• by Laurie Sullivan  @lauriesullivan, January 31, 2014

Too many marketers misunderstand programmatic buying, and as a result become overwhelmed, overpay, and lose bids they should have won.

More than $3.5 billion in the U.S. marketplace flowed through programmatic platforms in 2013, and many marketers don't know how to optimize bids in these systems, said Andrew Casale, vice president of strategy at Casale Media.

Casale said marketers must learn how to value an impression for media buys in programmatic platforms. Putting a maximum price in the platform doesn't mean the media buyer will pay that price. He said too many media buyers try to optimize for the first bid price and not the best price for the market, but they don't realize that the buyer will not actually pay the bid price, but rather the second-highest price bid.

The sophisticated technology is built into the technology that marketers use to bid and buy impressions programmatically, which surfaces in a bid. There is ample work going into determining the most optimal impressions, but when the wrong strategy is applied to acquire those impressions, it creates waste. In the marketplace, a buyer will lose the bid 95% of the time, Casale said.

Fall short in the valuation of media and a marketer will lose the bid. "You put a ton of work into determining the audience, and fine-tune the algorithm only to lose the bid, all because the company's strategy doesn't take into account market dynamics," Casale said. "There also are buyers who win 90% of the time, but the prices they pay aren't necessarily that much higher than the people who lose."

Just because a marketer bids $20 doesn't mean they will pay $20. In most cases, the marketer will price the buy more conservatively.

After price and bidding tactics comes competition. There's a misconception in the magnitude of buying vying for media. It requires transparency, rather than opacity. Today, nearly every major automotive manufacturer, telecommunications, consumer products goods, and financial institution actively bids in the programmatic marketplace. It's difficult for buyers to know the marketers they compete with for the ads, as opposed to search engine marketing.

Programmatic buying isn't transparent. Chrysler marketers can automatically see in search campaigns when they bid against keywords used by Honda, General Motors, and Hyundai. Companies are working to solve the problem. "While media buyers still can't see who they bid against, it's important to keep in mind they're bidding to beat their competitors," he said.