March 29, 2024

Back to Horseshoes and Grenades

I called my good friend Bill Lederer to ask him what effect Google’s and Apple’s decisions earlier this year to ban third-party cookies and device IDs on their Chrome and Safari/IOS browsers would have on digital advertising. My hypothesis was that context — content and environment — were more important now.

Bill is Co-Founder and CEO of iSOCRATES, a global marketing and advertising technology and services company that, among other things, executes digital ad campaigns for major advertisers and monetizes ad inventory for major publishers.

Before I give you Bill’s answer and the implications of that answer, here’s a little background.

In 2007, Real Media made the first computer-to-computer digital ad placement (other than Google or Facebook), that at the time was referred to as real-time bidding (RTB). Over the succeeding years, RTB grew exponentially and came to be called programmatic trading. By 2020, digital advertising accounted for 66 percent of total U.S. advertising investment, or $356 billion, and just over 90 percent of all digital advertising, or $320 billion, was placed programmatically.

When you go to a website or open an app on your laptop or cell phone, the ad spaces on that page are instantaneously put up for sale on an ad exchange (the biggest exchange by far is owned by Google), an advertiser bids to serve an ad to you (the biggest ad serving platform by far is owned by Google) and if the advertiser wins the auction, an ad is served to you. This auction and related ad serving happens in about 200 milliseconds (the blink of an eye), as the page is loading, so you are unaware of what’s happening.

The key to programmatic’s explosion is that an ad is served “to you.” Because of cookies and device IDs, when the ad space on a website or mobile app you just opened was put up for auction on an exchange, advertisers knew exactly who you were, where you were and all about your browsing history. It was precise targeting; what Bill Lederer calls a laser-guided missile.

With Chrome and Safari/IOS eliminating third-party access to cookies and device IDs unless the consumer opts-in to personal tracking(which is highly unlikely without incentives), except on Google, Facebook and Amazon, this precise one-to-one audience targeting disappears. Now when advertisers bid on an ad impression, they have to evaluate the context — the content and environment — of the page on which an ad will appear and make some assumptions about the type of people who would consume that content. In other words, the content and the context the audience is consuming becomes a proxy by which a marketer must now infer the identity of the underlying audiences. For example, older people watch CBS’s “60 Minutes,” therefore Pfizer is more likely to find its audience there.

As Bill Lederer explained, “Advertisers must return to pre-internet, imprecise assumptions about context and audience. Advertisers will be returning to horseshoes and grenades, in which just getting close to the intended target has to be good enough.  For performance marketers, this will not be unlike returning to the Dark Ages after living in the Renaissance.”

What are the practical implications of this move to context from precision, privacy-busting targeting?

First, you will get less relevant digital ads. You’ll be asking “why did I get that ad?” Less relevant digital ads will probably result in people paying even less attention to ads, which, in turn, will mean advertisers will have a lower return on ad investment (ROI) and, thus, will have to invest more in digital advertising or switch to a more targeted digital medium such as Google, Facebook or Amazon or more targeted television such as connected TV (CTV).

Second, as Bill Lederer posits, “New currencies such as small monetary payments, cashback or redeemable points will be competing to incentivize audiences to opt-in to tracking, permissioned data-sharing and for attention itself.”

Third, creative execution will become more important in advertising, sort of a return to the days of Don Draper and “Mad Men” and to The Big Idea that connects to people emotionally because when you’re throwing horseshoes or grenades, getting closer to the target is how you win. 

“Programmatic Buying Killed Us”

NEW YORK – July 5, 2020. “Programmatic buying killed us,” said CEO Jill Jack in an interview the week after she closed down National Spot Sales Representative, Inc. (NSSR), the last remaining independent television and radio national sales representative company.

ABC, CBS, FOX and NBC’s TV station representative divisions and Clear Channel’s Katz Media Group all shut down their operations a year earlier, leaving NSSR struggling with only 5% of all TV and radio inventory sold on a direct, guaranteed basis.

“With so little inventory sold non-programmatically, we couldn’t survive,” Jack said. “There weren’t any buyers left because all the agencies used their own or independent trading desks, so we had to call direct on small- and medium-sized businesses that typically made us call on their Purchasing Departments.”

“Selling used to be fun – calling on buyers, taking them to lunch, plying them with drinks, sneakers, jeans and all sorts of swag.  Purchasing Departments don’t take swag. All they want is Big Data and insights. What do my salespeople know about that? It’s no fun,” Jack said wistfully.

I asked Ms. Jack if there was any single event or watershed moment that might have foreshadowed the end of direct media selling. “Sure,” she said, “On June 4, 2014, Ad Age reported that the world’s largest advertiser, Procter & Gamble announced that 70-75% of its digital media wold be bought programmatically. I remember Ad Age’s sub-head on the story: ‘Other Marketers Likely to Follow P&G’s Example.’

“It was like the bottom fell out of direct selling. Up to that point, most digital ad dollars went for direct marketing, not for branding. P&G’s decision opened the floodgates for digital branding dollars. Everybody followed P&G like lemmings, as they always do.”

I asked if agencies weren’t reluctant to fire all of their media buyers. “Hell no,” Jack replied, “they couldn’t wait to automate the digital buying process and turn over buying to software at their trading desks. Media departments are cost centers; trading desks are profit centers. Automating their media buying process saved the agency’s bacon. Made them profitable again.”

I asked Ms. Jack what happened in the upfront market. “The upfront market went programmatic in 2017,” she said. “The big advertisers and their agencies still made deals under the table to allocate prime time and sports inventory and to shut out smaller brands, but the final buying was done on an automated basis. Actually, it was handled by Google.”

I asked if Google still handled the automated buying process even after it bought CBS in 2016. “Yes,” Jack said, “but killing salespeople wasn’t Google’s fault.  Google has added a lot of salespeople, who they, like Facebook, call evangelists. Google didn’t kill media salespeople, P&G did. They never liked us calling on them anyway.”