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THE PROGRAMMATICGIANTsome opportunities are too big to keep secret

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A new operating system for advertising

Programmatic Advertising is the future of advertising – it is without doubt not clear if it is evil or good, but the bottom line is that knowledge of Programmatic is mandatory. We therefore set out to write a paper, which shines some light on the agency market, sets a direction, and puts the topic on everyone’s agenda. A paper that is easy to read, understandable, and uses as few acronyms and technical terms as possible. After all, the speculations sur- rounding Programmatic extend from the death of media agencies to algorithm-only based creative. The Armageddon of advertising – the exitus of Mad Men. Time to give this subject some serious thought.

When we started researching for this white paper, we were very skeptical (admittedly) about whether this was not just a new hype, of which nothing remains in the end – just as with count-less other digital niche topics. But we were seriously wrong because Programmatic currently is like e-commerce was in 2000. Barely a serious option, far from being the new normal. "Too expensive," "technically much too demanding," "only interesting to a handful of pioneers." These excuses sound familiar? Precisely!

The evolution of communication on the basis of data and knowledge is as old as communication itself. Today however, self-learning algorithms and real-time measurement are regulating this development. Unbelievable efficiency and speed is intro- duced into our classic customary processes – the reason why it is a nuisance to some. But at its core, it brings virtually inconceiv- able opportunities for the evolution of communication. Program- matic Advertising introduces new players to the industry and opens up new possibilities for established players. Genuine relevance, real impact, and brilliant storytelling with individual meaning instead of one-size-fits-all in the amorphous ambient noise of advertising.

The rules of engagement are being realigned, but the game remains the same – to convince, to surprise and, yes, to woo. Charming. Impressive. Relevant. Advertising is getting a new operating system.

PRefACe

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ConTenTs

Management summary p. 05

Why you should be making Programmatic Advertising your business nowProgrammatic Advertising is not just a hype. We are facing a fundamental transformation of advertising. To stay ahead you need to act today.

p. 08

Programmatic Advertising – venturing into a new advertising ageReal time data, algorithms and interconnected touchpoints usher in a new era of advertising. Within the next few years Programmatic Advertising will establish itself over four development stages.

p. 10

Why Programmatic Advertising will prevailComplex markets, media and brands can only be managed with the aid of digital means. The infrastructure exists already.

p. 23

What Programmatic Advertising means for agenciesThere will be new markets and fields to grow in for creative, media and performance agencies. As agents of the transformation, they will pave the way for others in the advertising market of tomorrow.

p. 31

Still hesitant? Four excuses, four responsesProgrammatic Advertising is complex but will soon be up and running. Make sure that you and your business keep pace with it.

p. 42

ConclusionThe new operating system of advertising is coming. Check your compatibility, develop new applications and prepare to upgrade.

p. 47

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Why you should make Programmatic Advertising your business

Programmatic Advertising is not some abstract topic of the future. The new operating system of advertising is already being installed and ensures that advertising is gradually being gener-ated and run with far more automation. This transformation process is accelerating more and more rapidly, and its side effects are changing the structures, processes, business models, and power balances of the market.

The transformation facing the entire industry can be anticipated by the success achieved from Programmatic Buying. The auto-mation of media planning and placement, more accurate ways of measuring success, changed payment models, and increas-ing transparency are transforming a key part of the advertising world. Many other areas, such as strategy and creation, will follow. The rate at which the changes are taking place is breath-taking. According to a forecast by Magna Global, Programmatic will handle a third of advertising space in Germany by 2017. 1 Programmatic Advertising is something nobody can ignore – least of all agencies (who are playing a key role in the transformation process of the industry). As change agents, they are paving the way and creating new options.

MAnAGeMenT sUMMARy

Many agencies have already taken the plunge and are invest-ing in Programmatic Advertising. They are building up expertise and services. soon others will need to catch up. Those who simply close their eyes are at risk. Competitors, both new and old, are in the starting blocks to win business for themselves. opportunities are still virtually equally available and it is not advisable to simply jump in headfirst. one thing is clear – Pro- grammatic Advertising will not come overnight. The new system will be continually improving its performance through four development stages. We have already tackled the first stage. But we still have a way to go until we arrive at the final vision of a self-learning advertising system, which puts together modular elements to create individual messages, and leads consumers through the marketing funnel in a straightforward manner.

In the end, we will not live in a dystopian future in which programs reign over communication and take on the work of advertisers. equally we will not have an advertising paradise in which mass media claims attain an accuracy of n = 1. Instead, Program- matic Advertising will be a new way of thinking, acting, and operating. It provides a chance to perfectly align the unique capabilities of people and programs.

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Why Programmatic Advertising is becoming the new operating system of advertising

Marketing and advertising are starting to show their limitations in the highly complex and dynamic environment in which they operate. It is becoming ever more impossible to control the faster moving global markets, our more differentiated society, and the complex media using the standard processes and mechanisms – let alone analog. The installation of a new advertising operating system is a matter of urgency if we wish to con- tinue to operate successfully in the future. The good news is that Programmatic Advertising is already showing its effects today, because all prerequisites are already in place. Appropriate data on the social, consumption, and informational habits of people are being collected in quantities and qualities never seen before. Powerful hardware and software, learning algorithms, and scalable cloud infrastructure are helping with the analysis of data in real-time and converting this information directly into instructions for implementation. At the end of the process, there will be a programmatic infrastructure able to generate individual messages. This is undergoing continual enhancement. After computers, smartphones, and tablets, we will soon see ooH, television, and radio becoming integral parts of the

Programmatic Advertising eco-system. The technical capabili-ties are in place, albeit not able yet to provide cross-channel selling, omnipresence, or comprehensive coverage. The expansion of technological infrastructures for Programmatic Adver- tising will be shaping the agenda of decision-makers in the years to come. But this is not nearly enough. The development of a clear-cut Programmatic Advertising strategy and the search for a business model that is sustainable in the future is much more important.

What needs to be decided now

According to a collaborative study by advertising technology platform Appnexus, the IAB association, and the Warc Insti- tute, Programmatic Advertising has already been explored by every second German advertiser. 2 This is the right move, because now is the time to set the strategic direction of the future. The transition within the industry offers enormous opportunities for growth. These will include offers of new services in connection with established aspects. Creativity will experience a Renaissance – programs cannot simply replace creative performance.

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now, you need to answer two important questions in prepara-tion for the new redistribution of tasks, services, and budgets. firstly, which Programmatic Advertising options are you willing to offer your customers? And secondly, how can you benefit from the changes and distinguish yourself from the future competition?

The aim of this white paper is to support your understanding and assess Programmatic Advertising. Therefore, this white paper reviews the topic in all its operative and technical niches and highlights opportunities, challenges, and calls for action.

What is needed now are designs related to the new challenges and possibilities. These include new context-sensitive crea- tions, and intelligent campaign mechanisms for network infrastructures – with new touchpoints such as wearables, virtual reality gadgets, and smart cars. The role of consultancy and strategy support will also gain much more relevance (be it media or brand strategy, CRM or planning). It is about skill-fully guiding customers through the transition and managing of automated processes with clear-cut objectives and rules. Knowledge of brands, people, campaign mechanisms, per-formance models, and the entire bandwidth of digital technologies are of inestimable value.

new services and options, some of which, already visible today, are also being established in the advertising market. These include data analytics, algorithm tuning, target group segmenting in real-time, and consumer journey architecture. next to algorithms, new colleagues such as data scientists, mathematicians, and computer scientists will appear in agencies. Pro- grammatic Advertising will also bring new payment models. Programmatic agencies will be able to directly pinpoint their contribution to a sale, and will take part more directly in the success of the customer.

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Why you should be making Programmatic Advertising your business nowProgrammatic Advertising is not just a hype. We are facing a fundamental transformation of advertising. To stay ahead you need to act today.

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and customers wanted personal advice instead of anonymous packages. The playing field was left to agile players who shared the market amongst themselves. Whilst Amazon, eBay and Alibaba are now earning billions, some former giants have already vanished from the market. Programmatic Advertising is a revolutionary system in the advertisingworld – just like e-commerce was for the re-tail sector. Those who do not act today are at risk of becoming irrelevant tomorrow.

