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15 reasons why programmatic is not mainstream

Some of the earliest Hong Kong programmatic buying agencies opened three years ago, with more firms entering the market ever since.

However, programmatic buying has not become mainstream in Hong Kong.

The second part in this programmatic buying series will explore the reasons for resistance against using programmatic buying among marketers, publishers and media buyers.

Read up on Part 1 about the present state of programmatic buying and how its development will unfold here while Part 3 will discuss the impact of programmatic buying on media buy and other industries.

Below are some reasons why programmatic buying is still a niche practice in Hong Kong.

1. Lack of education

Yean Cheong, VP of marketing solutions Asia Pacific at Cadreon, cites lack of education about programmatic buying within the industry as a ,major reason why it is not yet mainstream.

“From a capability perspective, Hong Kong is ahead of Asia.  There is no shortage of companies capable of delivering programmatic buying,” she said.

“But marketers don’t have an understanding of programmatic buying.”

Michelle Ho, head of marketing at Brand’s, agrees, putting the onus of promoting programmatic buying on media buyers.

“The media buyers need to promote programmatic buying to marketers.  If they don’t help out in this respect and rely on the client to discover programmatic buying themselves, to be proactive and update themselves about this latest digital marketing trend, it simply won’t happen,” she said.

Ho believes there’s no big incentive pushing media buyers to develop the practice of programmatic buying.

“Media buyers care more about traditional media buy, which still offers the biggest commissions,” she said.

“Their agencies have already invested money in required systems, which are already in place whereas programmatic buying requires an enormous investment in new systems and is difficult to understand and sell.”

She sees agencies missing out on business opportunities.  The earlier a company starts gathering customer data through programmatic buying, the greater their competitive advantage over market latecomers in the future.

“By starting early, you can develop tried and testing programmatic buying solutions and people will want to buy from you,” Ho said.

Meanwhile, Siva Ganeshanandan, APAC digital marketing director at Adobe believes it is simply a matter of time.

He said local marketers question the value of traditional metrics such as impressions, and just like in search and traditional display advertising, clicks in the programmatic buying world are not intent-based.  Instead, they are intermediate metrics indicating that the user is potentially en route to purchase.

“The development of programmatic is slow in Hong Kong because brands question immediate results like impressions.  Instead, advertisers want good business metrics where exposure is about getting someone to make a purchase,” Ganeshanandan said.

“Brands are willing to pay more for a targeted ecosystem and programmatic inventory but you need the market to mature and observe the business metrics lining up.”

2. Low digital marketing expenditure

Programmatic buying is currently being conducted for digital ad spaces.  The growth of programmatic buying as we know it goes hand in hand with the growth of digital media buy in general.

Although digital ad spend is growing in Hong Kong, it remains low compared to traditional media expenditure, meaning fewer opportunities for using programmatic buying.

“The Hong Kong market has not gone digital – less than 10% of ad budgets are invested in digital.  Programmatic is not even on the radar,” Cheong said.

For example, it makes more sense to optimise TV spending because it makes up such an enormous portion of the marketing budget.

3. There is less demand for online conversions because Hong Kong’s eCommerce market is small

Raymond Leung, head of digital at Mindshare, said Hong Kong clients are less receptive to programmatic buying because digital marketing is used more to build brand awareness than for conversions into online sales.

But eCommerce is also usually one of the biggest categories of spenders in the programmatic buying space.

“Few people are doing eCommerce in Hong Kong compared to the US and mainland China, with few local Hong Kong eCommerce sites on the market. That’s why the need for online conversions in terms of online purchases is not as high compared to other markets,” he said.

“If eCommerce is the main channel through which a brand sells its products, it makes sense to use programmatic buying because it’s the most cost-efficient method of digital media buy that brings conversions, for example, by bombarding the customer with many different creatives to persuade them to make an online purchase.

“However, if you placed the same crazy number of ads for a brand whose main distribution channels are offline, cost per transaction would be high.”

4. Marketers fear ads showing up on inappropriate sites will damage brand image

What’s more valuable to a brand than its reputation and brand image?

That’s exactly what could be put at risk if machines control what sites a brand’s ads will show up in, as in the case of doing programmatic buying on public exchanges with real-time bidding systems.

Although less than ideal sites can be blacklisted, it’s not 100% guaranteed that your ads won’t show up on an inappropriate site.  Moreover, over-screening sites will ramp up the cost of programmatic buying.

