy side, with 60.2% support. Both options rated lower among programmatic ad sellers, less than half of whom thought they were very valuable. As a high-growth area of the digital advertising world, programmatic is evolving rapidly and growing pains have been part of the process for marketers and publishers alike, making such differences unsurprising. emarketer estimates that US advertisers will spend $14.88 billion on programmatic digital display ads this year, up 48.9% over 2014 spending levels. Next year, programmatic ad spending will grow another 37.2% and account for nearly two-thirds of the overall US digital display ad marketer. Most Valuable/Desired Types of Targeting that US Sell-Side Advertising Professionals Provide in Their Private Marketplaces, July 2015 First-look or exclusive access 68.2% Context (page type, content) 52.2% Specific ad sizes/formats 49.7% First-party data segments 45.2% Viewability 44.6% Geography/location 24.8% 0.6% Other 14.7% Frequency cap on visits Note: n=157; respondents chose their top 3 Source: Technorati, "State of the Industry: The State of Programmatic Partnerships" in conjunction with Digiday, Aug 31, 2015 195970 www.emarketer.com Types of Targeting that Have Most Maximized Their Private Marketplace ROI According to US Buy-Side Advertising Professionals, July 2015 First-party data segments Viewability First-look or exclusive access Context (page type, content) Frequency capping or session depth Geography/location Ad sizes/formats 24.1% 23.2% 31.5% 38. 53.7% Note: n=108; respondents chose their top 3 Source: Technorati, "State of the Industry: The State of Programmatic Partnerships" in conjunction with Digiday, Aug 31, 2015 69.4% 60.2% 195960 www.emarketer.com Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 3

Fraud, Brand Safety Take Center Stage Among Ad Buyers Programmatic buyers worry about brand safety most, digital buyers about fraud From the looks of it, ad fraud, viewability and brand safety may turn out to be big digital ad buzz phrases this year. In a November 2014 study by Integral Ad Science, these emerged as the three most important aspects of media quality among US digital media buyers. One-third of respondents in this group ranked ad fraud as No. 1, while brand safety accounted for 26% of responses and viewability over one-fifth. The problem, though, was that suppliers didn t completely agree. While ad fraud came in as the most important aspect of media quality here, too, transparency the second-tolast response among buyers landed in second, pushing brand safety to third and viewability to fourth, cited by 18% and 15%, respectively. Integral also found a big difference between buyers and sellers feelings toward viewability just 22% of buyers said the Media Rating Council s standard for display viewability was strict enough, compared with 61% of suppliers. While suppliers will likely work toward battling online ad fraud this year, they would also be wise to focus on buyers other needs or risk losing trust. Programmatic is one area of digital advertising where these three concerns are especially prominent. Last year was a big one for programmatic advertising, but November 2014 polling by Undertone unveiled that concerns about brand safety, ad fraud and viewability haunted marketers and agencies who bought inventory programmatically, which will no doubt have an effect on where they choose to buy this year. US marketers and agencies made it clear that they wanted brand safety most when purchasing programmatically the No. 1 concern among respondents. Those polled wanted to make sure they were getting their money s worth, as well: Around one-quarter of respondents from each group cited viewability as a quality concern when purchasing programmatic inventory. Buyers were also aware that programmatic ads are no strangers to bots. Nearly three in 10 agencies were concerned about nonhuman traffic, as were more than one-fifth of marketers. Most Important Media Quality Indicator According to US Digital Media Buyers* vs. Suppliers**, Nov 2014 Transparency 17% Viewability 21% Buyers* Geocompliance 3% Viewability 15% Ad fraud 33% Brand safety 26% Transparency 19% Brand safety 18% Geocompliance 4% Suppliers** Ad fraud 44% Note: *includes agencies, brands, marketers and trading desks; **includes ad networks, DSPs, exchanges, publishers and SSPs Source: Integral Ad Science, "2014 Year-End Survey," Dec 23, 2014 183766 www.emarketer.com Primary Safety/Quality Concern When Buying Inventory Programmatically According to US Marketers and Agency Professionals, Nov 2014 Viewable inventory 24% Lack of nonhuman traffic 29% Uncluttered environment 4% Brand-safe environment 43% Uncluttered environment 11% Brand-safe Lack of environment nonhuman 4 traffic 22% Viewable inventory 27% Agencies Marketers Source: Undertone, "Programmatic: What's Really Going On?" Dec 22, 2014 183706 www.emarketer.com Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 4

