Peering into the Future of Digital Advertising

Peering into the Future of
Digital Advertising
To cash in on emerging opportunities, organizations
need to extract better efficiencies from their online
marketing budgets through personalized audience
targeting via programmatic real-time bidding, dynamic
creative optimization, transactional ads and a wide array
of emerging advertising formats.

2 KEEP CHALLENGING December 20142 KEEP CHALLENGING December 2014
Executive Summary
“Half the money I spend on advertising is wasted; the trouble is,
I don’t know which half.”
— John Wanamaker, considered the father of the U.S. department store.
This statement, made more than a century ago, remains relevant today for
many marketers. With the plethora of digital marketing channels available
across various media, marketers are challenged to decide how to invest their
marketing budgets to achieve the biggest bang across touch points. The
dilemma extends across the entire marketing spectrum, from deciphering the
right audience attributes and their preferences, to determining the optimum
mix of media channels for audience targeting. While making decisions on the
media mix and audience attributes, marketers often struggle with measuring
ROI of ad spends and their direct impact on revenues. An additional challenge
is getting the attention of the digital customer who is flooded with a multitude
of messages from different brands. Amid this incessant bombardment,
consumers only focus on advertisements that are relevant, customized and
unobtrusive.
Moreover, in the fast-changing digital marketing landscape, marketers
must contend with multiple stakeholders and work in a large gray zone of
complexity and technological challenges.
This white paper covers five key digital advertising innovations that would
mitigate many challenges faced by today’s marketers, enabling them to create
greater efficiencies — and results — from their online marketing budgets:
• Personalized audience targeting via programmatic real-time bidding (RTB).
• Transactional ads.
• Dynamic creative optimization.
• In-app advertising.
• Native advertising.

PEERING INTO THE FUTURE OF DIGITAL ADVERTISING 3PEERING INTO THE FUTURE OF DIGITAL ADVERTISING 3

Personalized Audience Targeting via Programmatic RTB
Until recently, customers were seen as an aggregate of online visitors who somehow arrived at
a Web site. Targeting was limited to available knowledge of content, behavior, device, geography,
etc. But with the evolution of real-time and algorithm-driven technologies, the focus is now on
understanding each customer as an entity unto himself.
Ad tech has evolved significantly since the first clickable display banner ad debuted roughly 20
years ago. What began with blinky-ads has morphed into sophisticated real-time algorithms that
target specific customer profiles across devices, content, geographies, etc.
Despite these advanced technologies, the average click-through rate of display ads is about
0.11%, globally, according to Google.1
This figure implies that about 99.89% of display media
spends actually go “unclicked” – a matter of deep concern to marketers.
To make the digital display channel of advertising more ROI friendly, ad targeting is undergoing
radical change. In an ideal state, an advertisement needs to be customized for every consumer
in the right context of the interaction that he is exhibiting with the brand at that point in time.
The algorithms on which RTB functions can now, in real-time, capture, analyze and determine
the “audience” arriving on the Web site and serve targeted advertisements and communication
(see Figure 1).
With the maturity of RTB and programmatic targeting, and their adoption by industry leaders
such as Google (DoubleClick), Yahoo (RMX) and Facebook (FBX), among others, publisher entities
4 KEEP CHALLENGING December 2014
The Digital Ad Continuum
Figure 1
What began with blinky-ads has morphed into sophisticated
real-time algorithms that target specific customer profiles
across devices, content, geographies, etc.
1
2
3
1 2 3
SSP/Exchange
Publisher
has ad spot
available
Free
ad spot Ad B
Free Ad Space info
sent to SSP (Bid Request)
DSP calculates value of
Ad Spaceand makes a bid Winning DSP serves the ad
Winning Bid:
Advertiser B
User Fees
Advertiser CAdvertiser A Advertiser B
TreadMob
DSP
..IDFAx
..Device
..Operating
System
0,05 0,25 0,08
.Context
.Location

