Blog Post

Programmatic vs Performance Marketing: Understanding the Risks and Potential Returns

September 10, 2020 - Sierra Ducey

In an age of data-driven marketing, in which brands have copious amounts of consumer information and insights at their fingertips, advertisers are becoming more nimble in where they invest their advertising budgets. In an effort to optimize toward specific campaign goals, advertisers are opting for different formats and payment models of digital advertisements to suit their needs better. Programmatic vs performance marketing has sparked many conversations in the last few years as aspects of performance marketing such as affiliate and influencer marketing have grown in popularity. Advertisers might find it difficult to differentiate the two and figure out which one will work best for their goals as they both have unique risks and rewards. We’ve outlined the two marketing models, taking note of unique benefits and drawbacks you might face when deciding where to invest your digital advertising dollars.

What is Programmatic Marketing?

Programmatic marketing uses automated, real-time bidding to place ads across a variety of channels to relevant and targeted audiences. This streamlined ad buying can be done across desktop, mobile, and video, targeting audiences based on demographics, psychographics, purchase-intent, interests, and more. The popularity of programmatic marketing has grown tremendously in the past decade – projected to reach $147 billion by 2021

What is Performance Marketing?

Performance marketing is a form of digital advertising in which the advertiser only pays when there is a measurable result, such as a click, form fill, or lead generation. This form of digital advertising flips the traditional pay before you go methods on their head. Some of the more popular channels and tactics for performance marketing are: 

  • Social Media: 79% of the US population uses social media, so whether it’s Facebook, LinkedIn, Snapchat, Pinterest, TikTok, or Instagram, most brands are likely to find and interact with their audiences on social. Social media performance marketing campaigns look to drive clicks, shares, comments, and sales.
  • Sponsored Content: Using an “expert” in your vertical to tell your story and promote your brand is growing in popularity. MuseFind found that 92% of consumers trust an influencer more than a brand or traditional celebrity endorsement. Popular KPIs for this method are leads, acquisition, and purchases. 
  • Native Advertising: Designed to look like the website’s content, these ads should be contextually relevant to the sites they appear on. Advertisers should use this method to foster clicks and impressions.

Performance Marketing and Affiliate Marketing are Not the Same

Affiliate marketing is a subset of the umbrella term, performance marketing. Affiliate marketing is a revenue-sharing model that rewards affiliates with a portion or percentage of the sales they promote for a product or brand. It falls into the performance marketing category as affiliates are not paid upfront, but rather once the desired action has taken place, such as a sale. 

What are the risks: programmatic vs performance marketing?

With any form of digital advertising, there are risks you should be aware of when investing budget. However, many of these risks can be mitigated with a strategic partner that prioritizes transparency and is knowledgeable and diligent in avoiding common risks such as brand safety and ad fraud. 

Programmatic

  • Brand Safety: Everyone remembers the Youtube advertising scandal in 2017 when brands pulled millions of dollars in advertising from the platform after their ads were shown next to extremist videos promoting hate speech. This sparked the need for better brand safety measures as brands demanded protocol to ensure their ads were appearing next to acceptable content. Three years later, brands still need to be aware of brand safety measures when investing in programmatic. At Digilant, we partner with Companies like Integral Ad Science and DoubleVerify, data-driven companies that have developed formulas, algorithms, and data-driven tools to prevent ads from ever appearing alongside undesirable content. These tools, in conjunction with private marketplace deals and exclusion/inclusion sites, help to diminish the risk of negative ad placement. 
  • Ad Fraud: This isn’t a risk unique to programmatic, but rather something all digital advertisers need to be cognizant of when investing money. How do you know your ads are being seen by actual people? Just like brand safety measures, working with a digital advertising partner that puts issues like this at the forefront of their media plan is essential. Partnering with companies like AppNexus, who actively works to detect fraudulent clicks before they appear in your analysis, while also creating robust inclusion lists are two ways Digilant works to combat ad fraud.

Performance Marketing: 

  • Regulatory Rules: Keeping up to date with compliance-related issues such as regulatory rules, publisher fraud, and placement transparency is important for any type of digital advertising. However, as performance marketing tactics are commonly used to gain consumer information, such as emails, keeping up to date with new and updated rules can be a daunting task. 
  • Lots of impressions, but no earning: Although free ad impressions are not necessarily a bad problem to encounter when your brand is working to drive a specific action such as email subscription or sales, it can be frustrating not to see those actions come to fruition. It might take numerous impressions to finally reach that ultimate goal of closing a sale. 

What are the potential returns: programmatic vs performance marketing?

Both programmatic and performance marketing have similar advantages with regard to consumer insights and transparency. In both models, advertisers are able to see who is interacting with their ads, where they are interacting with their ads (which sites), and other valuable insights that will help streamline future campaigns. However, there are also unique rewards that both of these models provide for advertisers.

Programmatic

  • Real-time optimization: As soon as a campaign is launched, advertisers are able to track impressions, clicks, and other KPIs for any given ad. You no longer have to wait to see how a campaign does, but rather can switch in successful ads for those not performing as well – all in real-time, with real insights on the spot. 
  • Increased Audience Reach: With nearly 285 million active internet users in the US, once you plug in campaign parameters and target audience details, there’s still potential to reach millions of consumers throughout your campaign. 

Performance Marketing:

  • Low(er) risk: Because you are paying for a specific action, it automatically reduces the risk of spending and not seeing the desired results. 
  • ROI focused: Performance marketing is an extremely results-driven advertising model, so for brands looking to invest in digital advertising while keeping the top of line goals in mind, performance marketing is a great solution. 
  • Build Your Brand: As Performance marketing includes tactics such as influencer marketing and affiliate marketing, you are able to build your brand through different people and their audiences, which can have great benefits in regards to impressions and, hopefully, sales.  

So, which one should I choose?

After reading about programmatic vs performance marketing, you may be thinking: how do I choose the best option for me? The answer to this question depends not only on your brand’s overall goals but largely includes specific campaign goals. Digital advertising campaigns can have different strategic goals, which in turn will result in different buying models. If you’re looking for broad-scale and reach for a new product release, choosing programmatic will help foster a successful campaign. However, if you’re looking to drive newsletter sign-ups and you’re on a tight budget, performance marketing may be the way to go. 

Advertisers will spend nearly $140 billion in digital advertising in the US this year alone, so it is no surprise that this money won’t go into one single bucket. Rather, as more insights, data, and technology are released and adapted, advertisers will spend it strategically across platforms and models that best suit their needs. 

Finding a strategic digital advertising partner that understands the nuances of these different areas, the risks you should be aware of when choosing one and how best to optimize tactics to make the best of our campaigns is essential. At Digilant, we have experience and expertise across programmatic and performance marketing. We’re eager to hear your goals and work to find the best solution for your specific needs. Let’s talk!

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