Expect More Programmatic Ads to Pop Up on Mobile Mobile ranks as the No. 1 area of opportunity for programmatic Following triple-digit gains in 2013 and 2014, programmatic ad spending will continue on a solid growth trajectory in 2015, rising nearly 5 to $14.88 billion, or 55. of total digital display ad spending, emarketer estimates. According to February 2015 research by RBC Capital Markets and Advertising Age, though, programmatic still makes up a small share of marketers total budgets. Fully 45% of US marketers put 2 or less of their marketing spend toward such placements, while just 8% invested over 2. This will change in 2015, however, as nearly twothirds of respondents intended to significantly or modestly increase their programmatic ad budgets in the coming year. Mobile will see its fair share of those spending increases; it ranked as the No. 1 area of opportunity for programmatic, cited by 33% of marketers. Video landed in second, called out by one-fifth of respondents, while no other segment saw even half the response rate of mobile. Of course, it s not as if people aren t already using mobile for programmatic. February 2015 research by Digiday found that plenty of US ad buyers and sellers were involved in mobile programmatic advertising. Among those polled, 69.1% said they conducted mobile advertising programmatically. This was the second-highest response, trailing only display (85.6%) and slightly ahead of video (67.1%). Change* in Programmatic Advertising Budget According to US Marketers, Feb 2015 Modestly decrease 2% Stay the same 36% Significantly increase 22% Modestly increase 4 Note: n=905; *over the next year Source: RBC Capital Markets and Advertising Age, "Social Media Survey," March 15, 2015 187018 www.emarketer.com Channel/Format Where US Marketers See the Most Opportunity for Programmatic Advertising, Feb 2015 Native 1 Social media 14% Display 16% TV 8% Video 2 Mobile 33% Note: numbers may not add up to 10 due to rounding Source: RBC Capital Markets and Advertising Age, "Social Media Survey," March 15, 2015 187020 www.emarketer.com emarketer estimates that, following massive growth of 234.3% in 2014, US mobile programmatic display ad spending will nearly double this year, rising 88.4% to $8.36 billion, or 57. of total mobile display ad spending and 56.2% of total programmatic digital display ad spending. Next year, 68. of mobile display ad dollars will go toward programmatic as mobile accounts for nearly 7 of programmatic digital display ad spend. Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 5

Programmatic Sellers vs. Buyers: Who s More Hooked On Mobile? Mobile grabs nearly 4 of sellers programmatic inventory, 3 of buyers spending Marketers are excited about mobile programmatic, but based on recent research, sellers are further ahead when it comes to adoption. No matter which side s more advanced, one thing s for sure: Inventory and spending are exploding. According to January 2015 research by Advertiser Perceptions, US media sellers allocated nearly 4 of their programmatic ad inventory to mobile. This was higher than the other two channels studied by 6 percentage points or more. However, buyers exhibited different behavior. Among this group, display still ruled, grabbing 41% of programmatic budgets, vs. 28% of inventory. Mobile took three in 10 programmatic dollars just 1 point above video. Research released in March 2015 by PulsePoint showed explosive growth in mobile inventory and spending worldwide on one part of programmatic: real-time bidding (RTB) ads. Gains were strongest in Asia, where quarter-over-quarter growth was close to 192% in Q4 2014 alone, compared with 82.6% on desktop. Meanwhile, mobile RTB inventory rose 177.4% in Europe and 150.4% in North America in the final quarter of last year, vs. respective desktop gains of 85. and 56.6%. A look back at previous quarters suggested that growth isn t slowing any time soon, as quarterly RTB mobile inventory gains had accelerated throughout the year. RTB mobile ad spending showed even more impressive growth across the board. In both Asia and Europe, expenditures on mobile RTB placements soared about 33 in Q4 2014, and in North America this figure came in right under 30. Just like with inventory, all mobile spending growth rates were above those on desktop by the end of last year, and increases had made huge jumps quarter over quarter. emarketer expects this year to be a tipping point for the US programmatic market, as spending on mobile programmatic display ads will surpass that on desktop to grab a 56.2% share of total programmatic digital display ad spending. That share will leap again next year to nearly 7. Allocation of Programmatic Ad Budget/Inventory According to US Media Buyers vs. Sellers, by Channel, Jan 2015 % of total budget/inventory Video 29% Mobile 3 Buyers Display 41% Display 28% Video 33% Sellers Mobile 39% Source: Advertiser Perceptions, "Programmatic Advertising Report, Wave 3," March 2015 187914 www.emarketer.com Real-Time Bidding (RTB) Desktop and Mobile Inventory Growth Worldwide, by Region, Q2-Q4 2014 % change vs. prior quarter among impressions served by PulsePoint Asia Europe North America Mobile Q2 63.8% 38.1% 15.3% Q3 117.7% 76.2% 76.4% Q4 191.6% 177.4% 150.4% Desktop Q2 36.5% 41.2% -17. Q3 98.9% 77.6% 25.2% Q4 82.6% 85. 56.6% Note: based on activity on the PulsePoint platform, broader industry metrics may vary; includes display inventory; excludes video and mobile in-app formats Source: PulsePoint, "Programmatic Intelligence Report 2014," March 30, 2015 188200 www.emarketer.com Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 6

Desktop vs. Mobile: Where s Programmatic Marketplace Quality a Bigger Issue? Marketplace quality a bigger problem for desktop display ads than mobile Quality issues in the programmatic marketplace are a problem across the board. In April 2015 polling by ExchangeWire in association with OpenX, 94% of digital marketing professionals worldwide from ad tech providers, agencies, brands, data/measurement/analytics providers, publishers/media owners, trading desks and more said programmatic marketplace quality was a very or somewhat serious issue. May 2015 polling by Digiday for Chango and Rubicon Project found that all of the leading obstacles to programmatic advertising cited by digital marketers in North America and the UK related to marketplace quality issues. Nearly six in 10 of respondents cited fraud as a top hurdle to buying ads programmatically, and the same percentage pointed to site quality and brand safety concerns. Fully 56% faced obstacles related to viewability, and 46% said the same about waste, or ads that end up targeted to the wrong demographic. Similarly, when May 2015 polling by Strata asked US ad agency professionals their biggest fears about using programmatic buying, inventory transparency and inventory quality were each cited by nearly 5. ExchangeWire found that programmatic marketplace quality was a bigger problem for desktop than mobile. More than nine in 10 digital marketing professionals said marketplace quality in desktop display advertising was an issue. Data/measurement/analytics providers and publishers/media owners were the most likely to view this as a serious issue, with every respondent from both groups saying so. With the exception of brand respondents, 89% or more from each company type said the significance of marketplace quality in desktop display was an issue. Leading Obstacles to Programmatic Advertising Usage Among Digital Marketers in North America and the UK, May 2015 Fraud Site quality/brand safety concerns Viewability Waste (ads that end up targeted to the wrong demographic) 46% 56% 58% 58% Note: n=259 Source: Chango and Rubicon Project, "State of the Industry Q2 2015: 3, 2, 1 Brand Lift Off" conducted by Digiday, June 11, 2015 191216 www.emarketer.com Significance of Programmatic Marketplace Quality in Desktop Display Advertising According to Digital Marketing Professionals Worldwide, by Company Type, April 2015 Serious Somewhat Minor Not an issue serious issue issue issue Data/measurement/ analytics provider 8 2 Publisher/media owner Trading desk Brand Agency Ad tech provider Other Total 71% 71% 5 44% 44% 57% 54% 29% 24% 3 49% 45% 43% 39% 5% 2 5% 11% 7% 2% 1% Note: numbers may not add up to 10 due to rounding Source: ExchangeWire, "Perceptions, implications and the future of online marketplace quality in programmatic advertising" in association with OpenX, June 5, 2015 191103 www.emarketer.com Meanwhile, a lower but still high 84 said programmatic marketplace quality was an issue in mobile display advertising. Data/measurement/analytics providers led the pack once again, and agencies and Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 7

trading desks also ranked near the top by this metric, with about nine in 10 respondents each. Rates from publishers/ media owners, brands and ad tech providers were below average. Nine in 10 digital marketers in the Chango and Rubicon study intended to increase programmatic s share of digital ad spending somewhat (39%) or significantly (51%) by the end of 2016. And ExchangeWire found that overcoming programmatic marketplace quality issues could boost spending even more. Fully 84% of digital marketing professionals believed that media buyers would invest more in programmatic advertising if marketplace quality were no longer an issue. Who should deal with the problem? ExchangeWire respondents agreed that both sides needed to take responsibility for programmatic marketplace quality. Publishers as well as supply-side platforms and exchanges were each cited by 98, while 91% pointed to demand-side platforms. Fully 85% also believed governing and trade bodies should take part. Significance of Programmatic Marketplace Quality in Mobile Display Advertising According to Digital Marketing Professionals Worldwide, by Company Type, April 2015 Data/measurement/ analytics provider Publisher/media owner Trading desk Agency Brand Ad tech provider Serious issue 5 5 38% 35% 3 19% Somewhat serious issue 5 32% 52% 56% 5 56% Minor issue Not an issue Other 5 5 Total 33% 51% 15% 1% Source: ExchangeWire, "Perceptions, implications and the future of online marketplace quality in programmatic advertising" in association with OpenX, June 5, 2015 191105 www.emarketer.com 18% 1 9% 1 25% 1 Programmatic Buyers Demand Placement Transparency Loss of quality control is a key issue when buying programmatic