This white paper is targeted at decision-makers of the agency world. The aim is to help you assess the future relevance of strategic Programmatic Advertising. And so we take a look into the future of advertising to explain the need and potential of Programmatic Advertising, and provide initial recommendations of actions for media, creative and performance agencies that are not vanguards of the programmatic world just yet.

The programmatic trend has long been a topic of discussion in the industry. Cer- tain exorbitant customer expectations, strong interest from specialist media, and uncertainties within agencies go hand in hand. There is a huge discrep-ancy between perception and truth. The truth is that the many benefits and opportunities, which will be provided by Pro- grammatic Advertising, are not yet actually operationally available. The digital and automatic operating system will not simply complete its conquest overnight, but will gradually reveal its power.

Programmatic Advertising is a complex topic, not particularly sexy and not readily available free of charge. Those want- ing to benefit from opportunities must invest in infrastructure, time, and manpower. Many decision-makers are hesi- tating. But today Programmatic Adver- tising is now at the same stage at which e-commerce was about 15 years ago. People dreamt of the possibilities, but especially established corporations were running behind on implementation. The barriers appeared to be too large. The logistics were too complicated and too expensive, broadband internet was a scarcity, online payment unimaginable,

This is not simply the next white paper on Programmatic Buying, with confusing abbreviations and complex technical details. Instead, this paper shows that the automated purchasing of online media inventory is only the beginning of something huge – advertising is getting a new operating system. It is called Pro- grammatic Advertising and ensures that the advertising of the future is generated and run to a far higher degree with automation. nobody will be able to escape the consequences. everyone will sense the changes – be it marketing departments, publishers, or agencies. Programmatic Advertising is set to turn business models, processes, and structures upside down. There will be changes to budgets and hierarchies.

Agencies will play a key role in trans-forming the industry. As agents of trans-formation, they set the course, pave the way, and create new propositions and markets. At the same time, they are en- dangered. If they join the revolution, Pro- grammatic Advertising will challenge their right to exist as facilitator between company and consumer.

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Programmatic Advertising – venturing into a new advertising ageReal time data, algorithms and interconnected touchpoints usher in a new era of advertising. Within the next few years Programmatic Advertising will establish itself over four development stages.

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humans and technology together per-fectly, once it is proven possible to access the potential. Programs will take over where their abilities are superior – such as in the processing of large volumes of data and responses in real- time. Advertisers will manage the auto-matic systems by, i. e., defining clear-cut objectives and rules and developing unique campaign mechanisms and creative ideas. The best thing about this is that advertisers will save time – thanks to technology. Time for the things algo-rithms cannot master and things that make advertising unique. soon, creativ-ity and inventive vigor, emotional intelli-gence, strategic management of brands, and marketeers’ consultation will once again be at the heart of what agencies think and do – thanks to Programmatic Advertising. Ideas and strategies are becoming UsPs again.

create elements that later will be assembled to build personalized individual advertising. This advertising will be aligned with the corresponding recipients and delivered within the right time and context. feedback collected will than enable subsequent optimization in real-time. Advertising is becoming a partially automatic and self-learning system. It is becoming more potent, more efficient, and quicker because the perception of it being a distraction is no longer there. Adver- tising is no longer a nuisance but turning into relevant content. When content is being recognized as having multi-value, current problems such as advertising blockers resolve themselves virtually and autonomously. 4 But until this vision becomes reality, serious upheavals will occur in the system and the industry will have to adjust to new ways of thinking and working.

We are not heading towards the perfect, automatic advertising paradise or an evil advertising world in which machines as- sume the sovereign right to analyze brands and communication. Instead, Program- matic Advertising provides the opportunity to bring the unique capabilities of

The new operating system of advertising is called Programmatic Advertising. It is more databased, digital and automatic than the infrastructure with which ad-vertising has previously been generated and executed. This new system that has been running for a few years already provides proof of an inconvenient truth – computers can simply do many things better or more efficiently than humans. 3 for this reason they are also executing cognitive tasks and processes. Algorithms are to a larger extent becoming familiar friends in marketing departments and agencies. They provide assistance and undertake, i. e., the collection and analysis functions for consumer, market, and campaign data, in targeting, and in media planning and placement. Development is driven by technologies, software solu-tions, and tools from the fields of Big Data, Predictive Analytics, High-frequency Trading, and Deep Learning.

They form the backbone of Programmatic Advertising. once the new operating system is fully installed, the realm of possibilities will grow exponentially. In the ideal world of Programmatic Advertising, data will be processed automatically to

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Into the future – the status quo and evolution of Programmatic Advertising

Programmatic Advertising will not come overnight. The new operating system of advertising will establish itself on four levels of development. The capabilities for automatically supported generation, management, and distribution of adver-tising are gradually being broadened. The four levels (Programmatic online Buying, Programmatic All-Media Buying, Programmatic Creation, and Programmatic orchestration) build on one another. But they will not necessarily replace each other, and will exist simultaneously depending on communication objective, budget, target group, and context. It is not possible to make a sweeping statement on when the individual levels will become the modus operandi of advertising.

The forecast presented here is based upon market forecasts, 5 industry insights,and a strategic summary of current micro-trends in advertising.

Programmatic Advertising will reach new levels when the instruments are not just deployed in niches (such as for large-scale market launches, for important social events and award nominations), but extensively and routinely in every-day advertising. This means when about a third of the advertising budget is allocated accordingly, many brand name companies will run their campaigns accordingly and agencies will offer the necessary consultancy and implementa-tion services. But what can be said with certainty is, that Programmatic Adverti- sing will grow exponentially, just like in the past months and years. This applies equally to its shares of the market and revenue, as well as to its significance within the industry.

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2021LEVEL 4

2019LEVEL 3

2017LEVEL 2

2013LEVEL 1

PROGRAMMATIC

ORCHESTRATION

PROGRAMMATIC

CREATION

PROGRAMMATIC

ALL-MEDIA BUYING

PROGRAMMATIC

ONLINE BUYING

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Programmatic Advertising LEVEL 1: PROGRAMMATIC ONLINE BUYING

Programmatic online Buying is the auto-mated booking of online advertising inventory. This is made possible by the data we store when using our computers, smartphones, and tablets on the Inter- net. To simply put it, Programmatic online Buying works as follows: website operators and online publishers know their users very well, thanks to tracking methods cookies for example or, browser information, by saving search histories, and login information. from this data they generate anonymous profiles and offer their ad spots on Programmatic online Buying platforms.

This way advertisers are able to place targeted ads and purchase target groups. To do this they define whom they want to reach and where. once all necessary information is in the system, the algo-rithms take over and ensure that offers and demands are linked to one another,

and the relevant display ads, rich media, and video formats are displayed in the browser of the target groups addressed. In addition to precise targeting, Program- matic online Buying also enables indi-vidual and dynamic pricing. Real Time Bidding is a sub-area in which online inventory is auctioned automatically and in real-time. Meaning, if two brands want to advertise for similar people, the interested party with the highest bid wins.

Programmatic online Buying is not a vision of the future but already reality. The system and the infrastructure have been established for years. Millions of advertising messages are booked and run programmatically every minute worldwide. The glorious procession is no acci- dent and is instead attributable to the unparalleled efficiency of Programmatic online Buying. As a study by Boston Con- sulting Group shows, the desired inter-action with campaigns has risen by an average of 32 %.

The costs of clicks and views dropped by almost 70 %. 6 Programmatic online Buy-ing has become a multi-billion dollar business within a short period of time. Annual global turnovers are already at Us $ 21 bn – a formidable 15 % of the digital advertising budget. 7 And the mar-ket is still growing, predominantly in the Us. The trend is also well advanced in the UK, france, and the netherlands. In these countries, about 60 % of online advertising is booked through programs. In comparison, Germany is lagging behind. Magna Global is predicting that 33 % of advertising will be run through programs by 2017. 8

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1 Publishers and website operators analyze their visitors using tracking meth-ods (such as cookies) and utilize them to generate user profiles.

2 The publisher offers these user profiles and the available ad spots through a sell- side platform (SSP). This way, he can spe- cify minimum prices for an ad version.

3 Through a virtual auction house (the ad exchange), the sell- side platform offers advertisers the oppor-tunity to acquire the visitors.

4 The advertisers on the other hand are using a demand-side platform (DSP) to de- termine the ad impressions of interest. Here they can define the required target groups and surroundings, and whether or not and how much they want to pay for visitors.

5 The highest offer is accepted and the winner’s ad is transferred by its ad server to the visitor's website.

6 All of this happens a million times in fractions of seconds whilst the user is loading the website – without noticing a thing. Algorithms do the work.

HOW DOES REAL TIME BIDDING WORk?

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Programmatic Advertising LEVEL 2: PROGRAMMATIC ALL-MEDIA BUYING

At the second development level, Pro- grammatic Buying extends its influence beyond the browser and becomes the standard for media buying for almost all touchpoints. The prerequisite here is that the mass media and other channels are digitalized, classified, and connected to programmatic platforms (such as ad exchange). Then their users can be identified and addressed everywhere. The transformation process has already started. Radio is increasingly becoming web radio, television is moving towards IPTV, and outdoor advertising is getting digital en- hancements.

even print media is experimenting with the programmatic sale of its advertis-ing inventory. new touchpoints being added to the media mix now and in the future will be connected to the program-matic world as products of the digital era. Included here are wearables such

Instead of static billboards for weeks, they are able (fitted with face recogni-tion and other sensors for example) to display appropriate advertising depending on age 9, or gender 10 of target groups, depending on the context 11, weather 12, up-to-date news 13, time of day, or flows of passersby. This leads to highly relevant communication, for example, in the form of a digital billboard created by Porsche, which is only displayed to Porsche drivers with the help of intelligent cameras. 14

as smartwatches, and new developments in the fields of virtual reality and net-worked cars. A programmatic media eco- system guaranteeing automatic place-ment of advertising at the right time at the right touchpoint is emerging step by step.

It will make no difference whether the desired recipient is surfing the internet, on a run through town, watching televi-sion on the sofa, or using a tablet. Pro- grammatic All-Media Buying ensures that advertising arrives in a targeted and efficient manner, thereby raising the flexibility and efficiency in the planning and placement of campaigns to a new level. once the system is fully available and established, cross media net reach can be developed and planned, and targeting and frequency capping can be deployed across media. Another door is opening – context is becoming a highly interesting influencing factor. This is because, with the networking infrastructure and automatic systems, advertising can react to the environment everywhere and in real-time. Digital ooH billboards are already showing where we could be heading.

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Laptop / PC

Virtual Reality

Smartphone Tablet OOH Television Digital Radio

Print Media

Smart Car Smart- watch

PROGRAMMATIC ALL-MEDIA BUYING

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Programmatic Advertising LEVEL 3: PROGRAMMATIC CREATION

But not only media planning and placement is becoming programmatic. strategy and creation will also benefit from the assistance of automatic systems in the future. efficient tools are being used for planning, such as algorithms that run data-driven target groups segment-ing or collecting automated consumer insights. At the same time, a new form of individualized advertising is evolving that spurs creation. This is made pos-sible by identifying users at almost all touchpoints, and through sufficient and relevant data being available, as well as programs and algorithms reaching the next evolutionary level.

Advertising nowadays is becoming more and more individual. But Program-matic Creation extends far further than previous targeting measures, A / B testing of campaigns, and a toolbox of campaign motives – which is run for

different target group segments with Programmatic Buying. Programmatic Creation means advertising will become truly modular. Messages, content and tonality are created in freely defined combinations and then merged in line with the recipients’ touchpoints by intelligent software systems.

This requires smart mechanisms and creative excellence, as a simple example shows: A set of four motifs and four head- lines provide 16 combination options for a display. Two people may see the same motif at the same time, but with different messages. The decision about who gets to see what and when is made by algorithms on the basis of defined objectives and rules based on data available about target recipients. Target groups don’t turn into target people (n = 1) – but the targeting conflict between 1-to-1 and mass communication is resolved thanks to Programmatic Advertising. The creation of a modular toolbox for display ads, digital billboards and smartwatches can be easily imagined. Programmatic Crea- tion for moving images is more complicated but not impossible. A TV spot could have different endings or tell the same

story in a different context depending on the TV format (e. g. thriller or comedy).

Programmatic Creation's promising start can be experienced today by using a Rich Media browser. It provides the ability to interact with users as well as to merge text, audio, and video elements. 15

In international campaigns for example, text is generated in different languages to then be inserted automatically into the relevant language, and in real-time into dynamic displays (always with the same motif). It is mainly the big players in the field of e-commerce and international big brands who are using dynamic creatives extensively in the field of Rich Media, thereby forming the spearhead of Programmatic Creation.

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But using Programmatic Creation will make it worth it – especially for brands addressing a broad and more heteroge-neous target audience, for the advertising

In the foreseeable future, efforts and costs for concept, creation, production, and rollout of these types of campaigns will be way higher.

of high-margin products (such as cars, travel and furniture), and for communi-cation with the brands most loyal users and brand ambassadors.

VISUAL WORLDS

PROGRAMMATIC CREATION

TOUCHPOINT SET-UP PROCESSING MODULAR CREATION PLAY-OFF

KNOWLEDGE OF CONTEXT

USER INFORMATION

SITUATION

STRATEGY

GUIDING CREATIVE IDEA

AIMS COMMUNICATION

ALGORITHMHEADLINES TEXTS ¶

B 1

H 2

H n

H 3

B n

H 1

B 3

B 2

T 1 ¶

T n ¶

T 3 ¶

T 2 ¶

H1

B2T2 ¶

H3

B3

T3 ¶

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no longer does external content rely merely on data such as place and time of day for automatic content generation. If the relevant data is available, the funnel stage (point of interaction in the sales process) will be taken into con-sideration, determining which advertis-ing message is seen by him or her. A simple example: If a user is watching an ad to the end and rates it positively, it will have an effect on the advertising message at other touchpoints. These can then be i. e. aligned towards more interaction, making specific offers, offering more in-depth story elements, or emphasizing other product benefits. This intensifies the relationship with the user and elevates it to the next level in the sales- or communications funnel. If another user navigates away from the same ad after just a few seconds, an alternative storyline, tonality or message is presented with the next interaction. The self-learning system can also deter-mine at which point a user is no longer addressed (because it is no longer worth it, for example). Programmatic orches-tration also means detecting resistance and accepting it.

Programmatic Advertising LEVEL 4: PROGRAMMATIC ORCHESTRATION

Programmatic orchestration is the final development level of Programmatic Advertising. It turns full circle and trans- forms advertising into a self-learning and iterative system. once the users’ response to advertising can be captured at almost all touchpoints, advertisers and algorithms get to know their users and target groups better and better over the course of the customer journey. It is possible to channel targeted actions in real-time. Messages and offers can be adapted to address individuals, and the strengths of the individual touchpoints can be put to use. By incorporating and processing feedback, Programmatic orchestration can achieve transmedia storytelling, i. e. the managed, cross-platform storytelling of branded stories aimed at target recipients.

To reach the final level of Programmatic Advertising a few more obstacles need to be tackled. for example, the continuing expansion of the technical infrastructure – such as cross channel networking of touchpoints and establish-ing of data standards. The identification of users outside the reach of devices is of crucial importance. facebook is taking its first successful steps with its Atlas advertising network in the Us. These activities cannot be transferred to europe that easily. Because legal and social concerns need first to be adequately addressed. It is conceivable that it may take a few years until the final level of maturity of the new advertising operating system is reached, and Program- matic orchestration finds its way into the everyday life of operative advertising.

