Programmatic Advertising vs Contextual Advertising, exploring the path to advertising excellence

Programmatic Advertising has been part of the fabric of digital advertising for some time now but there is an increasing feeling amongst marketers that it has failed on its initial promise.

Issues around lack of control, advertising waste, increasing privacy requirements and disillusionment with the increasing level of ad cannibalisation mean advertisers are looking around at other channels. Contextual Advertising is seeing a resurgence and offers a privacy-friendly alternative that allows advertisers to strip away some of the complexity and waste associated with Programmatic.

Here we consider:

The failed promise of Programmatic Advertising
What is Programmatic Advertising?
How does it work?
5 reasons Programmatic isn’t working

• Advertising waste and the rise of MFA sites
• Programmatic’s false view of scale and viewability
• Most Programmatic Advertising is cannibalistic retargeting
• The complexity of third-party data management and privacy concerns
• Increasing costs in Walled Gardens is forcing spend into the Open Web

The rebirth of Contextual Advertising
What is Contextual Advertising?
How does it work?
3 reasons to a Contextual Advertising to your mix

• Take back control and unleash the power of whitelisting
• The business case makes sense and people like Contextual
• Contextual is better suited to a more privacy-centric world

The missing piece in the puzzle – effective AI-driven attribution

The failed promise of Programmatic Advertising

What is Programmatic Advertising?

Programmatic Advertising has traditionally focused on leveraging third-party data to deliver ads to the right individual at the optimal time and place – targeting these audiences with precision based on their browsing history and other metrics.

Back in 2013 (according to emarketer), Programmatic Advertising (which for us also includes Display as shown here) was only about 24% of ad spend. At this point a huge percentage of display was being committed to Contextual Advertising – which is more geared towards buying the ad based on where it is placed, the demographic of the audience that was likely to see it and how that lined up with the demographic that you felt your customer had.

However, there was an innate desire amongst marketers to move towards something more specific and targeted. In the case of Display, often the poor relation of Social and Search Advertising, this meant it needed to be more effective and measurable within the marketing stack – in a way that could really drive acquisition.

This impetus drove Programmatic Ad share of display spend from 24% (£0.47bn) in 2013 to a whopping 95.5% (£13.92bn) in 2023. Growth was also fuelled by the fact that – when you spend on big AdTech like Social (Meta) and Search (Google) and you are loading audience data – you are ultimately engaging with a Programmatic Advertising placement.

How does programmatic work?

Programmatic Advertising has traditionally focused on leveraging third-party data – and the use of automation – to deliver ads to the right individual, at the optimal time and in the right place.

The process typically takes the form of a bid-based auction and involves Demand Side Platforms (DSPs). Which advertisers can use to target audiences with precision, based on previous behaviour on the web.

In theory, Programmatic has several potential benefits:

• rapid access to large-scale audience reach – and new customers in particular
• a promise of efficiency in the ad targeting process
• reduced cost and increased ROI
• the ability to utilise first-party data to define audiences
• opportunities for cross-device campaign strategies

However, the reality is that – whichever way you cut it – Programmatic has failed to live up to its promise.  As brands grapple with a range of issues including the cannibalistic nature of much Programmatic spend, increasing ad fraud and privacy concerns.

5 reasons programmatic isn’t working

Here are 5 key reasons that Programmatic is not delivering for advertisers right now.

1. Advertising waste and the rise of MFA sites

Incredibly, Open Programmatic Ad Click Fraud rose 47% in 2023 according to Pixalate which is a huge concern for advertisers.

If you think about Social and Programmatic one area of marked difference is that – if you are placing an ad on Meta then you can trust that it is being placed on one of their properties. This partly explains why so much spend flows in there. This is also the case with much of Search advertising on Google (although increasingly Ads are being served out with Google properties themselves on their extended network).