inventory Programmatic spending is set for huge growth in 2015. According to US media buyers surveyed in March 2015 by Digiday in association with Sonobi, nearly nine in 10 said increasing programmatic ad spend would be a focus of their future digital ad strategy. However, the industry still faces several hurdles before programmatic becomes universal, and quality control is one of the top areas for improvement. Among respondents, 40.7% said there was a significant or very significant loss of control when purchasing ad inventory programmatically vs. direct, and an additional 43.3% said there was at least a moderate loss of control. Just 16% felt little to no control was lost. Extent to Which Quality Control Is Lost When Purchasing Inventory Programmatically* According to US Media Buyers, March 2015 No control is lost 4.7% Not too much control is lost 11.3% Moderate loss of control 43.3% Very significant loss of control 12. Significant loss of control 28.7% Note: *vs. direct Source: Digiday, "Premium Programmatic: Turning What If Into What Is" in association with Sonobi, March 26, 2015 187708 www.emarketer.com With quality concerns such as viewability haunting programmatic buyers, it makes sense that placement is Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 8

critical too. Nearly three-quarters (73%) polled by Digiday said placement transparency was essential in their decision to move more ad spend from direct to programmatic the second-highest response, behind only audience targeting (86%) and well ahead of third-place inventory availability forecasting (44%). Unfortunately for publishers, just 31% of buyers felt placement transparency was being sufficiently addressed, and such attitudes were limiting spending. More than six in 10 respondents said unsatisfactory placement transparency was the primary barrier preventing them from moving more spending from direct to programmatic. This was the top response and more than 20 percentage points ahead of No. 2 inventory forecasting (40.5%). Placement also plays a huge role in whether or not buyers define programmatic inventory as premium. The majority of Digiday respondents said placement on a website or platform was the primary criteria for considering certain programmatic inventory as premium, the No. 1 response, and placement location on a page followed, at 40.4%. Following massive growth of 135.5% in 2014, emarketer estimates that US programmatic digital display ad spending will rise 48.9% this year to $14.88 billion, or 55. of total digital display ad expenditure. Programmatic sellers that work closely with buyers and have clear lines of communication about quality and ad placement stand to benefit from those extra programmatic dollars. Barriers to Moving More Ad Spending from Direct to Programmatic According to US Media Buyers, March 2015 Unsatisfactory placement transparency Unsatisfactory inventory forecasting Unsatisfactory first-look impressions Unsatisfactory amount of rich media 26.1% 34. Unsatisfactory page-level share of voice 19. Unsatisfactory audience targeting 19. 40.5% 61.4% Source: Digiday, "Premium Programmatic: Turning What If Into What Is" in association with Sonobi, March 26, 2015 187710 www.emarketer.com Programmatic Creative: Look to Existing Processes for Guidance Marketers, agencies look to evolve creative process to meet demands of programmatic era Programmatic techniques have brought speed and efficiency to media buying. Now it s time for the creative side of the ad business to follow suit and become more efficient, nimble and innovative, according to an emarketer report, Creating Ads on the Fly: Fostering Creativity in the Programmatic Era. The creative process of the past isn t sufficient to keep up with the needs of the programmatic era. But a significant amount of infrastructure change and mindset change will need to happen before the new rules of creative development emerge. Frequency with Which US Digital Marketers Use Data Signals* to Adapt Creative Messages in Ads, Nov 2014 Rarely 27% Never 1 On a regular basis 22% Occasionally 41% Note: *such as location, day of week, time of day and other audience data Source: Digiday, "The Rise of Creative in a Programmatic World" in partnership with Celtra, Feb 12, 2015 186040 www.emarketer.com Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 9

Looking to existing processes for guidance can help marketers and their agencies navigate the coming changes: Consider it an evolution rather than a wholesale change: Digital marketers have long wanted the ability to target consumers with more personalized creative. Techniques such as dynamic creative optimization help pave the way toward future audience-driven creative processes. The truth is, our CRM business has been running daily optimizations for CRM for a long time, said Christian Purser, chief digital officer at M&C Saatchi, during a panel discussion sponsored by Google in February 2015. We ve seen dynamic banner templates and dynamic banner ad serving.... It hasn t just arrived from outer space. We ve been building up in different ways to this moment. Compare the needs to that of