Greg Shepard

Programmatic Buying VS Performance Marketing

Over the course of the past ten years or so, the online advertising space has become overrun by “big data.” You know, that goldmine of information that’s supposed to ensure that the exact marketing message gets to the exact demographic/psychographic/whatever-graphic at the exact time?

Funny how that hasn’t panned out and online advertising, for the most part, is still a big ‘ol crapshoot.

So what does the industry do to improve upon this supposed failure? Automate the whole process with computers, that’s what.

Yes, programmatic buying, the penultimate nirvana of online advertising success, right? Well if programmatic buying was the success so many believe it to be, every piece of online advertising would have a 100% CTR, right? And every click would lead to a completed sale, right?

According to a recent study by Winterberry Group entitled Going Global: Programmatic Audience Development Around the World, 93.3% of U.S and U.S-based global publishers are currently pursuing a data-driven, programmatic approach to audience development. And depending upon the source, about three-quarters of ad agencies report using demand-side platforms to engage in programmatic buying. IAdditionally, Magna Global says programmatic buying accounted for $9.8 billion of ad spend in 2014.

Programmatic Buying Is An Inefficient Use of Marketing Dollars

When ad exchanges came along, it became very easy for publishers to sell (and buyers to buy) unsold, remnant inventory. Exchanges then moved to programmatic buying of premium inventory from publishers.

Centralizing things, agencies then began offering their own programmatic solutions with in-house trading desks to buy the media they had planned to purchase. And that leads to a bit of double dipping, which does not benefit the brands they represent.

It’s time brands realize that they are paying ad agencies for the “possibility” of their ad dollars achieving results when they could be engaging in pay-for-performance affiliate marketing. Sometimes brands are even paying agencies twice when you factor in the costs for both the planners and the trading desk.

Performance Marketing Is Directly Tied to Sales

It would seem everyone wants in on the action providing programmatic buying a bright future. But consider this. Why invest all that time, energy and upfront money into a system that supposedly improves the ability of a brand to reach its intended target but completely ignores whether or not a revenue-generating sale is made?

Yes, there’s CPA, CPL and a whole host of other acronyms that move toward the direction of paying for ads based on a desired action, but rarely is that tied directly to an actual, completed sale.

Enter performance and affiliate marketing. If you mention the term “affiliate marketing” to some brand marketers, they either don’t know what you’re talking about, or they think it’s some shady method of generating traffic.

Nothing could be further from the truth. Affiliate marketing, simply put, is the use of third parties (affiliates) to help sell your product or promote your brand. Even better, affiliate marketing is a better way for a brand to pay for advertising. Wait, what?

Affiliate marketing simply means paying for marketing on a performance basis. As a result, ad expenditures are based purely on whether or not a sale is made. If an affiliate sells a product on behalf of a brand (and, in doing so, promotes the brand), then the brand pays a percent of the sale to that affiliate. If the affiliate’s efforts do not lead to a sale, the brand does not pay anything.

For the affiliate to make money, they must promote the brands with whom they have affiliate deals. This is how affiliate marketing, in a way, pays for a brand’s advertising. Yes, the brand pays, but only if a sale is made. And, while affiliates are attempting to make a sale, the brand is receiving, essentially, free advertising.

Performance Marketing Minimizes Fraud

Only the sale matters to everyone in the performance marketing chain. Fraud is a concern with the programmatic buying model because all parties want clicks and impressions to increase (no matter what) so that CPA, CPL and all those other buzzword bingo acronyms look more efficient. All while having zero direct effect on completed sales.

While there may be some benefit to a system that increases the likelihood the right ad appears to the right audience, it’s all just a hope and a prayer unless it’s tied to a sale. And that’s exactly what performance marketing is all about. Give it a look.

Greg Shepard

About Greg Shepard

Greg Shepard, the Chief Strategy Officer of Pepperjam, is a seasoned veteran in building and running sustainable growth businesses. Inspired by the unique perspective he garnered as both a merchant and affiliate in past ventures, Greg established AffiliateTraction and it has since expanded into the largest multi-national affiliate marketing agency with offices in Silicon Valley, Toronto, London and Sydney. In January of 2016, AffiliateTraction was acquired by eBay Enterprise Marketing Solutions. In April of 2016, eBay Enterprise Marketing Solutions became Pepperjam, resurrecting a familiar name in the performance marketing space.

One Response to Programmatic Buying VS Performance Marketing

  1. Steve says:

    Sounds like an apple criticizing an orange.