PEERING INTO THE FUTURE OF DIGITAL ADVERTISING 5
— the suppliers of online traffic — are more confident of the results that can be achieved via this
method of media buying and selling.
Globally, organizations are depending more on digital display advertising delivered through
the programmatic form, if dollars spent are any indication (see Figure 2). Their rationale: By
matching key digital attributes and preferences, this approach provides a more granular way to
target particular audience segments for delivering the right message in the appropriate form
to the right visitor. In fact, the approach applies Code Halo thinking, where every digital swipe,
click, like, etc. contributes to producing a unique identity of an individual.2
By distilling meaning
at Code Halo intersections, organizations can build personas to deliver a curated experience that
anticipates consumer behaviors, needs and desires.
In the realm of display advertising, where the window of opportunity is limited to available
inventory on the page and the attention spans of visitors, personalization of the communica-
tion message is of utmost importance. Personalization is delivered via multiple modes such as
imagery, tonality, stylization, content, offering, etc. (see Figure 3).
* Includes both RTB and other programmatic/automated platforms for banner, social and video ads on desktop
and mobile devices; Includes Australia, China, France, Germany, Japan, Netherlands, Spain, UK and the U.S.
Source: MAGNA GLOBAL as cited in press release; eMarketer calculations, Oct. 14, 2013.
Figure 2
Delivering Custom Banner Ad Experiences
Banner ads personalized for two visitors, in terms of image and price, for a male
arriving on a site from Chicago and a female arriving on a site from San Diego.
Also note the color composition of the images, depending on the local weather.
Figure 3
U.S. and Worldwide* Programmatic Display Ad Spending
0%
71.4%
56.3%
26.5%
19.4%
14.2%
62.20% 63.20% 62.50%
59.00%
56.60%
51.80%
0%
10%
20%
30%
40%
50%
60%
70%
80% 40
35
30
25
20
15
10
5
0
2011 2012 2013 2014 2015 2016 2017
YEAR
Percent
Change
U.S.
Worldwide
Percent
of Total
30.7%
54.20%

For instance, drawing information from third-party sources, cookies, geo-location, etc. of an
arriving visitor on a Web site, advertisers can tailor their ads with a location-sensitive, demo-
graphic-relevant and contextually-relevant version of their advertisement to drive a desired
behavior. With the programmatic technologies, all this can now be delivered in real time.
Transactional Ads
“The mission of an advertisement is to attract a reader, so that he will look at the advertisement
and start to read it; then to interest him, so that he will continue to read it; then to convince him,
so that when he has read it he will believe it. If an advertisement contains these three qualities
of success, it is a successful advertisement.“
— Elias Lewis, an American advertising pioneer
This traditional marketing approach of attention — interest — desire — action (AIDA) to facilitate
a viewer action, is gradually becoming a thing of the past.
With the advent of transactional advertisements, a marketer can sell a product via the advertise-
ment without directing the customer to a separate Web page. The customer is able to transact
within the ad unit on the site she is browsing, without switching to the advertiser’s site. The ads
function like strategic sales tools in the hands of the marketers.
While in appearance they are like any other form of ads that occupy a standard format on a Web
page or mobile application (see Figure 4), the true disruptive power of these ads lies in their
interactive features. They are activated by a gesture and present a secure transaction or coupon,
sometimes in the context of an interactive shopping experience. They can also be used on social
platforms to convert a conversation into a transaction. Another interesting feature is that they
are intrinsically innovative in that they create a single touch point where the interaction and
transaction meet, be it online or mobile.
A transactional ad may not always be successful in creating interest, but it can capitalize on a
customer’s latent desire to transact. It essentially offers context to the customer’s action and
is designed to encourage specific interactions. Consider the example of a customer research-
ing online to purchase a mobile phone. During the course of his research, if he is presented a
transactional ad of a mobile phone that is in his consideration set — and the ad offers a solid
discount — there is a high probability that he will purchase it through the ad itself. Besides the
purchase offer, related services can be included in transactional ads such as additional coupons
and loyalty services.
By incorporating related product offers, loyalty services, coupons, etc. into transactional ads,
companies can achieve a higher ROI from their advertising spends while reducing the time-
to-purchase for consumers. The reason: The advertiser is able to utilize a single touch point
for consumer awareness, product
promotion and sales facilitation.
By up-selling/cross-selling to the
same customer via this single
touch point, it can drive higher ROI
from its digital ad spend.
While today’s transactional ads
present a few technology-related
challenges and consumer security
concerns, we see high potential
for these ad units and predict
that it will be a force multiplier for
marketers in the coming years.
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Figure 4