However, outside of this in the Open Web where you are buying space via a DSP you open yourself to a wide range of Ad fraud that includes:

• The challenge of ensuring your ads are seen by humans on high-quality inventory – in the drive for lower cost clicks your ads are increasingly being shown on MFA (Made for Advertising) sites as AI speeds up the production of these properties. In fact, according to ANA  21% of digital ad impressions now occur on MFA websites.
• The issue of viewability and click fraud, where ads are shown but not visible to the user due to them being underneath other ads or off-page etc
• Issues of brand safety as brands lose control of where their ads are being shown

2. Programmatic’s false view of scale and viewability

And the implications of MFA are huge for advertisers.

Just to return quickly to the major ANA Programmatic Advertising study for context. Incredibly, they found on average that individual advertisers were using 44,000 sites – with 21% of them being poor quality MFA sites which weren’t driving performance.

They were able to show that you should focus on quality over quantity. And that you would only need 75 high-quality, premium websites to deliver +98% reach. Sites that reduce the risk posed by MFA and which are much more likely to drive performance. This means you can also adopt a whitelist strategy for those sites which is infinitely easier to manage than blacklisting the ones you don’t want to use in the 44,000.

This echoes the thoughts of Corvidae CEO Chris Liversidge who explained in our Beyond the False Promise of Programmatic webinar:

“What is needed here is a strategy that is not purely focused on cost per thousand impressions because you will just end up prioritizing these low-cost ads on poor sites, that real people don’t visit most of the time.”

3. Most Programmatic Advertising is cannibalistic retargeting

It is also worth noting that – far from delivering on the promise of attracting new customers – most Programmatic activity is retargeting anyway!

Retargeting is essentially showing ads to people you already know and who are already in a conversion journey that you haven’t unravelled yet (partly due to the inability of Programmatic reporting to track cross-channel and device journeys) and NOT new customers from Programmatic.

In fact, a significant volume of Programmatic activity across Google, the Open web and Meta is classed as prospecting but is retargeting based on a cookie on the user’s browser (retargeting in disguise). So it is cannibalistic – and 36% of the cost of the spend is lost to buying and placement costs.

4. The complexity of Programmatic third-party data management and privacy concerns

One of the challenges with Programmatic Advertising is the huge amount of third-party data that it generates – and that needs to be managed on an ongoing basis.

This has created several challenges for brands including:

• the costly and extensive nature of tech stacks
• poor tracking and measurement capability due to the particularly poor job that 3^rd party cookies  make of tracking cross-device and cross-channel journeys
• the difficulty that third-party cookies pose in terms of meeting compliance requirements in what is a ‘privacy-first world’

5. Increasing costs in Walled Gardens are forcing spend into the Open Web

It is also worth noting here that huge CPC and CPM spikes on big AdTech Walled Gardens like Meta and Google (according to Statista 57% of total ad spend goes into either Facebook or Google) are forcing more and more spending onto poor-quality inventory on the Open Web.

A combination of finite advertising space, increasingly competitive auctions and bias in AdTech reporting that overvalues lower funnel touchpoints in the customer journey have seen a perfect storm that has seen Meta Ads CPM increase an incredible 720% in less than 10 years.

It is a trend that isn’t going to change soon as Google intend to replicate the iOS change to opt-in advertising on their own Android devices, which make up 60% of the mobile market. This will further deprecate Meta’s targeting data and ultimately drive the same sort of cost increase that we saw during the iOS transition.

So Programmatic has failed on its original promise. But where to now for marketers looking for a replacement? Enter the rebirth of Contextual Advertising.

The rebirth of Contextual Advertising

As advertisers become increasingly frustrated with the limitations of Programmatic, Contextual Advertising is emerging as a viable alternative strategy.

Unlike Programmatic, Contextual ad placements focus on the relevance of the ad’s environment rather than the individual user’s data.

What is Contextual Advertising?

Contextual is a privacy-friendly advertising approach which does away with the ‘right person, right place, right time mantra’ of Programmatic that has proved so ineffectual. It involves placing ads on websites that align with the intended audience’s interests and behaviours, based on the content of those sites.