social media: In some respects, this creative evolution has its roots in social media, where marketers and agencies have had to adapt their workflow to meet the demands of alwayson marketing. When social burst on the scene seven or eight years ago, [we said], How on earth would we produce seven bits of creativity a week? There s no doubt we have to produce more and more, and make that more and more cost effective over time, said Purser. The key difference is the access to data that programmatic provides, said Luke Kintigh, global media and content strategist at Intel. We re used to it on the social side. But programmatic takes it to a whole other level with personalization, because of the proliferation of DMPs [data management platforms] and all of this data. Borrow from your content strategy: Thanks to social media, most marketers have a lot of content available. That content can easily be sliced and diced into various ads. OneSpot is one such company that takes a client s content and turns it into multiple ad units. For each piece of content we ll create several different sizes of display ads, mobile ads, social ads and soon, native ads, said Matt Cohen, OneSpot s president and founder. We have a crawler that automatically looks at the client s content, pulls out the headlines, the video, thumbnail, the full video, the photo. It also does an analysis of the content to figure out what it s about, what are the keywords in it and so forth. Then it goes into an ad studio where the client can review it, and alternate variations can be created. With so much content available, the chance that you re going to have something for anybody in your target audience is extremely high, and you re likely to have something that s actually really good for that specific person, Cohen said. Look to direct marketing: In the direct mail world, audience segments and matrices are created to inform the creative messaging that is distributed to different audiences. In programmatic, despite technology enabling the opportunity for as many audience segments as possible and the same variation in creative messages, this doesn t happen, said Paul Frampton, CEO of Havas Media. Retailers Account for One-Quarter of Programmatic Spend Digital display ad spending skews heavily programmatic US retailers spend more on digital advertising than any other industry, and they also lead all verticals in programmatic spending. emarketer estimates that nearly 25% of programmatic digital display ad dollars will be spent by the retail industry this year. Digital display ad spending by US retailers was also more programmatic-heavy than in any other industry. Retailers are spending 70. of digital display budgets on programmatic buys this year. Overall, the industry will spend $3.71 billion on programmatic digital display ads in 2015. Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 10

Retailers are using programmatic to boost brand awareness as well as for a host of other goals, according to research. Industry subsegments are adopting programmatic display at different rates. Online retailers that need to make up shipping costs and those that trade in commodity products that compete with Amazon could spend as high as 10 programmatically. Luxury, on the other extreme, could be as low as 2 since this sector likes maintaining control of ad placements and has the margins to play around with pure branding. Brand safety is brought up repeatedly as a concern among retailers. The importance of ads not running against unflattering content is a general issue, but particularly for more image-conscious categories like luxury retail. According to Aaron Kaliner, vice president of direct response and commerce solutions at programmatic mediabuying platform Rocket Fuel, it s one of the reasons why these brands have been slower to adopt programmatic than others. Private media placements will begin changing some of this reticence, though. In probably 2015 or 2016, luxury retailers will realize that they can bring programmatic and audience buying to their publisher relationships and get great performance and efficiency, he said. US Digital Display Ad Spending, by Industry and Transaction Method, 2015 billions and % of total industry ad spending Retail CPG & consumer products Automotive Telecom Financial services Computing products & consumer electronics Entertainment Media Travel Healthcare & pharma Other Programmatic* $3.71 $2.10 $1.57 $1.58 $1.66 $1.04 $0.78 $0.62 $1.09 $0.19 $0.54 % of industry ad spend 70. 63. 50. 52. 55. 52. 41. 38. 68. 25. 40.8% Nonprogrammatic $1.59 $1.23 $1.57 $1.46 $1.36 $0.96 $1.13 $1.01 $0.51 $0.57 $0.79 % of industry ad spend 30. 37. 50. 48. 45. 48. 59. 62. 32. 75. 