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The Productivity Paradox of Programmatic: How to Thrive While Transforming

Written on
Aug 29, 2017 
Author
Mike Driscoll  |

One of the more memorable characters in A&E’s Mad Men was not a man, but a room-sized IBM mainframe, installed at Sterling Cooper as a symbol of the computer age. The agency believed, as many firms did in the early 1970s, that information technology would revolutionize worker productivity. Yet as the economic data rolled in through the 1980s, it revealed a jarring paradox: computerization seem to lead to less productivity.

The American economist Robert Solow famously summed up the contradiction in 1987 when he said “you can see the computer age everywhere but in the productivity statistics.”

Solow’s productivity paradox has held true for many classes of technology development in recent decades: when you introduce new innovations, there’s a transition stage where — by any variety of success metrics — things get worse before they get better. Eventually, the benefits of information technology investments of the 1970s were realized, and US labor productivity surged from a tepid 1.4% in the 1980s to over 3% in the 1990s and 2000s. But it took a few decades to get there.

Today’s digital marketing leaders are facing a Solow-esque predicament. Adtech firms promised that programmatic innovations would drive productivity gains to marketers, on both sides of the ROI equation. On the return side, programmatic buyers’ rich data sets combined with smart algorithms would deepen engagement and lift conversions. On the investment side, software automation promised to lower the cost of media.

Yet for some of the world’s largest marketers, the benefits of programmatic are visible everywhere but in the marketing metrics. As P&G’s Marc Pritchard described in a recent presentation at 4A’s Transformation Show, “we serve ads to consumers through a non-transparent media supply chain with spotty compliance to common standards, unreliable measurement, [and] hidden rebates.”

The good news: We are still in early innings of programmatic’s digital transformation of marketing, and the industry is starting to work out the kinks. Programmatic buying is fundamentally about enhancing the productivity of marketing, and now with years of successes and pitfalls to learn from, we can start to draw on a few lessons from previous rounds of IT innovation. Here are a few pieces of advice we can take from Solow for those now looking to jump into the programmatic game:

1. Pioneers get the arrows, settlers get the land. Avoid making the mistake of being too early with embracing innovations before they’ve fully matured. Arguably, P&G’s ambitious Hawkeye initiative — its in-house programmatic trading system, which sought to unifying data across all of its brands — took a slew of arrows as a programmatic pioneer. Recent indications are that it will be winding down and replaced by a set of more mature data management and buying platforms. The best decision is often to adopt the established “boring” technology instead of building something shiny and new. More aggressive marketing teams might be enticed to create their own customized innovations that fit a unique purpose, but taking the time to properly research your options and leveraging trusted industry tools and partners is almost always a critical component of success in programmatic buying.

2. Match your rate of innovation to fit your organization. Bleeding edge technologies are not for everyone. Startups can often be quicker to embrace a new tool and integrate it to their workflow, but at bigger organizations, it’s important not to force employees to turn on a dime and immediately adopt drastically different workflows. Instead, be patient and watch carefully as you intentionally wait for technologies to mature – once an innovation has been proven to succeed at the scale of your company, you’ll be in good position to reap benefits more quickly.

3. Prepare your tech for future adaptability. A common problem among early-stage innovations is solving for a current, specific challenge without considering how future market shifts might leave that technology quickly obsolete. For example, a recent study from 614 Group revealed that many publishers have been unprepared for the rise of mobile monetization. In the years to come, we might see new trends like programmatic TV separating the fastidious forward-thinkers from the ill-prepared companies. Ask questions of your technology partners and look for signs to determine whether their systems can easily adopt new standards, metrics, or formats in short order – otherwise you might be left scrambling to integrate other systems down the line when new trends pop up.

4. Take ownership and control of your data. Just because you work with partners to manage your programmatic buying doesn’t mean you can set it and forget it. Insist on receiving transparent access to your data so you can understand where your dollars are being spent and what sites your ads are appearing on. Many brands are increasing the pressure for transparency following the 2016 ANA report that revealed non-transparent practices involving kickbacks, incentives, rebates, and fees that weren’t disclosed. For those just getting started in programmatic, it needs to be a priority from the start.

Today, we’re lucky to be at a healthy point in the growth of programmatic buying where, with the proper research and strategic adoption plan, higher rates of advertising productivity and efficiency are becoming much more widespread. Marketers would be wise to avoid the knee-jerk reaction that programmatic’s flaws outweigh its advantages. The digital transformation won’t happen overnight, and those who treat programmatic as an evolutionary, not revolutionary style transformation, will find the most success.
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Mike Driscoll is the founder and CEO of Metamarkets, a provider of interactive analytics for programmatic marketing. Mike has spent more than a decade developing data analytics solutions for online retail, life sciences, digital media, insurance, and banking.

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