“You can blacklist extremely political or inappropriate websites for the brand. For example, if your client is an airline, you can blacklist websites discussing plane accidents. But if you do too much screening, you lose the scale that makes programmatic buying cost-efficient,” Cheong said.

Luxury and premium brands should instead opt for private networks or premium inventory programmatic buying.

Ho disagrees with premium brands jumping the gun and eliminating too many platforms that could potentially give the brand exposure in a cost-efficient way.

“If you’re too picky about your pool of websites, you won’t get enough data.  It’s best to use a small part of your budget to try out programmatic buying for a range of platforms, track them all for several campaigns and see which one brings you the most sales.  That’s when you can start eliminating platforms,” she said.

5. Programmatic buying is expensive and companies within the field are too specialised

Because services within programmatic buying are divided by type of service and platform, paying for all of these services can be very expensive for in-house marketers.

“It costs a lot to track customers on many channels and to test many creatives, necessary for building a database of customer data,” Ho said.

“There are companies doing tracking, re-targeting, acquisition and social media tracking. Then, they only monitor traffic for platforms in their own networks. There is no one-stop shop for all of these services.”

Data consolidation platforms and tools are also separate, meaning marketers have to pay another company for yet another service.

Even after you create a dashboard of data on the data consolidation platform, there can be instances where the data is broken because different companies collecting data about the user’s customer journey gather the data in different formats or through different methods.

The different service providers may generate data that is by nature different and difficult to string together to give a coherent picture of the customer journey.

But it is precisely this diversity of services and companies that makes it hard to monopolise the programmatic buying market.

“It’s difficult to monopolise the internet. In the future, cheaper platforms will emerge but I don’t foresee a monopoly being formed,” Ho said.

6. Programmatic buying is difficult to sell

Because programmatic buying is so technical, it is difficult for front-line sales people to understand and explain what it is and what it can do to clients without resorting to plenty of technical jargon.

“That’s why we want to teach our salespeople to transform the jargon into something our clients can understand. At the end of the day, programmatic buying is really just a display version of SEM,” Jackson Kwok, CEO at Omnicom Media Group Hong Kong, said.

7. Data about users are fragmented because different agencies and platforms may not know they have the digital footprints of the same users

Even the best data miner cannot derive meaning from data about IP addresses on one platform, email IDs on another, and social media ID on a third because it is not clear these users are in fact unique users.

“You cannot track the entire footprint even if you combine the data collected by different agencies from different platforms,” Ho said.

8. Ensuring transparency of data requires extra auditing

You cannot know whether the data given to you by a programmatic buying agency or publishers are accurate.

Cheong sees this as a problem that can be solved by asking third party companies to measure the performance of publishers and generate data that can be used as benchmarks.

“This is already in place for traditional digital media buy where you ask a partner to track the publisher’s performance. The same can be done for programmatic buying,” she said.

9. Sharing precious customer data with programmatic buying vendors is risky

Allowing another company to help you collect data by tracking your users with cookies, and then handing over the data for analysis or consolidation can be risky.

While trust between clients and agencies is important, Ho points out that no one can check whether or not the agency has used the data for something else or shared it with competitors.

“We only share limited customer data due to privacy issues, such as mobile phone numbers or email addresses, without any identifiers. Agencies are not allowed to share data with clients in the same category – in our case, it’s health and supplements – and that’s in the contract,” Ho said.

“No one can audit them about this so it’s all based on trust.  Even if they share data with other companies, those companies can only steal a little bit of business because they don’t know anything else about our customers apart from the fact that they like health products.”

Conducting due diligence of programmatic buying service vendors helps brands choose credible programmatic buying service providers.

“We look into their policies, technology, how they will protect our data and how we can ensure the cookies they place on our digital platforms only collect data which should be collected,” Ho said.

“We will only with agencies we deem to be safe or low-risk.”

10. Doing programmatic buying in-house gives transparency but is expensive and still requires building relationships with publishers

For Ganeshanandan, it’s a trade-off between enjoying the expertise of programmatic buying agencies and inventory, and transparency from the brand’s perspective.

“If I buy the technology and do programmatic buying myself, it’s transparent to me.  But if an agency runs it for me, this takes away a lot of the transparency from my point of view but it can take care of the strategy for me and also has the inventory,” he said.

Ho believes it’s not worth it to do programmatic buying in-house.

“It’s a good idea but it’s very expensive – you have to invest in large-scale data storage systems.  It’s also difficult to put into practice because you may not know much about that technology and it’s expensive to hire someone who does for an in-house role,” she said.