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PROGRAMMATIC ORCHESTRATION

LEARNING AND ACTING

REACTIONTOUCHPOINT DISPLAYPROCESSINGSET-UPMODULAR CREATION

KNOWLEDGE OF CONTEXT

STRATEGY

USER INFORMATION

GUIDING CREATIVE IDEA

SITUATION

AIMS COMMUNICATION

FUNNEL LEVEL

ALGORITHM

V1 ♫ A1 S1

♫ A2 S2

V3

V n S n

VIDEO ♫ AUDIO STORY

V2

S3

♫ A n

♫ A3

V2 ♫ A3 S3

TVTV

+/–

+

–

CONTINUING INTERACTION

NEW MESSAGE

NEWTOUCH POINT

NEWSTORY

NEWCREATION

ITERATION

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THE EVOLUTION OF PROGRAMMATIC ADVERTISING

Stage of development Definition What it can do How advertisers benefit

AS OF 2013

PROGRAMMATIC ONLINE BUYING

Automated purchase of media inventory and automated insertion of advertising on the Internet.

t advertising messages displayed in browser in precisely targeted way; aim for data-based target-group elements t short-term and flexible media buying

in quasi real time t spontaneous testing of various

campaign motifs A/B tests

t increased efficiency through decreased wastage t greater flexibility in media planning t individual negotiation of prices for

online media inventories t performance optimisation through

validated learning

AS OF 2017

PROGRAMMATIC ALL-MEDIA BUYING

Automated purchase of media inventory and automated insertion of advertising at almost all touchpoints.

t programmatic media buying in almost all mass media; can address new programmatic touchpoints such as wearables, connected cars, and TV t context-based advertising over

and beyond browser

t target groups can be reached at almost all touchpoints t more efficient deployment of

media budgets t increased relevance of advertising

through reference to the latest events, situations, time, and place

AS OF 2019

PROGRAMMATIC CREATION

Strategy and creation are programmatic. Advertising can be generated modularly, in the form of text, picture, film, and audio elements, and then assembled automatically at the touchpoints.

t automatically generated insights and target-group segmentations t conception, design, and display

of modular advertising t more individual messages, offers,

and tonalities

t more effective advertising through more individual approach t any number of target groups can be

addressed at the same time t planning in real time

AS OF 2021

PROGRAMMATIC ORCHESTRATION

Advertising is a learning system and an iterative process. Users’ reactions can be recorded at almost all touchpoints. Story-telling, campaign mechan- ics, messages, and creative elements can be adjusted automatically in the course of the customer journey.

t learning from the recipient’s reaction t personalised advertising at almost

all touchpoints t trans-media story-telling – automated

and self-learning t addressing concrete funnel levels

with the right messages

t target individuals are addressed dynamically and in the best possible way t consumers are steered purposefully

through the sales funnel t orchestration of all advertising

campaigns t optimum budget deployment

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Why Programmatic Advertising will prevailComplex markets, media and brands can only be managed with the aid of digital means. The infrastructure exists already.

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you may think that Programmatic Adver- tising sounds like something that will be with us tomorrow rather than now. But, when observing global developments and trends, tomorrow is clearly not so far away.

on one hand there are market needs, which cannot be dismissed. The diversity of challenges facing advertising, calls for new solutions.

on the other hand, the structural pre-requisites are already in place. It is pos-sible to use Programmatic Advertising in day-to-day business.

ProgrammaticAdvertising

t target-group models no longer reflect social reality

t acceleration of global markets putting pressure on advertising

t the media landscape is exploding

t suitable data is available

t the technical prerequisites and efficient tools are ready and waiting

t all touchpoints can be reached programmatically

WHY IT IS NEEDED WHAT IS POSSIBLE

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Advertising needs a new operating system – the necessity for Programmatic Advertising is increasing

The environment in which advertisers operate is multi-layered and becomes more and more confusing by the minute. Markets are becoming more global and dynamic than ever before. society and the media landscape are continually diverging. The requirements being im-posed on advertisers are becoming stricter.

Classic target group models no longer reflect the reality of society today

People’s lifestyles are becoming increasingly fragmented and are developing dynamically. Milieus as well as social categories and conventions are vanish-ing. This also has an effect on consumer habits. Brand loyalty is falling, 16 appar-ent paradoxes (such as the combination of designer furniture and IKeA) are normal, and more and more purchasing

decisions are being made depending on the situation. Marketeers and adver-tisers are attempting to confront these issues. This is because old, tried-and-tested tools such as classic target group models, market-media studies, and segmenting of third party suppliers have reached their limit. They no longer accu- rately represent the diversity of attitudes, requirements, needs, and the dynamics of change − even if the methods are undergoing fine-tuning. Likewise some customer typologies established by companies are often no longer sustainable. The overhead required to keep them up to date is on the up and its ability to be valid is falling.

Basically there are two facts: Data col-lected in the past becomes relatively quickly obsolete, and the structuring of society into static clusters generates an apparent reality that does not actually exist. for marketing, advertising, and market research, understanding con-sumers at all times is becoming the key to survival. The automated collection, combination, and analysis of data is the right track for the future. Already today, methods similar to dynamic segmenting

and so called look-alikes using 2nd and 3rd party data are used in e-commerce for identification. Comprehensive sur-veying can be conducted virtually at any time in the digital and networked world. Information and consumer behavior, for example, can be closely monitored, mea- sured, and polled randomly. An automatically generated data-base forms the basis for up to date and accurate target group segmenting – which can be formed in real-time with distance analyses.

The acceleration of global markets puts pressure on marketing and advertising

The product ranges to be advertised are growing all the time. More than 800,000 brands are registered with the Patent and Trademark office in Germany alone. 17 every year new ones are added. A glance at the product portfolio of larger brands shows that there has never been so much choice. adidas for example is listing more than 2,100 different shoes in its webshop. 18 A supermarket in Ger-many now has an average of 25,000 items in its product range. 19 The dynamics of markets are also reflected in the short product development and product life cycles.

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individual and available any time. The web has long been addressing a target audience made up of all age groups, not just the younger generation. But in particular for the generation that has grown up with the new media, it is normal to decide what they consume and when.

To them, the linearity of television as a medium feels like something from another era. only about half of the younger generation watches television every day, as opposed to 81 % who are on the internet every day 24 – switching expertly back and forth between facebook, youTube, WhatsApp, Instagram, snapchat, Tumblrand et al. 25 something new arrives continu-ously – grabbing plenty of attention only to be replaced by the next wave of hype.

Mobile Internet means we use our tab-lets and smartphones more, even when watching TV. Around 43 % of those in TV households have a second screen. This means it will become even more difficult to guarantee reachability. A highly dynamic and complex media landscape is nothing new to advertisers.

The fashion industry, for example, no longer produces collections according to seasons. 20 The Gerry Weber label is now offering 21 collections over the year; 21 even H & M has 24 22. A new dimension of com-plexity is currently being added with the capability of dynamic pricing. 23 This tool is nothing new to e-commerce companies, but now even the stationary retail sector is experimenting with it. Classic infrastructure and campaign planning of advertising is reaching its limitations in this environment. A new operating system capable of processing large, dynamic data volumes in real-time and translating them into actions is necessary.

The media landscape is exploding

Advertisers are confronted more than ever before with a highly complex media world. Channels and touchpoints are replicating at rapid speed. Today there are more television and radio channels, and more newspaper and magazine titles with more content, than ever before. A new content giant has also arisen in form of the Internet. This attracts the attention of the masses, and fragments itat the same time with offers which are

It accompanies these developments, drives them forward (partly by itself), and finds solutions. excellent media strate-gies, which combine touchpoints intel-ligently in the media mix, and targeting techniques, help to achieve excellent results. Programmatic Buying is showing the way for the continued, growing requirements of the future. When it gets difficult (even for experts) to understand who can be contacted where and when, or to act competently at all times, soft-ware systems and learning algorithms help to provide assistance and make the media landscape manageable again.

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The prerequisites for Programmatic Advertising are already in place

Three conditions must be satisfied for Programmatic Advertising to develop its full potential. The new operating system for advertising requires appropriate data on social, consumer, and information habits of people, which need to be col- lated on as individual a basis as possible. This data must be analyzed in a mean-ingful way and be translated as quickly as possible into instructions for action. Powerful tools are required for this, in other words, hardware and software so-lutions but most of all specialized and learning algorithms. To convey adverti-sing messages in an individualized manner to customers at all times, as many touchpoints as possible must be connected to the digital system, and be accessible digitally.

Appropriate data is available

never before has data been available in such quantity and quality. 90 % of data available worldwide has been generated in the last two years. 26 Digitalization and the triumph of the mobile Internet are giving rise to an explosion in the num-ber of internet-capable devices and networked sensors. The hardware and software all around us is already collecting data on a continual basis – mostly in the background. And every one of us ishelping – knowingly or not. social media 27,online search queries, e-commerce, and quantified self-data are ensuring that information about our habits and preferences can be collected and processed. The algorithms and systems get to know us better with every interaction.

Analog information is also becoming a greater part of the system. This applies forexample to purchases that are undertakenthrough stationary transactions but whichare recorded digitally by means of a cus-tomer card or as part of a bonus scheme. The quality of data is also improving as quantity increases. It can be captured in real-time and linked using software.

