Programmatic surges as media buying habits change

Programmatic advertising is revolutionising the way that brands buy media and leading to a decline in the traditional marketplace, according to third-quarter ad spend figures from Standard Media Index (SMI).

UK spending on programmatic – the automated buying of online ads according to the audience they reach rather than the sites they appear on – surged by 61.6% year-on-year in the first three quarters of 2014. This compares to a 2.7% decline in traditional display advertising bought directly from a media owner and a 1.5% drop in out-of-home.

SMI captures around two-thirds of the total UK agency spend from the booking systems of five of the six global media holding groups: Publicis, Dentsu Aegis, IPG Mediabrands, Omnicom Media Group and Havas Media. SMI does not release monetary figures on ad spend but tracks rises and falls across different channels.

Alberto Leyes, director of business development at SMI, describes the growth of programmatic as “unstoppable” and suggests that some large media owners in the UK could sell close to 50% of their inventory through programmatic in 2015.

“Advertisers and media owners originally used programmatic to buy and sell unsold and low-quality inventory,” notes Leyes. “Now the premium and high-quality inventory is starting to be sold through programmatic too. It’s here to stay and is expected to keep growing over the next few years.”

The data shows that in total, UK ad expenditure for the third quarter was flat, down 0.4% year-on-year. This compares with a 12.2% rise year-on-year during the second quarter, when the hosting of the FIFA World Cup in Brazil led to a surge in ad spending. The market is up 4.6% in the calendar year to date (YTD).

Spending on digital has increased by 12.7% this year, though growth was relatively slow in the third quarter alone (+3.7%). This compares to a rise in television advertising expenditure of 7.4% in Q3 and 6% in the year so far. Despite growing at a slower annual rate to digital platforms, TV ad expenditure has maintained steady momentum across both subscription (7.4% growth YTD) and free-to-air channels (5.4% growth YTD).

Research released last month by Thinkbox, the marketing body for commercial TV in the UK, claimed to show the central importance of TV within multichannel advertising strategies. It noted, for example, that 74% of people pick up another device or look at another screen during TV ad breaks.

As a result, many TV advertisers are seeking to encourage interaction through additional content on mobile apps and social media. A good example is the app for ITV’s The X Factor, which allows advertisers and sponsors to offer additional content.

According to the SMI data, ITV’s various channels account for 41.8% of TV ad expenditure in the year to date, versus 22.8% for Channel 4 and 15.7% for Sky. Spending on ITV advertisements also rose by 13.5% in the third quarter.

Although spending on TV is holding up relatively well, the demand for print advertisements is declining sharply year-on-year, with newspapers and magazines down 18.9% and 10.1% respectively in the third quarter. The digital sites of the UK’s largest newspapers are all growing strongly, however, with Q3 spending on online advertising on the Guardian, Mail Online and Telegraph websites up by 40.1%, 37.5% and 34.9% respectively.

Twitter saw the highest growth of any digital publisher, with ad spending via its ‘promoted tweets’ offer up by 81.7% in the year to date. This compares to growth in ad spending on Facebook of 21.1% and a rise of 32.4% on LinkedIn, though Leyes points out that only a portion of advertising spend on social media goes through agencies, with a significant part of their inventory sold directly to advertisers.

Twitter’s strong showing is reflected in its recent financial results, in which the social network saw worldwide revenues grow by 114% in the third quarter to $361m (£227m). Speaking at the Web Summit in Dublin earlier this month, Twitter’s president of global revenue Adam Bain suggested that marketers are getting better at using its native advertising system and are realising the benefits “of being good, rather than just loud” in how they communicate brand messages.

In addition to looking across different advertising channels, the SMI data breaks down spend according to vertical markets. This reveals that gambling and lotteries (+37.8%) and computers and software (+29.8%) were the sectors showing the highest year-on-year growth in ad spend during the third quarter of 2014, followed by toys and video games (+11.4%) and FMCG (+7.9%). The biggest drops in spend were shown by entertainment (-22.5%), telecommunications (-20.8%) and financial services (-16.7%).

Want to know more about programmatic? Attend Marketing Week and Econsultancy’s “Get with the Programmtic” event in association with AppNexus on 4 December. Go to marketing week.co.uk/programmatic for more details.