“In addition, you still need to talk to publishers to access their data – which does not change just because you run your own data consolidation platform.”

11. Publishers are concerned about allowing cookies onto their platforms

Marketers are not the only ones worried about giving up control.

Publishers are concerned that cookies could wreak havoc on their websites, or collect data that they shouldn’t be collecting.

Ho said these concerns are legitimate.

“For some publishers, allowing cookies into their website is like bringing a stranger into their house, letting the stranger take lots of photographs and then hand them over to someone else,” she said.

“Cookies can mess up the publishers’ website. They need to be controlled – it’s like ensuring that certain rooms in your house is locked so that the cookies can’t collect particular data sets.”

Meanwhile for marketers, not using cookies makes re-targeting campaigns much harder to conduct. Without cookies, it is difficult to identify where users visiting the brand’s digital platforms come from, according to Ho.

12. Publishers are concerned that real-time bidding will reduce the yield of inventory and that intermediaries will take too much of a cut

Publishers are important stakeholders who need to opt into programmatic buying for it to flourish as an industry.

Andy Chung, director Hong Kong at Xaxis, said, “Media vendors, especially the larger ones, have been slow to act and are lagging behind.”

As a form of programmatic buying, real-time bidding allows brands and agencies to bid for the audiences they want, which allows for more targeted campaigns.

Publishers are scared that real-time bidding will lower the price of their inventory if the audience reached through that inventory is not popular among marketers.

“If the performance of inventory is measured properly, brands are only willing to spend ad dollars on inventory from which they can get the relevant eyeballs, rather than looking at the number of impressions the inventory has had in the past,” Ganeshanandan said.

“This seems to create a stand-off between the advertiser and the publisher but in the long run, programmatic buying will actually raise the yield of inventory if advertisers have done the targeting well.”

The more relevant the inventory is to the advertiser, with relevance going up as more data is gathered by the advertiser, the greater the yield of the publisher’s inventory.

Another concern on the part of publishers is that intermediaries between the publisher and advertiser will take big cuts that eat into the publisher’s profits.

Ganeshanandan said, “Intermediaries often take too much of a cut and there can be many of them acting as middlemen.”

13. Privacy issues and creeping users out by retargeting across many platforms

Marketers may worry about running into privacy law violations when collecting data about users through programmatic buying, tracking and re-targeting.

Cheong argues what is shared with agencies and publishers and used to optimise campaigns are tidbits like IP addresses and behaviour, with no identifiers such as names.

For example a family sharing a desktop PC would be tracked by the behaviour of everyone in the family.  There is no way for marketers to know which family member was visiting what websites on the shared computer.

Data such as IP and email addresses were usually collected through opt-in procedures and users always have the option of deleting their cookies if they are concerned about privacy.

“Research has shown that only 3% or less of the entire Internet population delete cookies.  Users are in control and can turn off cookies straight away if they don’t like it,” Cheong said.

She added that people have moved on from debates about privacy issues surrounding users’ identities.

Cheong said, “Users don’t want ads that are not relevant to them.  It can be convenient for some users, for example, when they are searching for flights and looking for great deals to a certain destination.”

14. Concerns about fraud

With programmatic buying being a relatively new field with new companies opening up in this space, some marketers are worried about being scammed.

Chung said, “As with the offline world, you increase your risk of being a victim by putting yourself in the wrong situation. If you walk in the wrong areas and buy goods from unknown vendors then you will likely be a victim. This is also true online.”

“If the ads are very cheap and it seems too good to be true then it probably is. I would advise advertisers to avoid very cheap ads and demand higher quality even if they do not deliver the best click-through rates.”

15. Transparency of data provided by programmatic buying does not protect from arbitrage

Arbitrage is a practice where inventory is bought by middlemen in batches at low prices and resold to brands at higher prices for a profit.

Ho believes it is harder to fall victim to arbitrage in the arena of programmatic buying.

“It’s more transparent because you can see the performance of your ads,” she said.

However, according to Cheong, arbitrage can be just as common in programmatic buying if the vendors promise publishers that a certain amount of inventory will be purchased.

“There are some players who engage in arbritrage and this can be done in programmatic depending on how you package the inventory,” she said.

“When the publishers expect a certain level of inventory to be bought, arbitrage can easily take place.”

In contrast, real-time audience buying with no pre-commitments to publishers helps avoid arbitrage.

[Image]: Shutterstock

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