Companies and brands have been col-lecting mountains of data for decades. Be it customer details collected with analog methods, sales figures, studies, or digital CRM systems, many are sitting on a treasure trove, which is utilized by Programmatic Advertising. To improve their own data, companies are able to employ the services of 3rd party data suppliers. They have set themselves the task of collecting, and then selling, data from various sources. The new, major players are already one step ahead in the game with data.

facebook, Google, UIM, netflix, Apple, eBay and Amazon (and many others) not only have access to much more data, they also have better analysis systems to generate insights from the data. They know how they can identify and contact their users across devices using logins. This capability is highly relevant in the world of Programmatic Advertising. In the ideal world of marketing and adver-tising, all details would refer to individuals and be linkable to each other. But given the legal framework conditions and the fact that data is collected from different players, this is not the case.

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What is new is that programs are becom-ing more autonomous and increasingly capable of learning. start-Ups that devel-op deep-learning solutions are the new stars of silicon Valley.

Companies such as narrative science 32, Aexea 33 and Polarr 34 are working on algo-rithms that write autonomous texts and learn the aesthetic likes of users. Cur- rently the creative performance of auto-matic programs is still limited, but the massive investments in these companies and their visions mean that we can hypo- thesize on what will be possible in the future. Algorithms are becoming the new advertising superstars. Today they aid and conquer media planning and market research – soon it will be planning and creation. We just need to take a look at stock markets to see where this trend is heading. There, algorithms are already assuming trading functions and are autonomously managing 70 % of American stock trading. 35

It is quite apparent what this means for the creative industry. Just like financial experts are being greatly assisted by computer scientists at stock exchanges,

The German federal Data Protection Act is an important factor in our free society. But data protection is by no means an obstacle to Programmatic Advertising. for one thing personal details are not necessarily needed to learn something new and develop new product offers. secondly, customers are willing under certain circumstances to disclose their needs and preferences, specifically when this is associated with added value. 28 Payback 29 and facebook Connect 30 are examples of relevant options.

The technical prerequisites and power-ful systems are already in place

In addition to increasing transfer rates and storage capacities, the computing performance of hardware is growing exponentially – and with continuously falling prices. This is making the analy-sis of big, heterogeneous, and dynamic data volumes possible, in real-time – an essential requirement for Programmatic Advertising. software is also becoming increasingly powerful, and algorithms are being fine-tuned and becoming more complex. The Google algorithm, for exam-ple, is optimized 500 to 600 times a year. 31

the advertising industry is set to see a similar transition. The success of Pro- grammatic Advertising is not a question of technology but a question of time. Many solutions are available today. The infrastructure for Programmatic online Buying has been set up and accepted quickly, and is currently available. Today online advertising would be unimaginable without mechanisms and tools for the automatic buying and selling of media inventories (such as sell-side and demand-side platforms) and for trading (real-time bidding and ad exchange), and they can essentially be transferred to other media and channels. Those not connected to the new system today are already running the risk of being ex-cluded tomorrow.

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even the underlying technologies and tools for Programmatic Creation and Pro- grammatic orchestration are already available. They do however need to be improved, scaled, and networked in years to come.

All touchpoints are digitally accessible

To place advertising messages in a targeting, variable, and punctual manner, Programmatic Advertising requires a digital and networked infrastructure, which connects all touchpoints to pro-grammatic buying and selling platforms. This is already the case on computers, tablets and smartphones. Classic mass media is gradually moving towards the programmatic future. Television plays a special role here. With over 40 % 36 of the media split, it continues to be a highly relevant sales driver for the advertising sector.

Programmatic Advertising will dominate commercial breaks as soon as the majority of televisions are fitted with return channel enabled network connections. Theoretically, already a third of German households can be reached digitally. 37

Their televisions are connected to the Internet – be it in the form of smart TVs, via set-top boxes, through streaming boxes/sticks such as Amazon fire TV, Google Chromecast and Apple TV, or game consoles such as sony Playstation and Microsoft Xbox – or they consume classical television content via a com-puter, tablet, or smartphone. But the German market is only moving at a slow pace. Whilst the RTL Group has partici- pated in Programmatic TV start-ups spotXChange and Clypd 38, and Prosieben-sat.1 39 has conducted initial digital ex-periments, it is not possible to speak of a general transition yet. The majority of broadcasters, distributors, and media agencies are not yet willing to invest in the transition because the old system continues to be highly profitable. But the pressure of marketeers and agencies will increase. The transformation process is already in full swing in the Us.

The success is already speaking for itself and will, soon here too, convince the sceptics. from 2014 to 2015, the figure for TV advertising booked digitally in the Us will increase from 1 to 5 % 40. According to a forecast by Magna Global,

in four years 17 % of the TV advertising budgets (Us $ 10 bn or so) will flow into digital campaigns. 41 Mass media other than television (such as print, radio and out-of-home) are opening up for Program- matic Advertising.

since the beginning of the year, the largest Us publisher (Time Inc., which reaches millions with titles such as People, sports Illustrated, and Instyle) has also been selling its printed ads digitally. 42 first out of Home advertis-ers, such as ströer 43 and Goldbach Ger-many 44 are starting to roll out advertis-ing via ad server. The ball is also rolling for online radio. Major players such as Pandora 45 and iHeartMedia 46 are already offering programmatic advertising. Join- ing the spearheads are specialists such as Jelli 47 and Xaxis Radio 48, who develop programmatic solutions for classic radio stations. In addition to the many stand-alone solutions, there are also initia-tives that show that the comprehensive, digital media eco-system is no longer far away. Back in 2013 IPG Mediabrands in the Us formed the Magna Consortium, an unprecedented merger for Program- matic All-Media Buying.

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Those participating include the AoL on-line group, outdoor and radio promoter Clear Channel Media & entertainment, print group Tribune, and TV companies such as A & e networks and esPn. This way the relevant and classic channels should be programmatically offered and played digitally from a single source. 49

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What Programmatic Advertising means for agenciesThere will be new markets and fields to grow in for creative, media and performance agencies. As agents of the transformation, they will pave the way for others in the advertising market of tomorrow.

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Programmatic Advertising is turning advertising into a much more data- and technology-driven industry. 50 Those who understand how to merge their industry expertise and current capabilities per-fectly with their technical possibilities benefit from this transition. Big budgets are already moving in the direction of Programmatic and many customers are evaluating the opportunities. Their requests for consultation and specific implementation services are initially directed towards their standard agencies. They must, at least understand Programmatic Advertising and offer an informed stand- point. This would be a good starting point for all those, not currently part of the programmatic spearhead. However, this is not enough to survive. To be prepared in the medium term for the reallocation of functions and budgets, all agencies must face the facts and develop a relevant programmatic offering.

A harsher wind is blowing – Programmatic Advertising is changing the market

Programmatic Advertising is bringing a new philosophy, new processes and changed requirements to the advertis-ing market. This opens up the competi-tion for budgets and clients − at large scale. There are currently four trends that are moving the market. firstly, Pro- grammatic Advertising is stimulating the emergence of special agencies that conquer the market with fresh ideas. These companies are tailored to the needs of the new era. They occupy gaps in the market, which established players do not (yet) cover, and create product offerings in disciplines such as analytics, creative optimization, and verification. 51

secondly, established agencies are broad- ening their portfolio along the value-added chain.

To offer Programmatic Advertising services from a single source, they combine the expertise of strategy, media, creation, consultancy, and technology. The bor-ders between agency disciplines are dis- solving, and clear-cut "old school" re- sponsibilities are becoming blurred.

The world's largest media agency hold-ing, GroupM, for example, combines all its Programmatic Advertising expertise in the newly created "GroupM Connect" unit. 52 When systematically thinking this development through to the end, it becomes clear that a new form of full-service agencies could emerge offering Programmatic Advertising from a single source. Large networks clearly have the advantage given their broad portfolios. other players will need to acquire what they need. Thirdly, changed rules of engagement and requirements bring new players into the game. IT and software companies are becoming aware of the opportunity to use their expertise in data and algorithms to also make money in advertising. 53

sAP, IBM, and oracle are already official partners of the marketing program for facebook. Through its acquisition of photo agency fotolia, 54 Adobe is posi-tioning itself in Programmatic Creation, and is developing the Creative Cloud in the direction of automated creative so-lutions. Technical developments in the industry are also involving management consultants such as Deloitte Digital and Accenture Digital.

