How Mad Men Are Losing Out to Algorithms

It's happened to fighter pilots and stock brokers, why not to advertising execs?

Programmatic buying enables advertisers using sophisticated algorithms akin to high speed securities trading programs to buy and sell ad time by inputting variables like cost, reach, frequency and audience characteristics in order to match the optimal ad spend with the targeted consumer.

Advertising 'creatives' have traditionally designed ads while account executives sold them by convincing clients of their appropriateness for the intended purpose. Timing was built around seasonal migrations of consumers' attention to autumnal new car sales, Christmas, spring wardrobe changes, back-to-school, etc.

That model was fine for a simpler and seemingly more orderly era. But commercial rhythms based on 1950s lifestyles are as outdated as Green Stamps and cars with big fins. In the global 24-7-365 economy one customer's autumn is another's spring, and the sales in Dalian may be more profitable than those in Dallas.

Given the amounts at stake, the demand for greater accuracy and accountability as well as the ability of algorithmic buying to more closely match the needs of buyers and sellers, the role of the ad agency will have to change or face elimination. Computers programmed with the right data can design and sell ads. We flatter ourselves by believing that their will always be a role for human creativity and relationship building. But that role, too, is changing. Humans will be needed to do some inputting and some quality control. There will be some account supervision and maintenance required. But in a global market in which computers communicate with their like elsewhere, the needs, training and uses of whichever people are retained will also have to change to reflect the new reality. There may even be a TV pilot in this for someone who can articulate the industry's evolution from martini to machinery. JL

Emily Steel reports in the Financial Times:

Programmatic buying is gaining traction in the online ads business. It allows marketers to buy cheap ads on thousands of websites rather than negotiating deals directly with publishers. Marketers can target ads to specific people based on data about them.

Television networks are this week rolling out the red carpet for dozens of celebrities and hundreds of advertisers attending their annual “upfront” sales presentations.
The decades-old ritual, featuring star-studded performances and lavish parties, kicks off the annual market where US TV networks sell about three-quarters – or tens of billions of dollars’ worth – of their commercial inventory for the coming season.
The spectacle stands in stark contrast to the rise of new technology-based systems known as “programmatic buying”, which mimic stock exchanges and tap sophisticated algorithms to buy and sell ads in real time.

As media becomes more digital, some ad executives predict that a large portion of advertising – including TV commercials – will be traded this way.
Such a change would have profound ramifications for the $518bn media and advertising business, transforming not only the commercial value of TV programmes but the types of shows that make it to air.
Today, there are very few TV commercials that are bought and sold via programmatic systems. But the old ways of doing business are under threat amid the proliferation of media and a number of new companies such as Google , Facebook and AOL that are pitching digital video ads.
“The industry is at the forefront of great change,” says Tim Spengler, worldwide chief executive for Interpublic’s media-buying group Magna Global. “The next couple of years will be evolutionary, then it will be revolutionary. Technology will force it.”
The upfronts are a legacy of the 1960s advertising world depicted in the hit TV series Mad Men, featuring Don Draper. Broadcasters aligned their season premieres with the autumn release of new cars in an attempt to tap into the large sums that carmakers spent on TV commercials. The networks started selling bundles of ad time in May for the autumn shows, giving marketers months to prepare their campaigns.
Ad rates inflated steadily year after year, and the upfront bazaar took on extravagant proportions.
In protest at the price increases, agency J. Walter Thompson boycotted the frenzy in the mid-1970s thinking it could negotiate for better rates on its own. The plan backfired. JWT ended up paying higher prices and the episode remains a cautionary tale to advertisers who, year after year, return to the upfront bargaining table and agree to higher ad rates despite audience declines. The fast rise of programmatic buying, however, is causing some ad executives to rethink their approach to buying television airtime.
Almost a fifth of marketing dollars spent on online display ads already pass through such systems, according to eMarketer. Xaxis, the programmatic buying arm of WPP, generates annual billings of more than $400m. The group now buys ads on the web, online video, social media, mobile and radio. TV is on the horizon, said Brian Lesser, chief executive of Xaxis.
“Programmatic buying is just a more efficient means of buying ads and serving the most appropriate message to the most appropriate person,” he said.
A shift is likely to face much resistance. Advertisers are still keen to buy TV airtime, which helps them reach broad audiences. Networks, meanwhile, are unlikely to cede sales to algorithms that have the potential to drive down prices.
Jason Maltby, president of WPP’s Mindshare media buying group, said: “The [upfronts] model is sustainable. In the next four weeks, advertisers will spend tens of billions of dollars on traditional television.” But all it will take to usher in a wave of change is for big marketers to start testing buying TV ads via programmatic systems.
Michael Kassan, chief executive of the MediaLink consultancy, said: “This year may be the tipping point where programmatic buying, which has been historically online, will make the transition to offline. The nature is to resist change, but I don’t think they can stop it. Momentum is building. Broadcasters will have no alternative.”