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Dynamic Creative Optimization
“Sportygoods” is a hypothetical sporting equipment company that wants to sell its products
across the world and is advertising on various digital channels. It wants to reach only sports
enthusiasts, and therefore it acquires the impressions of this target audience via a program-
matic RTB ad exchange. Based on the digital signature of the Web visitors, the impressions of the
sports enthusiasts are obtained and presented the ads via RTB programmatic buying.
Thus far, it has successfully zeroed in on the right audience, individuals who are categorized as
sports enthusiasts as a result of their digital behavior such as surfing sports Web sites, being
present on sports discussion forms and/or subscribing to sports channels on YouTube. It has also
designed a set of creative content that details different sporting goods such as cricket bats and
soccer balls with standard information. Thus, the campaign delivers its sporting goods ads only
to sports enthusiasts. So, Sportygoods’ marketing campaign follows the maxim of delivering the
“right message to the right customer.” However, the company is missing out on ways to drive
personalization a notch higher.
For instance, what if Jim – a London-based cricket player – is shown a standard cricket bat and
the address of the local store nearest to his current location, alongside a discount for a specific
cricket bat that is aligned with his requirements? But to do that for every such Jim, Sportygoods
would need to create a humongous set of creative materials. So how can it do this without
having to create numerous ads and spend a large amount of cash on creative production and
media management?
The answer lies in dynamic creative optimization (DCO), which allows marketers to break an
ad into individual pieces and create different versions for different audiences. Each ad uses
a template of one to four dynamic elements related to variables such as content, visuals and
calls to action. These are then dynamically assembled to serve up a customized ad based on
unique user attributes. The live audience data from the ad exchange is fed into a DCO platform
that serves as the decision criteria for restructuring the creative. Decision parameters could be
segmentation attributes such as geography, demographics or behavior — or conditions such as
weather, time of day or inventory levels. The increased adoption of real-time bidding in media
buying provides an added advantage for DCO as the same targeting parameters can be used for
creative optimization. DCO can be used in all ad formats such as banners, rich media, videos and
social-media-sponsored links. The marketer can create thousands of customized ads on the fly,
without needing its creative department to create every combination (see Figure 5).
The Art and Science of DCO
Figure 5

$32.42
$4.36
$0
$5.00
$10.00
$15.00
$25.00
$35.00
$20.00
$30.00
$40.00
2012 2013 2014 2015 2016 2017
BILLIONS
Mobile**Desktop
$32.98
$9.60
$33.12
$14.97
$32.12
$21.24
$30.19
$28.27
$27.21
$35.62
*
Programmatic RTB coupled with audience targeting techniques such as behavioral, contextual
and semantic techniques have given marketers the ability to reach individual customers with
unique offers. DCO allows marketers to take personalized targeting to the next level by pairing
every targeted customer with personalized creative ads.
In-App Advertising
Reaching the right customer with the right message is the holy grail of marketing. The
smartphone/tablet era has brought an additional dimension – reaching the right device. Among
the different devices, smartphones are at the top of one’s mind when it comes to eyeball share.
The smartphone’s home screen can rightfully be termed the most important real estate for
marketers. Advertisers are well aware of this, and are gradually shifting their marketing budgets
from desktops to mobiles, as a recent eMarketer report on U.S. digital ad spending on mobile
reveals (see Figure 6).
* Includes spending primarily on desktop based ads; ** Includes classifieds, display ( banners and other, rich media and
video), email, lead generation, messaging based and search advertising, ad spending on tablets is included.
Source: eMarketer, December 2013.
Figure 6
U.S. Digital Ad Spending by Channel
The next important aspect to understand is content consumption preferences and the behavior
of smartphone users. An analysis of where smartphone users are spending the maximum time
reveals that they are engaging with mobile apps rather than Web browsers. Hence, if marketers
want to reach the smartphone user audience, they need to invest in in-app mobile advertising.
In-app advertising operates outside of a browser context and blends the overall experience of
using the app with contextually relevant ads. An ad network pays the ad developer to include its
software code into the developer’s application so that when the app is running, the ad network
can collect user information and serve targeted advertisements via the software.
In-app advertising is highly targeted, as the app typically understands the interests of the
audience and delivers a focused and relevant message. The message is put in front of a self-
selecting audience which is more receptive to in-app advertisement. Targeting capabilities can
be further enhanced with location-based services.

Additionally, marketers can adopt certain ingenious
tactics to ensure a seamless and unobtrusive
messaging to create a relevant user experience.
One such tactic is to sponsor rewards inside
freemium apps. Depending on the app, these could
be in-game currency that offers a reward to users
engaging with an in-app ad. This then allows the
user to access additional content without paying.
The beauty of in-app advertising is that it works
very well for all the players across the ecosystem,
from advertisers who seek deeper engagement
with their customers, to developers who can use
it to monetize their applications. Developers now
integrate advertising into the app right from the
design phase; moreover, advertisers carefully
screen different apps on the basis of category,
content and user demographics to identify the
right one/s on which to advertise.
While in-app advertising has a huge upside,
numerous concerns have emerged. One is around
increasing the discoverability of apps. A vast
number of apps are created every day, but many
of these are buried deep within Google Play or
the iOS App store. So, there is only a handful of
bestsellers on which the lion’s share of media ad
money is spent. This means that lucrative applica-
tions which would garner the maximum consumer
eyeballs – and hence are the best targets for adver-
tisers – remain limited in number.
Another concern is standardization. There are
many formats for in-app ads, depending on the size
and aspect ratios of different tablets and smart-
phones, as well as the variety of OS versions. With
standardization, brands will be able to leverage the
same high-quality creative output across different
platforms. Another challenge for developers is the
need to provide users with incentives to identify
themselves and opt into features such as location
tracking and sharing in full compliance with privacy
regulations.
Despite these challenges, in-app advertising has
a very high potential and remains one of most
promising innovations in digital advertising (as
Figure 8 reveals).
The In-App Advertising Experience
Figure 7
+56%
+211%
0%
50%
100%
150%
200%
In-App
Advertising
IndexedRevenue
iOS App Store & Google Play
Freemium Paid
2012
Paidmium
2013
-23%-29%
The message is put in front of a self-selecting audience
which is more receptive to in-app advertisement.
Note: Key countries Include: Brazil. Canada, France, Germany, India,
Japan, Russia, South Korea, the UK and the U.S.
Source: IDC Mobile App Advertising and Monetization Trends Report,
March 2014 and App Annie.
Figure 8
Freemium and In-App Advertising Tower
Over Other App Busines Models