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They want to convert the experience gained in the integration of IT systems in large organizations into the consul-tancy business to get a piece of the pie and make money with Programmatic Ad- vertising. 55 fourthly, the insourcing of functions and processes in Programmatic can be observed as a clear-cut trend.

In the Us, companies such as Procter & Gamble 56, Kellogg’s 57, and netflix 58 are already going their separate ways. 59 In Germany, it is mainly leading e-commerce companies such as Zalando and otto that have got a hold of the technol-ogy (e. g. a separate demand-side plat-form) and established Programmatic Units. The wish to own a usable in-house CRM system for effective re-targeting and cost efficiency is driving this devel-opment. one thing becomes clear when examining it closer – insourcing is not interesting for all customers.

establishing an in-house Programmatic infrastructure is anything but trivial 60 and calls for high investment costs and necessary expertise within the company. In the future, the vast majority of adver-tisers will therefore deploy agencies, or

deploy digital platforms that automatically provide the services previously offered by agencies. some of the former big budgets could be allocated inter-nally in the long run.

new, agile special agencies, expansion of established agencies along the Pro- grammatic value-added chain, and the entry of new competitors and insourcing trends – the industry is experiencing an exciting transformation phase. Who will declare victory in this transition is not yet decided, but many are already taking a stake in it.

Participate in shaping the future −Programmatic Advertising wants to be conquered

The new advertising operating system offers agencies a fantastic opportunity to develop new offers and services from old UsPs. The possibilities are diverse. from a more accurate, up-to-date data-base, consumers along the entire customer journey can be understood better and relevant actions can be derived. This applies to every interaction, for both situational offers and the long term management of brand relations.

Just imagine what data collection and analysis can possibly render in real time. The knowledge about information along the funnel, the possibility to directly in-tegrate feedback, better targeting, and modular creation – all this opens up a giant market from which all disciplines can benefit. Mass branding and aware-ness campaigns can also become more efficient thanks to Programmatic Adver- tising. 61 More than ever before, brilliant, creative media experts and consultants are needed to guide their customers with assurance into the future of advertising.

Agencies will broaden their portfolios towards data refinement, customer journey consultation, cross-channel archi-tectures, smarketing (the merging of sales and Marketing), and Programmatic Creation. for many of the new offerings, it is necessary to define KPIs, which mea- sure and represent the value proposi-tion. 62 In the generation of leads for ex-ample, the quality of a contact attains more weight 63, and the increased level of measurability of funnel stages means that the expected sales effects can be defined for every communicative mea-sure. Agencies are therefore able to be

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with Programmatic Advertising already on their agendas, but perhaps not with a high enough prioritization. If, in your everyday operations, you are already familiar with terms such as DsP, RTB and ad exchange, and your business models are already aligned systematically to-wards Programmatic Advertising, then you can see our recommendations as a checklist and inspirational tool.

more directly involved in the success, such as the sale of a product. To rise to the challenges of Programmatic Advertis- ing, new professions are required at agencies of the future alongside the standard roles, such as customer advisors, art directors, and media strategists.

Mathematicians, computer scientists, and natural scientists in particular bring on board urgently required qualifica-tions – such as data analysis, process modelling, and programming skills. The war of talent has begun and is simulta-neously leading to a major challenge regarding corporate culture. even established occupations need to adjust because strategic knowledge will become more important in conjunction with au-tomated systems. Beforehand a precise definition is required of which formats, message, visuals, and videos will be displayed within which frequency. further-more, they need to learn to engage with a whole new target group: the algorithms. 64

The following section contains specific recommendations for creative, media, and performance agencies. They are aimed mainly at agency decision-makers

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Implications for FULL-SERVICE AND CREATIVE AGENCIES

The current service portfolio of full-service and creative agencies mirrors the linear communication process. This learned sequence of activities will change, and will have a significant, predominant effect on planning and creation. Planning is becoming more important in its role and function. It will be transformed from a formerly preliminary pre-stage to a relevant cross-sectional function in the adver-tising process. This is because it takes comprehensive strategic and tactical expertise to successfully manage and develop digital campaigns. All planning activities such as research and den-sification are automated. Due to this, the standard tasks usually involved around planning and customer services are often no longer necessary, creat-ing more time for customers and the delivery of comprehensive consultancy services.

This is beneficial because plan-ning must be moved closer to the customers.

The seamless link with the customer database is, amongst other things, providing the basis for accurate in-sights into consumer behavior. In the Programmatic Advertising world, these no longer have to represent the lowest common denominator of a target group. for a campaign for example, appropri-ate and inspiring insights relevant to a particular target group can be used, and then be translated into a high-impact approach. This mainly requires comprehensive data analysis skills in addition to strategic expertise.

even after the creative phase is initi-ated, planning continues to be the leading function in managing the it-erative advertising process. once the campaign is on air, success monitoring provides everlasting real-time readjust-ment options. This means that upfront planning is becoming less necessary. The new data scenario is readjusting the focus of planning by becoming much more tactical and in need of

reiterations. Programmatic Advertising is ushering in a new era – for creation too. new fields and forms of interaction in the advertising eco-system need to be mastered creatively. new advertis-ing forms, formats and mechanisms are required for customizable TV ads, personalized in-game advertising, and advertising for wearables, virtual reality gadgets and smart cars. new possibili-ties are also emerging because the sto-rytelling is becoming more intelligent. Programmatic Advertising provides creative minds with the ability to link consumers to the storyline, interactive-ly, and across media. Campaigns run in a modular manner resulting in the implementation of many creative ideas, not just individual ones.

How full-service and creative agen-cies can benefit from Programmatic Advertising:

Make data-driven planning your core competence. In the world of Programmatic Advertising, higher qual-ity data than ever before is available when planning. It is almost impossible to keep track of the sources – including

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first party data from customers; data acquired yourself, and third party data. excellent planning is required to differ-entiate between data sources that are unimportant and those critical to suc-cess. Tools and algorithms are used as a matter of course to analyze and link data, and with their help it is possible to draw important insights in regard to consumers. Many tools for real-time data analysis are available now. Most of them are even available at no charge (such as search Trends, Think with Google, and Topsy).

Flaunt your creative excellence. Precision targeting of different target groups makes the creation of exciting approaches within a few campaigns possible, instead of watered-down campaigns for everyone. This does not only excite creative minds but is also for those consuming advertising. The development of effective, modular advertising requires unique ideas and new programmatic touchpoints call for creative excellence. speed to full throt-tle and start surprising your customers. Who else, other than creative agencies, would be in the perfect starting posi-tion to do so?

Become a storyteller. Programmatic Advertising is revolutionizing cross-media storytelling. To generate touch-ing (brand) stories, whose narrative remain consistent over a longer time period and different touchpoints, spe-cial skills are required. even algorithms will not get there that quickly. Brilliant creative individuals with advanced skills are required. These will be more game designers than copywriters – trained in user interaction, entertain-ment, and drama. Those combining the techniques of storytelling with the possibilities of Programmatic provide a genuinely differentiated offer.

Develop APIs to the customer. Tight dovetailing between the data of your customers (such as CRM, social media, sales, and pricing data) and data you acquire and use (such as own, from market research, and campaign analy-sis) is becoming increasingly more im-portant. This ideally results in a win-win situation – advertising has a greater impact and advertisers are able to further refine their own data. necessary for this are secure interfaces that you develop either yourself proactively or

by means of adapting existing service provider APIs to your requirements.

Collaborate. expertise in Programmatic Advertising and the technology need not be built up in every agency unit. Bypass high investment costs by means of smart cooperation. By their very nature, agency networks have the ideal starting point. Managed service Providers can help if internal col-laboration is difficult. even players like facebook and Google can introduce programmatic knowledge to agencies.

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Implications for PERFORMANCE AGENCIES

Performance agencies are predisposed to playing a key role in the world of Pro- grammatic Advertising. Data and algo-rithms represent their day-to-day busi-ness, and they master the techniques of auction and data-based advertising management (e. g. seo, AdWords, and retargeting). Despite this, most performance agencies are not yet actively involved in Programmatic Advertising. This is surprising – due to the fact that their starting situation, on paper, is a good one, and because they need to continu-ally keep up with technological develop-ments if they want to keep track of the contact points for targeted communica-tion with consumers.