59.2% Total $5.29 $3.33 $3.14 $3.05 $3.02 $2.00 $1.91 $1.63 $1.60 $0.75 $1.34 Total $14.88 55. $12.17 45. $27.05 Note: numbers may not add up to total due to rounding; includes advertising that appears on desktop/laptop computers as well as mobile phones and tablets; includes banners, rich media, sponsorship, video and other; *digital display ads transacted via an API, including everything from publisher-erected APIs to more standardized RTB technology Source: emarketer, May 2015 188679 www.emarketer.com Keeping the Art in the Automated Buying and Selling of Media Jeff Hirsch President CPXi As programmatic advertising continues to forge ahead, marketers are becoming more mindful of what s at stake for their creative processes. Jeff Hirsch, president of CPXi, a digital media company, spoke to emarketer s Danielle Drolet about creative s role and future within programmatic. emarketer: Is programmatic buying redefining what creative means? Jeff Hirsch: It s not redefining what creative means. Creative still comes down to how do you develop messaging that engages a consumer? No matter how media is transacted or ads are delivered, creative is still going to be that. Programmatic media is the automation of the buying and selling of media. We re thinking about how to automate more of the elements that are used to portray the creative message. There s still an art to buying and selling of media regardless of whether or not it s automated. And, at this point, we re not talking about automating the development of the creative messaging. Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 11

We think the next step in programmatic creative is automating the generation of the elements to be able to display the creative message at a speed that is comparable to how you can buy and sell media. We think the next step in programmatic creative is the ability to display the creative message at a speed that is comparable to how you can buy and sell media. emarketer: What s the difference between programmatic creative and dynamic creative? Hirsch: Dynamic creative is the automatic changing of information that s displayed within the creative, based on data about the consumer. It s used quite a bit in online retail, where a consumer has visited a retail website. For example, they looked at a specific product. They leave that site without making a purchase. Then, that data can be used to display that same item automatically on different places on the web. Meanwhile, we think of programmatic creative as a much larger term that encompasses dynamic creative, but can also include template-based creative generation. It s the utilization of a wide variety of templates where there s a tremendous amount of creative control. And then, those are changed based on the dynamics of your media buying, and who you re reaching. It s a subtle difference, but what s significant is that brand advertisers and publishers want to be able to look at their ads and approve them before they run. The templatebased system puts a lot more control into the hands of the buyer and seller even though the process is still highly automated. emarketer: How are marketers and agencies evolving to support the increased creative needs for programmatic? Hirsch: It s a tough thing to do. It s very expensive to [produce] a lot of creative. There s a lot of value in having the tools and capabilities so that when creating one ad, you re able to propagate it to all the ad sizes you may want to run, and be able to do that all automatically. The automated generation of the elements of creative is about finding a way to at least take off a piece of that long process of production, approval and cost. It s an interesting dynamic that s changing, and driving more marketers to want to use these tools directly. They realize the savings they can get vs. the means they used previously to generate creative. We re seeing more marketers interested in doing more of their own work, both on the media buying side and programmatic creative side. emarketer: Is it expensive to create ads on the fly? Hirsch: It can be. If you previously had one ad, and now you have to have 50 ads to be able to have a different message, of course, that has potential of being 50 times more expensive. And, that s why we re seeing tools today that provide the capability for marketers to get around a large chunk of that cost. We think of programmatic creative as a much larger term that encompasses dynamic creative, but can also include template-based creative generation. Programmatic creative looks at how to make it possible to take advantage of the media without using all your money to create the creative elements. If you re trying to reach consumers, and it s costing you X rate to reach them. Then, add in very high creative costs, and you ll have less money for media. You re going to reach fewer people. The key is how to bring down that cost to have your media dollars spent on reaching people. emarketer: What are the industry s big questions about the role of creative within programmatic buying? Hirsch: In the past, brands were measuring results by where they ran their ad. Now, they re going to have to measure their results by where the ad ran, what the message was and who the person was that was reached with that message. A significant level of complexity is being added to the idea of optimizing a brand s campaigns. The next issue that s going to come with programmatic creative and programmatic buying is that we re going to be challenged with how to programmatically optimize media against message against consumer. emarketer: If you were to envision the way advertising creative is developed five years from now, what would the process look like? Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 12

