Welcome to the programmatic revolution

Up to now brands have faced great difficulty in reaching customers across devices and mediums - but with the new range of data available, real-time bidding and a programmatic approach, 2014 might be advertising's "big bang" year.

In my last piece for the NS website, I predicted that the advertising industry was headed for a Big Bang moment. This was a comparison I drew with the financial industry, where, in 1986 almost overnight the bowler hats and handshakes for completing a deal disappeared and were replaced with electronic, screen-based trading. It revolutionised the industry and properly cemented London’s position as a financial powerhouse.

The reason I think we are heading to this point, and fast, is due to the reams of data that are being produced across the web every single second. Thanks to the proliferation of smartphones, tablets and personal computers, coupled with the emergence of social networks, sharing platforms and the resilience of email, people are sharing their likes, preferences and opinions more than ever before. The web has always been social. And by this I mean the way in which content is produced, consumed and distributed across the digital world. In granular form this can mean shortened links, using widgets on pages to share information, even sending a good old fashioned email with a link in it. The human behaviour of communications is very much alive and well in the digital age.

This has created an unprecedented opportunity for marketers, who are now able to take advantage of the amount of data out there to help target consumers and find new customers in a precise and relevant way, at scale. Simply put, there are billions of sharing data points in all forms happening across all digital touchpoints.

We are however at a stage now where processing this information has to be automated. And this is why we are fast approaching a “programmatic” revolution. Technology, through sophisticated algorithms, is increasingly able to find valuable characteristics, gauge consumer behaviour and target messages with laser focus to the right audiences. It brings a previously unavailable automated intelligence to help brands target quickly enough to hit potential audiences with relevant content in a timely fashion.

Some may say “isn’t this just real-time bidding?” It’s not. The concept of “real-time bidding” has been in existence for a few years and is simply the methodology behind buying and selling advertising impressions in an open marketplace, much like an auction model. This is where brands are (allegedly) able to buy and sell online display advertising in real-time, one ad at a time and serve them to the public. However, as with most software, your desired outcome is wholly reliant on the information you put in and the way in which you use the data you have. How often have you been served an ad for a train or plane after you have made the journey? Real-time bidding is an important trading component of the marketplace but it is the marketplace as a whole that is becoming programmatic. This enables brands to aggregate, book, analyse and optimise all forms of digital content and media so they can serve targeted offers, messages, and ads across all channels. The ultimate benefit here is that marketers can identify customers in real-time, in the right place, and on the right device, to help retain or win new business.

It basically means that they are able to connect the dots between their content, their audience and their media buying; to ensure they are genuinely reaching their target audience based on their likes, preferences and behaviours right here, right now. This is a hugely powerful asset for brands.

Another reason this is going to start to address the challenges we all face is the mobile channel. Mobile advertising has struggled on two levels. Firstly, it has struggled as web advertising did in the early stages and has sadly had to adopt a clusterbomb approach with clients being measured by the number of app downloads that they are able to achieve (akin to how many likes or followers you can get - numbers with no real meaning). It’s expensive and sees little return on investment. Secondly, even though the mobile or smartphone is becoming the prime means through which people communicate today, marketers have struggled to connect with them as they move between smartphone, desktop and tablet. The programmatic marketplace will address both as it brings data and a cross platform approach, thereby enabling brands to target and connect with their next customers using tailored marketing messages. A big drive for this new paradigm will be the ability to combine the analytics of each consumer action and deliver a personalised experience to users, with intelligent software and an increasing use of cookieless targeting technology. It’s the shot in the arm that will ensure mobile continues its aggressive growth.

Brands are already turning to a programmatic approach and seeing significant returns. However, thanks to the amount of data out there and the need to integrate with mobile, 2014 promises to be the year which all channels reach a “Big Bang” moment - and you don’t want to be the brand that is left behind.

Rupert Staines is European Managing Director at RadiumOne

Communications are thriving in the digital age. Photograph: Getty Images.

Rupert Staines is European Managing Director at RadiumOne

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR