New digital ad model works for Kellogg

NEW YORK: Kellogg, the food group, is deriving an impressive return on investment from pursuing "programmatic buying", or the automated purchase, of an increasing number of digital ads.

Speaking to Forbes, Bob Arnold, the firm's associate director of digital strategy, reported that this way of acquiring ads, which is similar to the stock market, was yielding an above-average payback.

"We've seen tremendous results when using programmatic buying," he said. "Depending on the brand, the digital media ROIs have increased as much as six times, according to our third party market mix models."

Programmatic buying occurs when websites pass on unsold inventory to ad exchanges. These exchanges are linked to demand-side platforms run by brands and agencies, which make purchases based on factors like price, context, placement and user data.

Online companies including Google, Facebook, Yahoo and Microsoft are all seeking to tap this space, and some estimates posit that "several trillion" such ads are served each month, Arnold said.

The "most interesting aspect of this ecosystem", he continued, is the ability to combine a client's priorities – like budgets and preferred metrics – with reaching the right consumer at the right time.

"Bottom line, programmatic buying is more efficient, more effective and more transparent than the traditional digital media buying model. It's more efficient because it's automated and eliminates expensive overhead," he added.

"Additionally, the bid process allows advertisers buy at true market rates for each individual impression, rather than a large group of impressions, which may vary in degree of value."

IDC, the insights provider, has predicted that real-time display advertising will enjoy a compound annual growth rate of 59% globally over the period to 2016, when revenues should come in at $13.9bn.

Parks Associates forecast that this format will account for 50% of North American display ads in volume terms by 2017, with spending standing at $16.8bn by this date, versus $1.6bn in 2012.

Having seen his own company ramp up its activity in this area, Arnold suggested that such ambitious projections were not completely unfounded.

"Compared to two years ago, we're aggressively leveraging it today," he said. "One bold, yet somewhat common, prediction is that programmatic buying will eventually be used to purchase traditional media like TV and print."

Data sourced from Forbes; additional content by Warc staff, 12 November 2012

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