Hirsch: We re still going to see the creative process, as we started this conversation; people figuring out what s going to appeal to other people. The creative itself, or the essence of the idea, is not going to be taken out of people s hands. I think we ll see that the generation of the creative elements will become completely automated, and will carry from print and TV in through digital display, mobile, social and video. And, this will bring down the cost of personalization, which will increase the utilization of it. Intel on How Programmatic Intensifies Content Marketing Luke Kintigh Global Media and Content Strategist Intel Intel believes its wealth of social media content will be a strong foundation for crafting ad creative that is relevant to finely targeted audiences. Luke Kintigh, global media and content strategist at Intel, spoke to emarketer s principal analyst Debra Aho Williamson about the challenges and the opportunities of applying programmatic techniques to creative development. emarketer: What steps have you taken to bring programmatic techniques into your content marketing and advertising? Luke Kintigh: You have to have a fairly large volume of content to match all the capabilities [of programmatic] in terms of retargeting and sequencing and putting really personalized content in front of the right audiences. We finally got to that place about seven or eight months ago with Intel IQ, our branded digital magazine. We are producing about 60 to 70 posts a month, and we re covering topics similar to a traditional news stream. Once we hit that threshold, we said, OK, now how do we actually get content out in the market that s highly personalized and that will actually nurture an audience over time vs. just going out and putting a bunch of money behind content and hoping for a lot of traffic and a lot of clicks. When we promote content, how do we pick that audience that engages with it and then start to do flights of content to that audience that is relevant, that is highly personalized to them over time? [And how do we do it so that content] will hopefully result in a greater relationship with that audience and build loyalty and trust with the brand? emarketer: How has the drive toward programmatic influenced the way you develop and refine the content you use for advertising? Kintigh: Historically, we would have content that was already predetermined, buttoned up. Here s the media plan, here s the destination, here s the creative. There wouldn t be a whole lot of adjustments outside of optimizing from a media perspective. When we promote content, how do we pick that audience that engages with it and then start to do flights of content to that audience that is relevant? Now we re trying to match agility with planning. We still want to plan out the content and tie it to the media spending. But we also want to build in the agility where we are able to actually replicate those best pieces of creative or best pieces of content midflight based on the results that we re getting and the insights that we re seeing. If we do 50 stories that we promote and launch initially, only about 1 of those will drive 9 of our traffic and engagement after we optimize against performance and things like cost efficiency. So now it s a matter of how do we shift budget and how do we shift resources over to those top-performing pieces of content, reallocate budget toward the content that s working and also where it s working? Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 13

The next step is what is it about this creative or this content that s working? How do we replicate that or create more of it? And that s where it s a matter of looking at the insights and the data midflight and saying, OK, here s what we re seeing. We re going to shift budget, we re going to shift resources and we re going to double down on those outliers that are working. It could be everything from small little messaging cues like this word works better than that word, these images work better than these images. We found list posts work really well when you use a number in the headline and you can format it in a list format. We also found that putting the interactive assets, like a video, up top in a long-form piece of content vs. in the middle works well. That s been the big shift for us just trying to build agility into the process. emarketer: What about taking it a step further? In display advertising, advertisers can sub in different copy or change a tagline, change a background, put in a different message. Is that possible right now through programmatic native advertising? Kintigh: I think it s close. I can t say that we re doing that right now, but it s something that we re looking at really closely to do in the future. A simple application of how we foresee this working isusing our DMP to export all these audiences that we have first-party data on into the demand-side platforms. If