Where we are in digital media: A Q&A with IAB chair Joe Strolz

    Check out the latest AD-Vantage news, features and columns. Subscribe today In November, IAB Canada appointed a new chair of the board of directors — Joe Strolz, AOL Canada general manager and former vice-president of Microsoft Advertising. One of his key roles will be guiding the industry into the programmatic future. Marketing sat […]

In November, IAB Canada appointed a new chair of the board of directors — Joe Strolz, AOL Canada general manager and former vice-president of Microsoft Advertising. One of his key roles will be guiding the industry into the programmatic future. Marketing sat down to chat with him about how programmatic fits into marketing strategy, where the economics still need some work, and whether we should be bracing for the mobile craze.

How has the programmatic space changed since you’ve started working in it?

Joe Strolz

If you said to the average person in the business a couple of years ago, “At one end of the spectrum is programmatic. What’s at the other end?” Most people would say “premium.” I think a lot of people would still say that today. But the reality is the opposite of programmatic is manual, because premium is going to exist at both ends of the spectrum. What dictates whether you put humans on the job or computers is your marketing strategy, the way that you deploy, the outcomes that are expected, and where your strategy lines up against the consumer purchase funnel.

In our view at AOL, the future of programmatic is actually not about remnant, and it’s not about RTB necessarily, which is more of a buying tactic. It’s about workflow efficiency. Increasingly, programmatic will be a market space that’s defined by programmatic direct where you’re taking humans out of the low-value tasks in the relationship between marketers, agencies and publishers. In our optimistic view of the world, those people are redeployed to areas where they’re adding insight and driving more opportunities for the marketer.

I think that makes sense from the perspective of what humans are good at, and what computers are good at. Computers are really good at crunching vast amounts of data from virtually infinite sources, and identifying themes, trajectories and trends. That’s something that humans are terrible at, particularly after a martini lunch. But what computers are awful at is creating content and native experiences that drive huge affinity and create magic moments between a user and a brand.

What major challenges does programmatic face?
If you look at any industry at its early stages, its filled with tons of point solutions, each one claiming to make life easier. And the challenge of that early stage is that one of the key promises of programmatic is supposed to be efficiency.

Say I’m a marketer and I’ve got a dollar to spend, and I put it in the programmatic system. It goes through my DSP, and there’s a cut there. It hits the exchange, and there’s a settlement transaction. I know it’s going to perform better with data, so I’m going to have to buy some. There might be additional charges for rich media, for ad serving, for analysis and measurement. And then ultimately, whatever is left over is landing as working media on the publisher’s website.

Studies we’ve done at AOL suggest that on average, the marketer is seeing a loss of anywhere between 45 and 75 cents on the dollar before it actually lands on the publisher’s site. Those economics aren’t sustainable, because ultimately they don’t produce the efficiency required. And when you have and environment where the economics don’t make sense, that’s got to go someplace, and it’s going to go toward consolidation.

What are some steps the industry can take to address impression fraud?
Everything starts with education. The more people are empowered, the more problems sort themselves out. Nobody wants to be associated with that. Certainly agencies don’t want to be associated with it, marketers don’t want to be associated with it, quality publishers don’t want to be associated with it. But it requires an understanding of how the infrastructure of programmatic is set up, and that requires education. As with any industry, the more it matures, and the better educated people are in terms of understanding how to leverage it, the fewer rent-shifters there will be and the more value players there will be.

There are challenges to get to where we need to get, and I think those are known and understood. But I would hate to present the issue as, ‘Hey, there’s this horrible bogeyman,’ and ‘Let’s not be aggressive.’ The opportunity is far bigger than the risks we see in front of us.

Is the industry where it needs to be with measurement?
We can spend a lot of time figuring out how to fine-tune measurement in a digital silo, and that could be a fun academic experiment. But already, digital as a media option is infinitely more measurable than any of the other choices.

The real impact is going to come from using the GRP as a currency to transact in digital. Not that it makes any sense to use a GRP in 2014 – scientifically, academically, philosophically, it makes no sense. Economically, it makes a lot of sense, because there’s a whole industry that’s built on it. It’s become an actuarial science, not a predictive science. If you’re risk-averse because you’re spending a lot of money, you’re going to lean on actuarial, rather than predictive or real-time.

Eventually, the users will drive us across that chasm. The consumers of today are consuming more video than any generation before, and basically none of it is on TV. It’s not on a TV screen and it’s not transacted on a GRP basis. So that model is ultimately going to be irrelevant.

This interview has been edited for length.

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