The ability to track every impression of media and assess it for the purposes of optimal return-on-investment is essen-tial. Increasingly, other market players are gaining ground to become special-ized and the systematic enhancement

of software for campaign management is lowering entrance barriers. These tools are becoming less expensive and more intuitive to use. It is mainly media agencies that are penetrating the business areas of performance agencies by investing in expertise and technology. In- sourcing of large online dealers is also becoming a challenge. When performance agencies come under attack in their core business, they must offer extra benefits.

How performance agencies can benefit from Programmatic Advertising:

Broaden your product portfolio. Affiliate, social media, and email marketing, display advertising, programmatic buying, and mobile advertising − nowadays consumers can be addressed through an array of digital touchpoints using different methods. excellently positioned performance agencies are already offering their expertise over the entire digital spectrum. This can be a lucrative strategy because the current focus on small and individual services in the market will become irrelevant for advertisers in the medium term. They require advice on the entire field of the

performance-based advertising system and this will extend in the future to cover the entire value-added chain of advertising communication.

Give advice on data handling and refine existing data. There will be intensified competition when it comes to data own-ership and quality. Performance agen-cies are data experts and should be providing extensive consultation services to their customers (also with regard to data collection and processing). This is the case, for example, when it comes to selecting the right data management platforms as well as providing advice on whether CRM data is suitable or not for the different data platforms. once the relevant data is identified, it is about asking the right questions to tap into their knowledge. Providing interfaces to the customer enables data to be refined further and be enriched with more vari-ables (e. g. by systematically recording campaign results and customer journeys, and comparing them with existing data material).

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Broaden your algorithm expertise. one of the decisive factors for success in the new advertising system is the automated provision of algorithms on the basis of digital signals. Performance agencies can excel in this discipline because they use algorithms every day and know what matters. new business opportunities are opened up when performance agen-cies broaden and market their algorithm expertise. Included here (alongside the definition of parameters) are mainly the control, tuning, and development of algorithms for Programmatic Buying, Creation, and orchestration. The fact that the new business models focusing on algorithms are by no means far-fetched is demon-strated by the arrival of Appnexus, an organization that promotes new forms of data usage for companies through its "Bring your own Algorithm" concept. 65 Algorithm online marketplaces such as Algorithmia are also showing where we are headed. 66

Use the customer journey for bid man-agement. Are investments in displays leading, not only to more clicks but also to increased search queries? or is the search pushing banner advertising?

What role do social networks play in the buying process? A full customer journey analysis across all channels and plat-forms remains a technological challenge. But who can address this better than performance agencies that have been working on this for years? Use the find-ings obtained for Programmatic Buying. This information will deliver smarter pricing in Bid Manager.

Connect previously disconnected data silos. your customers are interested in a consumer profile that is as extensive as possible. But data sources from search engines, social networks, and e-com-merce can rarely be linked to one another because of their competitive situ-ation. even your customers themselves store data in different areas and depart-ments. This represents unused poten-tial. If you manage to force open these silos and aggregate the data, you create significant added value.

Jump on the internationalization band-wagon. Large companies (operating in the e-commerce sector for example) may like being headquartered in Germany, but they also provide services to many customers abroad.

To be effective beyond borders, these companies require agency partners who feel at home on the international field. Those who can service many markets will experience the benefits in future.

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Implications for MEDIA AGENCIES

It is no secret that media agencies have long been on the lookout for ways to add new revenue streams (such as consul-tancy) to their primary source of income: trading with advertising inventory. The automation of media placement, real-time speed, more accurate ways of measuring success, changes to payment models – all of this is shaking the foun-dations of a system, which has worked very well for decades. Competitors both new and old are already in the starting blocks to battle future business with media agencies.

At the very forefront are marketeers who want to bypass agencies (as inter-medi- aries for advertisers) with their own Pro- grammatic platforms. Market research companies are attacking on the data front. Cable network operators and manufac- turers of smart TVs analyze the usage habits of households. social media platforms such as Twitter cap the connections

to data resellers 67 to cash themselves out on the sale of data. And for advertising agencies, it is expedient for the purposes of holistic campaign management to win back ownership of touchpoints.

Media agencies, in particular the ones operating internationally, have identi-fied and reacted to the pressure to act. Be it GroupM, Dentsu Aegis, omnicom, Publicis, Havas, or IPG Mediabrands − the large networks all have the relevant task forces. They are forging ahead with programmatic platforms, data centers, and technology units. Many others, however, are playing for time. Provided business continues to run as it has (espe-cially for TV advertising), they keep their eyes shut to programmatic reality. This can be an existential risk. To survive in the market, media agencies must em-ploy their media expertise and their networks. The changes that are occurring with regard to expertise and activities will also be crucial to success. The time- consuming generation of reports, in-voicing, and clearing of individual media will become automated in the medium term, as will the selection and booking

of advertising space. Time will be clea- red for more intensive consultation and customer contact. Data analysis and strategic consultation skills in particu-lar will be called for at media agencies – because this is where the growth poten-tial lies.

How media agencies can benefit from Programmatic Advertising:

Obtain your orientation within the touchpoint jungle. Many advertisers lose track of the media landscape, especially in regard to the different functions of touchpoints for individual target groups and funnel stages. When media agencies methodically broaden their knowledge of touchpoints and media (discontinu- ities), they can strategically advise advertisers, publishers, and other agencies. for this, they need to accompany con-sumers to a larger extent along the customer journey, and collect, link in, and market relevant data.

Improve the measurable results of adver-tising. Advertisers think that verification of the impact of convergent advertising impressions is one of the hottest topics.

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neither associations nor committees have yet managed to obtain a consen-sus. The fragmentation of the media landscape is playing into the hands of media agencies. Research into adver-tising impact must be holistic to reach reliable conclusions. This is something neither publishers nor customers can do. only media agencies are able to con- solidate individual media KPIs to achieve an impact and success KPI that provides valuable information. Agencies having specialist departments for market media and consumer research at their disposal, are at a good starting point.

Develop and market insights. no other players in the advertising eco-system are currently as close to consumers as media agencies. Benefit from this con- venient situation and convert this knowledge into revenue. The creation of di-verse and powerful consumer insights is set to gain in significance − even if the way they are identified changes. Instead of long-term studies and interviews, data must be collected in real-time and analyzed.

Return to consultancy. If media agen-cies were traditionally consultants, who ultimately made purchases, today they are wholesalers with add-on consultancy services. Given that more and more customers understand they only require software for purchasing, agencies have to return to consultancy – a task no computer can replace. every programmatic purchase is only as good as the media strategy developed previously. Know- ledge of campaign strategies, target group research, effect models, and the entire bandwidth of digital technologies are of inestimable value. Make it visible.

Provide consultation services on the forefront of Programmatic – trading desks, sell/deman-side platforms and big data companies. Industry knowl-edge and manpower are required to coordinate the diversity of suppliers and service providers. neither is available at medium-sized companies or digital late-followers, or even to some degree at large corporations. The market is so dynamic that it is impossible for those interested to follow developments.

excellently positioned media agencies on the other hand, are at the forefront of the market. They can assess which equipment and service providers their customers require, and offer expertise for establishing a managed service.

Invest in creation expertise – in the era of Programmatic, it is important to consider data holistically. In the ideal scenario, creative and media agencies use existing target group knowledge of the customer and publisher for cam-paign planning, they then supplement this with their own or external market research. This, however, is usually different in practice since information is only passed on in fragments. As new types of full-service providers and media agencies have the opportunity of taking on this data hurdle they thereby offer the customer added value. some media agencies are therefore already ponder-ing the acquisition of creative digital agencies. This takes them beyond pur-chase-only issues and opens up access to very new budget offers.

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Media agencies

providing orienta-tion in the touch-point jungle

making the im-pact of advertising more measurable

offering advice on the digital infrastructure

expanding creative expertise

Performance agencies

expanding the product portfolio

advising on data refinement

developing algo-rithm expertise

linking data silos

improving collaboration with other players

promoting the agency's own internationalization

Full-service and creative agencies

developing APIs for customer data

exploiting the strengths of modular creation

making data- driven planning a core expertise

offering transmedia storytelling

improving collaboration with other players

Implications – an overview

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Still hesitant? Four excuses, four responsesProgrammatic Advertising is complex but will soon be up and running. Make sure that you and your business keep pace with it.