you re targeting females, using an image of a female vs. a male in the creative, or if we know this person is a small business owner vs. a broad consumer, we re going to tailor the image or the messaging according to that. I do think there are a lot of ways you can automate that. Where we re at now is just getting our production team more plugged into how to leverage our DMP and all the targeting that we can pull through some of the solutions we have. That s a big hurdle right now internally, just changing the mindset of our production team to say, instead of using broad personas, let s actually look at really granular data on an audience. emarketer: Do you think that programmatic is redefining what creative means? Kintigh: Yeah, I definitely think so. Of course going back to the days of advertising of print and broadcast, it was all about that 30-second spot or that beautiful print ad. And then you get into the social side and you ve got to create a lot of content, because you ve got audiences that want it. We re producing at least one post a day on Facebook. On Twitter, we re doing 10 tweets a day. But now it s almost taking it to a whole other level because of programmatic, because of the proliferation of using DMPs and all of this data. So now I think marketers and advertisers have access to so much more granular data that it s transforming how to create content because users have so many options. And you can get so personalized today because the data is there, the access to data is there. First-Party Data Top of Mind for Brands Buying Programmatic Video Ads Lauren Wiener Global Head, Sales and Marketing Tremor Video Many marketers have their pulse on the biggest influences affecting video advertising today. Lauren Wiener, global head of sales and marketing at Tremor Video, is one of them. Wiener recently spoke with emarketer s Lauren Fisher about programmatic video seeing a greater emphasis on first-party data, brand demand for performance-based guarantees and programmatic TV. emarketer: How would you describe the current state of programmatic video advertising? Lauren Wiener: Programmatic has made its way from display to video. Last year, there was a huge uptick Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 14

in programmatic video conversions. Many of those conversations were about moving brand dollars over to programmatic, which is different than what s happening in the display landscape where programmatic is more of a direct-response play. Programmatic video is not just about direct-response dollars. Brand marketers like Kraft and Kellogg s want to use their own first-party data to add value to their campaigns. emarketer: What are brands and agencies asking for this year that they haven t in the past? Programmatic video is not just about direct-response dollars. Wiener: Transparency has become a much bigger part of the conversation both in terms of viewability and brand safety. Agencies and marketers also want more performance guarantees in their buying models. There has always been guaranteed performance models in direct response. But what s new is offering these types of guarantees for branding, where advertisers are buying on outcomes vs. just on reach and impressions. Everybody knows their own first-party data is far more accurate than third-party data. That trend will only continue. Wiener: We have seen increased interest in first-party data vs. third-party data. Everybody knows their own first-party data is far more accurate than third-party data. That trend will only continue. Marketers want to be more fine-tuned about who their consumer is. That purchase data helps them figure out their targeting with greater accuracy. emarketer: Any thoughts on programmatic TV? Wiener: This year is not the tipping point for programmatic TV. The ability to do dynamic ad insertion is incredibly limited. There s no availability right now to do interactive ads. There s still a lot of work to be done on the operational workflows and getting it so that it s not just programmatic in the PR pitch, but also on the back-end. emarketer: This seems a bit counter to how brands have historically bought digital impressions. Wiener: There are brands that just want to buy the way they ve bought in the past. They ll move money over from TV and buy on demos validated by Nielsen Online Campaign Ratings or comscore validated Campaign Essentials exactly the way they do it in television. Those are the brands that have awareness goals and want an aggregate gross rating point across every way they buy. However, there are a lot of brands that want the guarantee that their ad was seen. Entertainment is one category that has gone into the cost-per-view-complete model. Automotive is another industry that is interested in making sure its ads are seen. emarketer: You mentioned brands turning to programmatic to activate their own first-party data. Are there trends surrounding this and other data types that brands are using to inform their buys? Programmatic Buying Roundup Copyright 2015 emarketer, Inc. All rights reserved. 15

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