We are often asked about how econometrics analyses digital, thankfully we have covered this before in our blog ‘Econometrics and Digital can be Best Buddies’. I’d like to take this a bit further and talk about programmatic and addressable media and whether it, quite frankly, works.

What does programmatic and addressable actually mean?

If you Google, you of course get a multitude of different definitions. If we had to summarise them, in a nutshell we would say:

Addressable media is any advertising that connects brands with individual consumers across online advertising platforms such as social media, OTT (Over The Top) content providers, such as Netflix or Amazon Prime, and smart TV platforms (e.g. Sky AdSmart). Programmatic media is the use of automated technology for media buying.

Addressable and programmatic are both a way of using data to target your advertising to the most relevant people for your brand. These days pretty much all channels could be bought this way. In theory, it is now possible to devise a media plan which is 100% addressable, but the burning question is: should you?

As ever, the answer is maybe.

The Case For

The pros of addressable and programmatic media essentially boil down to minimising waste.

  • Talking to purchasers at the right time

There are very few brands that want to advertise to everyone all the time. In most cases, purchases are infrequent, so ideally you want to talk to purchasers in the period running up to their purchase, and not after. Anyone who shops on Amazon will know the irritating phenomenon of buying a hedge trimmer and then for the next six weeks being shown recommendations for more hedge trimmers.

  • Maximising airtime

Take car insurance. We all have to buy it (urban millennials aside), BUT, we only buy it once a year. It is a bit of a chore and so we only care about it for about 1 week a year; the other 51 weeks we don’t give it a second thought (unless, of course, we are unfortunate enough to need to make a claim). If we surmise that cars are insured roughly equally throughout the year, meaning that 2% of car owners are in the market for insurance every week. This suggests that a staggering 98% of TV adverts are to people not currently in the market. Wasteful, no? Cue addressable and programmatic media!

Continuing with our car insurance example. What if the advertiser could reduce the 98% wastage? Buying a database of everyone who insured their car and when, and then combine that with a technology partner to overlay this data to only show ads to people who we believe are in the market for buying car insurance i.e. they bought their last policy just over a year ago. Seems like a no-brainer. And to some degree it is, but it does have some flaws.

The Case Against

  • The increased cost

If the decrease in wastage is less than the increase in cost per eyeball, then it is pointless doing it, might as well take the wastage and be happy.

  • Reduction in reach

We bang on a lot about reach and do so for good reason (Read our blog all about reach). Take the example of car insurance above. The targeting is great for getting to those people who are renewing their annual car insurance, but what about those who have just bought a car and therefore aren’t on the database for a year ago? They will not see any relevant ads to encourage them to purchase.

  • Recruiting first-timers

Some markets by their nature have buyers who drop in and out. For example, baby products. If you decided to only show ads based on the fact that someone has bought baby products in Boots (category buyers), then you are missing out on a key audience, i.e. new parents. What if new parents are loyal to the brand they first buy when their darling child pops out? You weren’t there to make your case as they weren’t category buyers, and now it’s too late, no amount of advertising is going to change their minds.

Still not sure whether to include addressable and programmatic in your next campaign?

In our experience, the programmatic and addressable channels work very well at the middle and lower end of the funnel; they are good at steering consumers to your brand and converting them. Where we have seen real weakness is in the role at launching new brands/products. This is particularly in the programmatic display market, where you have a fraction of a second to try and tell your story. (We could show you loads of large display campaigns for NPD that have failed).

In our experience, addressable and programmatic campaigns do perform well. In fact, if we crunch our benchmark database, we get some interesting positive facts:

  1. Addressable TV has a ROI between 1.5x and 2.5x higher than linear TV, however these campaigns are often only 10% of the spend, so do not deliver the same absolute volume.
  2. Spotify and Digital Radio outperform analogue radio by approximately 20%. Interestingly, whilst Spotify on its own does perform well, the cost can be prohibitive, and the reach limited. We have seen the best results when it is combined with other digital audio providers.
  3. Programmatic display outperforms non-programmatic buys significantly. However, don’t rule out display partnerships with relevant providers, as we often seen these outperform programmatic, as the “right place” aspect comes into play.
  4. Online Video (including YouTube) is often the highest ROI channel on the plan. Online Video is 80% more effective than the average channel.

Overall addressable and programmatic channels deliver an ROI 55% higher than those channels which are bought by traditional means. However linear TV still remains the largest volume driver for most brands.

To include or not to include?

As with most things, there is a time and a place and addressable and programmatic should not be considered or used in isolation. Carrying out some scenario planning will help you decide whether the trade-off between more accurate targeting and hence reduced waste is worth the higher cost and limited reach.

If you would like to explore addressable and programmatic factors on your media campaigns or purely understand the impact of your media spend based on highly sound modelling and analysis to inform your media choices, then get in touch with us.

Sam Watts

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