Weighing up the pros and cons of programmatic advertising

Comment John Mclellan

As the tide continues to turn against the duopoly of Facebook and Google, up to the bridge stepped Lidl’s head of media Sam Gaunt who told the Festival of Marketing last week that the use of programmatic advertising was being “oversold”.

The German supermarket chain operates a highly intensive, on-going appraisal of its marketing directly related to sales. All aspects of their advertising are constantly tested to measure their effectiveness, so at any given point it knows exactly how much bang it gets for every marketing buck spent.

And it’s a lot of bucks; according to Marketing Week magazine its budget rose from £28 million in 2013 to £75m this year. It has become a mainstay of established sectors, in particular the regional and weekly press. Campaigns which seek simply to improve brand awareness by exposure to large audience numbers will butter few of Lidl’s parsnips unless they sell more of them. Much of their advertising is tied to pushing particular product lines in particular stores, and as the brand represents value for money, brand awareness is almost a by-product from making sure real value is front and centre of every communication they send. Awareness alone cuts no mustard and immediate return on investment is essential. If they are selling more parsnips, butter or mustard, they will know exactly which approach leads to the biggest uplift in sales. Being exposed to millions of eyeballs means nothing to them if those eyeballs weren’t then at a Lidl check-out taking advantage of the latest offer.

So Gaunt knew what he was talking about when he described programmatic ads, the ones which follow your every click on a computer or mobile device, as “new, shiny and overvalued”. While conceding programmatic ads will play an increasing role, Gaunt cast considerable doubt on the claims being made for them now. “Around March last year, what we had been seeing across a number of brands was ROI declining, cost of digital media was going up,” he said. “We were realising the reach had actually come down.”

According to trade website Press Gazette, Facebook and Google take most of the £10 billion spent on digital advertising in the UK every year, so Facebook’s reported 300 per cent increase in turnover in 2016 to £842m looks somewhat on the low side. And judging by Gaunt’s remarks it’s fair to speculate how much of that came from advertising which failed to meet the client’s expectations.

Gaunt concluded: “There is a long way to go to until we reach that nirvana of really understanding how programmatic can work effectively and generate an impressive ROI.” The mystery is why so many companies are still falling for it. ● John Mclellan is director of the Scottish Newspaper Society