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There is, of course, no guarantee that you will actually profit from Programmatic Advertising. Those looking to benefit from the changes will have to leave their comfort zones and tackle it. There are reasons not to do it, but many of them can be counteracted and simply sound like excuses. The following four main concerns have emerged from discussions within the community.

"Should I be investing in Programmatic Advertising now? It is far too expensive and does not pay for itself."

Those playing with the idea of sitting out the change until Programmatic Advertising is fully established, competitively priced tools are available on the market, and the majority of customers request corresponding services, are on the wrong track. The digital world has its own laws and late-comer strategies rarely benefit. The time to act is now. This does not mean going out on a hectic spending spree.

first, invest in a sound Programmatic Advertising strategy, and evaluate the chal-lenges and opportunities for your company. There are powerful partners inside and outside the industry from whom you can learn and with whom you can network.

This applies in the case of technical infrastructure as well as Programmatic Adverti- sing expertise. you cannot and do not need to set up everything yourself. service providers and managed services for Programmatic Advertising are already out there.

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"My customers aren’t asking for Programmatic Advertising services. I am not even sure they know what it is."

The impact of Programmatic Advertising, such as greater efficiency in using a media budget, more accurate targeting, and more individual communication, are unparal-leled arguments that should convince your customers. This applies across industries – for B2B and B2C, for corporations, for mid-sized companies, and for local busi-nesses. True, it has mainly been big brand name companies who have been sound-ing out the opportunities of Programmatic Advertising.

But demand is developing exponentially. Programmatic Advertising will be a mass market in two to three years’ time. By then at the latest, you will require the services and expertise to respond adequately to the requests of your customers. you need to make them aware of the possibilities of Programmatic Advertising now and assist them in a consultative capacity.

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"Where can I hire Programmatic Advertising experts? There is hardly anyone out there with the necessary expertise, and the few there are cost too much."

Programmatic Advertising is not rocket science and the skills are certainly out there. There are already many capable employees in the industry who are well versed in seA, seo, Programmatic Buying, and AdWords, for example. They are mainly currently employed by performance and digital agencies.

In the meantime, the next generation of digital experts is currently undergoing train- ing at universities. AdWords and the like are now on the marketing curriculum and algorithm experts complete their courses in the Mathematics and Computer science faculties. for the latter, agencies have to put themselves forward as potential em- ployers – this is because mathematicians and developers have always been attracted to engineering careers, the finance industry, and software forges. yes, Programmatic Advertising experts want to earn good money, but overall personnel costs will not rise exorbitantly. This is because an inconvenient truth about automation is that soft-ware assumes many functions at agencies, thereby reducing overall working hours.

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"Why should I be investing in a system change that could potentially reduce my profits over the long term, for example, as a result of increased transparency?"

It is true that Programmatic Advertising will affect some established payment and billing models. Those mainly living on discounts in the purchase and sale of media services are not going to welcome the new era. But it will not necessarily be the case that agencies will earn less.

Quite the opposite in fact: The Programmatic Advertising world is giving rise to new business segments, services and skills – for which your customers are willing to pay. This includes, for example, automated market and insight research, conception and implementation of cross-channel architectures along the customer journey, and modular creation. new participation models are also conceivable. An example: If it is more readily possible to evaluate the success of an agency in terms of campaign objectives (leads, image, conversion in the funnel, closures, etc.), the reward offered to the agency can be more clearly defined.

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ConclusionThe new operating system of advertising is coming. Check your compatibility,develop new applications and prepare to upgrade.

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Programmatic Advertising will become advertising’s new oper-ating system and it will undermine the established structures, expertise, and processes of the agency world today. There are huge potential and numerous opportunities behind the trans-formation. But these are only available to those who act at an early stage. This is because Programmatic Advertising is growing exponentially – one upheaval is following the other, and assump- tions become outdated before standards can be established.

The good news is that there is still a level playing field out there. This is because only a select few understand how Programmatic Advertising works, and every agency discipline has specialist associated skills. All players still have the opportunity to emerge victorious, by the process of metamorphosis. But it is necessary to make a start and not to wait around. even sceptics sworn to the traditional course can clearly make out what is just the tip of the iceberg of change on the horizon. Those who don’t change their course are at risk of sinking.

In at least three years’ time, we will clearly see who has missed out on a future offered by Programmatic Advertising today. Agen- cies that are still not able to cope with the new digital advertising system will lose credit in the eyes of their customers and their own star employees. This is why Programmatic Ad- vertising must become a concern of top management.

Identifying and elevating potential is not simply an IT operative issue. It is about the core of the business, the enhancement of your corporate strategy, the structure of your service portfolio, and the competitive edge in the future. The question as to whether business models will change is invalid – it is about the how and where the change will occur. for this reason Program- matic Advertising should be very high on the strategic agenda – especially today, but certainly no later than tomorrow.

ConCLUsIon

49

1. http://digiday.com/agencies/programmatic-advertising-europe-country-country/

2. http://www.appnexus.com/sites/default/files/The %20Why %20and %20How %20

of %20programmatic %20- %20european %20report %20- %20fInAL.pdf

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send-kids-secret-message-adults-cant-see-149197

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Poster-Astra-quatscht-frauen-an-132387

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with-the-weather/

13. http://www.gutewerbung.net/netflix-digital-billboards-campaign/

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15. http://static.googleusercontent.com/media/www.google.com/de//

doubleclick/pdfs/dynamic-creative-techniques-white-paper.pdf

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not-feeling-the-love-mindshare-reports-brand-loya.html?editio

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18. http://www.adidas.de/schuhe

soURCes

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artikel-im-lebensmitteleinzelhandel-in-deutschland-nach-betriebsformen/

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labels-allzeit-bereit-1.1747942

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groessenwahn-verfallen-1.153808

22. http://diepresse.com/home/wirtschaft/international/1420612/

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verkaufen-sie-ihre-daten/

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im-datenschutz-check/

31. http://moz.com/google-algorithm-change#2014

32. http://www.narrativescience.com/

33. http://www.aexea.de/AX_semantic.html

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browser-based-photo-editor-seeks-learn-aesthetic-preferences/

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35. http://www.sueddeutsche.de/wirtschaft/hochfrequenzhandel-in-der-

kritik-maschinen-regieren-die-boerse-1.1441262


mediasplit-im-deutschen-werbemarkt/

37. http://www.die-medienanstalten.de/fileadmin/Download/Publikationen/

Digitalisierungsbericht/2014/Digitalisierungsbericht_2014_Web.pdf

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investiert-in-Us-Plattform-Clypd-133798

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40. http://www.nabshow.com/thought-gallery/programmatic-buying-repre-

sents- %e2 %80 %98next-frontier %e2 %80 %99-tv-advertising

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global-tv-budgets-2019/298786/

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audience-buying-through-print-programmatic/

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pm-public-video-adserver

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programmatic-offerings-allows-demographic-targeting-164116

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47. http://www.jelli.com/

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52. http://www.horizont.net/agenturen/nachrichten/Connect-Group-M-

installiert-weltweit-neue-Unit-fuer-Programmatic-Advertising-134317

53. Werben & Verkaufen, nr. 23, 2015, s. 18

54. http://t3n.de/news/adobe-fotolia-584672/

55. http://www.thedrum.com/news/2014/03/12/here-come-heavy-hitters-

accenture-and-deloitte-are-flexing-their-creative-muscles

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programmatically/293553/

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58. http://digiday.com/brands/netflix-programmatic-ad-buying/

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operations-house/298102

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2014/apr/24/her-siri-brands-marketing

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67. http://recode.net/2015/04/11/twitter-cutting-ties-with-all-data-resellers-

including-datasift/

IMPRInT

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ConTACTT + 49 (0) 30 69 53 74 - 0 www.diffferent.de [email protected]

CHIef eXeCUTIVe offICeR

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AUTHoRsDirk Jehmlich Martin schiek frank Botta

TeRMs of UseAll rights reserved by the publisher. Any editing, duplication, circulation or public reproduction is prohibited.

DATe August 10th 2015

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