Every time we open a webpage, search for something online, or log-in to our social media feeds, we become the subject of an auction. “We have a 37-year-old male here, likes tech gear, the outdoors, and travel. Do I hear 50 cents? Okay, 50 cents to Priceline. Do I hear 60? 60 to REI. 70, takers at 70? 70 to Home Depot, sold to Home Depot.” The page loads, and with it comes the winner’s ad. That’s programmatic digital advertising. It makes up the largest portion of all online advertising.

The selling point of programmatic advertising is exactly what’s described above. It provides an opportunity for advertisers to target specific audiences, anywhere. There is no way humans could conduct millions of auctions in fractions of seconds, every second of every day. If that speed and volume of transactions sounds similar to financial markets, that’s because it is. Unfortunately, that’s not the only commonality. In his new book, Subprime Attention Crisis, Tim Hwang has some concerns: 

“Imagine a supermarket with the level of inventory fraud that exists in the programmatic marketplace. In some aisles, one out of every five products on the shelves is a fake: you’d return home to find that these boxes contain nothing. Even when you stick to familiar brands that you recognize and trust…your purchases turn out to be imitations filled with sawdust.”

Hwang, the former global public policy lead on artificial intelligence for Google, fears the digital advertising market, the financial underpinning of the internet, shares uncanny similarities with the financial sector circa 2008. Gulp. That thought is sure to send a chill through any CMO, communications manager, really anyone that touches online advertising—us included.

The problem, Hwang argues, is that the commodification of attention (which is what is being purchased by advertisers) has created a witch’s brew of growing fraud within the programmatic marketplace, and concerning opacity among the small number of companies who operate these virtual markets. Spoofing, click farms, bots masquerading as real users, ads being served to real people who have ad blockers, inflated data from marketplace owners (Facebook’s pivot to video as an example), and significant upcharging are among the many ways Hwang has identified a bubble of trouble growing in the marketplace. In the near term, this combination is resulting in advertisers paying for programmatic campaigns that, per the analogy above, could be up to 20 percent sawdust.

That’s disconcerting on a macro level—the internet as we know it is largely accessible because advertising funds its operation. Imagine how differently we would use the internet if it cost a nickel each time we searched something online. Much of our online activity is delivered free of charge thanks to advertising. A panic and collapse within the digital advertising market could therefore have many resulting consequences. Those are longer term, digitally existential stakes, the likelihood of which remain uncertain. In the near term, what does one do upon hearing serious fissures may be snaking through a pillar of a marketing, advertising, or public awareness effort?

“Both advertisers, and the programmatic markets will need to evolve,” said Mindy Gantner, President at Explore Communications, a long-tenured media planning and buying agency in Denver. “The trackability and attribution of programmatic campaigns can be addictive. A programmatic buy kicks out so many metrics and data that it’s easy to take that as evidence of an effective, provable return on investment. But the reality is without diligent management of a programmatic ad campaign, it’s all happening in a black box.”

Recalibrating expectations and how we view programmatic advertising is essential. There’s been a fair share of myth-making about programmatic advertising, mostly concentrated on its ability to create little-to-no waste in terms of reaching a desired audience. However, if up to 20 percent of the results programmatic delivers (a number Gantner agrees on) may not be valid, the hyper-targeted luster is tarnished. 

“It’s important to be realistic that not every cent spent on programmatic is creating measurable value,” said Gantner. “At the same time, if 80 percent of the ads served in a well-managed programmatic campaign are working as they’re supposed to, that can still produce extremely meaningful returns on investment. The key is active, knowledgeable management. A ‘set it and forget it’ approach is high risk.”

Another key step in mitigating risk in the programmatic market is to invest in a healthy media mix. The other strong selling point of digital advertising, and particularly programmatic, is affordability. Marketing and awareness can be accomplished with budgets of any size. That makes it very enticing, even for five and six figure media spends, as the perception is those dollars are going further. Gantner says it’s critical to remember that every media tactic does a slightly different job. Layering digital, broadcast, and other types of media can provide a much more holistic approach that achieves objectives more effectively than programmatic alone. And she notes, the influence of programmatic continues to force traditional media to innovate. 

Services are emerging that are helping connect the dots between various media. Passing a billboard advertising a restaurant can now result in receiving online ads from that same restaurant. Organizations have an increasing ability to correlate the airing of a TV spot to activity on their website. These are technologies that didn’t exist several years ago but will continue to evolve and sharpen the efficacy of traditional paid media.

At Clermont Eliot, we don’t intend to abandon programmatic media, or recommend that our clients do. But its issues do warrant caution and discussion. At the very least, keeping a close eye on how the programmatic marketplace continues to address what could be crisis-inducing problems is very much warranted.