Modern Contextual Advertising leverages first-party data and white-list strategies to ensure ads appear only on selected, high-quality sites. It is also important to recognize that it isn’t new, it was how a lot of advertising was placed pre-digital. But our own research shows that 40% of marketers are adding it to their mix right now and spending on Contextual globally is expected to double to $562bn by 2030.

How does contextual work?

Contextual Advertising works based on targeting individuals by relevancy on the page or app. By showing ads that are closely aligned with the content being shown on the website or app they are browsing.

The Contextual example on the right is taken from the Times online travel section. Where an article for travel on holiday destinations is accompanied by a Contextual ad for VRBO.

3 key reasons to consider Contextual Advertising

Here are three reasons you should be considering Contextual in your mix.

1. Take back control and unleash the power of whitelisting

Contextual Advertising enables you to take back control of your advertising strategy.

Unlike Programmatic, which largely operates at arms-length and suffers from issues around transparency, Contextual puts you firmly in the driving seat in terms of where you place Ad content and how you measure the results.

It enables advertisers to fully maximise the value of first-party data to build customer profiles for the type of audience you are trying to reach – and then to create a single whitelist of websites that these prospects are likely to be browsing. Instead of trying to target ads like Programmatic, simply show all of your ads to all of your prospects all of the time and measure the impact.

This strips away the complexity of managing complex blacklists (and tech infrastructure needed to support Programmatic !) and cuts out the risk of your ads ending up on MFA websites by serving ads only to a whitelist of websites.

2. The business case makes sense and people like Contextual

As costs continue to increase in Walled Garden platforms like Google and Meta, Contextual Advertising is expected to play a crucial role in balancing cost with effective ad placement.

It has a number of financial benefits for brands including:

• At the most fundamental level, Contextual enables you to do away with the costly tech stacks that are needed to manage third-party data which has a direct impact on ROI.
• contextual targeting is 53% cheaper – according to Remerge. Due, in part, to the fact that advertisers using Contextual operate in a less competitive environment (for now, at least) compared to the cut-throat, highly competitive lower funnel auctions being run on the big platforms like Google Ads and Facebook ads.
• CPMs are 36% lower in Contextual according to Martech Series

It also appears that users like the format – with 63% indicating they prefer online ads that relate to the content they are consuming.  A Nielsen and Seedtag survey also found that 32% of people are more likely to act as a result of seeing a Contextual ad compared to those targeted demographically.

3. Contextual is better suited to a more privacy-centric world

Contextual is also a closer fit for an environment where user privacy is top of the agenda for individuals, regulators and advertisers.

When Apple launched its ‘opt-in’ stance for ad tracking in its iOS14 update in September 2020 it sent a message on the importance of privacy to the market as a whole. And Google is following suit with its Google Privacy Sandbox initiative and plans to replicate the ‘opt-in’ change on Android.

Contextual is ideally suited to this environment with its lack of reliance on third-party cookie data and ‘privacy-first’ focus. 

The missing piece in the puzzle – effective AI-driven attribution

So campaign-level attribution for contextual ad placements to a white list of sites, profiled on your first-party audience data is the great standard that everyone should be working toward.

The only remaining piece of the puzzle is effective measurement. Which is where Corvidae our AI-driven attribution platform comes in by offering:

• 100% cookieless attribution – Corvidae does not rely on cookies at all with AI and Machine learning effectively replacing them
• a privacy-first approach – in the same vein as Contextual Advertising it has privacy at its heart and is fully GDPR compliant out-of-the-box
• highly accurate, unified attribution – we use our patented stitching technology to enable you to compliantly track customer journeys that are significantly longer than  cookie-based solutions – which are limited to only partial views of customer journeys
• effective attribution at a channel, campaign and creative level – the capability to assess what is and isn’t work in your Contextual strategy (and Programmatic, Social, Search…)right down to the level of individual creative execution

Need to learn more?

REQUEST A DEMO NOW