Native Advertising
Until recently, online advertising was markedly different than the online content delivered to
the viewer. This distinction was primarily seen in the form, function and integration of banner
ads within content pages, among other aspects. The issue: Advertisers were keen to spend their
budgets alongside the publisher’s content to optimize brand awareness.
The intent of such ads was to siphon visitor attention from the content and toward the ad.
Over time, online visitors developed a form of “blindness” to such ads, and often tended to ignore
such placements altogether. The rare exception was where the ads were extremely relevant and
engaging, or were clicked on accidentally. With the phenomenal growth of digital devices and the
amount of time people spend online, it is imperative for marketers to reach their audience in a
form most appealing and engaging to targets.
To address this need, a relatively new format of advertisements has emerged known as native
advertising. Native advertising is a concept in which advertisements are cohesively delivered
and integrated into the page design so that the visitor feels the ad is part of the content.
Marketers and online publishers have forever attempted to blur the lines between content and
ads and provide an experience that is “native” to the publishing format. There is an increasingly
high variety of forms in which online publishing properties serve their visitors. As a result, the
definition of “native” has remained fairly nonstandard.
IAB, the governing body of Internet ads, has developed six forms of ads that currently constitute
the native ads landscape:
• In-feed units.
• Paid search units.
• Recommendation widgets.
• Promoted listings.
• In-ad ads with native elements.
• Custom designs for native ads.
Marketers should use the emergence of native ads as a fertile opportunity to expand their
outreach and advocacy of their brands to customers. In a recent study by eMarketer, such a
1994’s First Internet Banner Ad
Figure 9
Native advertising is a concept in which
advertisements are cohesively delivered and
integrated into the page design.

platform’s most appealing feature is its ability to
influence the top-of-the-funnel customer via brand-
building (see Figure 10).
As a result of these opportunities, native advertising
has surged in the U.S. as a percentage of overall digital
advertising (see Figure 11).
On the supply side, publishers are increasingly upbeat
about native advertising, since its emergence gives
them additional opportunity to better monetize their
content. Digital media properties such as Facebook,
Twitter, etc. and online media publishers (e.g., social
media, content portals, news properties, video-sharing
sites, etc.) are making significant efforts to integrate
native ad units within their content feeds.
From a planning standpoint, brand managers must
draw a holistic roadmap and wear multiple hats to
address:
• Content strategy and planning.
• Content generation and distribution.
• Media planning and buying.
Though this format looks extremely appealing to
marketers, it comes with its share of challenges.
For instance, as a result of the uniqueness of each
publishing channel, the content production costs tend
to rise significantly. Moreover, content quality must
remain extremely high to ensure native advertising
pays off for sponsors. Furthermore, the content has to
seamlessly merge into the language and tonality of the
publishing platform, which is never easy for outside
parties to continuously capture and replicate.
This limits the scalability of this format, especially,
when compared with conventional formats such
as display banner ads, e-mail, etc., where creative
material can be easily repurposed for different geog-
raphies, audiences, etc.
Another associated challenge results from the
numerous variations of content channels, in terms of
layout, placements, experience, accessibility across
devices, etc., making it difficult to build a unified mea-
surement system that can transparently represent
engagement with the brand across all the native touch
points.
With an average user in the U.S. seeing over 5,500
advertisements per quarter, native ads provide an
extremely compelling way to break through the clutter
and seamlessly merge brand message to the growing
Internet population in a less intrusive and distracting
format than before.
* Includes tablet ads.
Source: Sharethrough, 2013 Native Media Survey Results, Sept. 16, 2013
and eMarketer Report on Survey of Native Advertising, Sept. 16, 2013.
Figure 10
Note: Includes desktop and mobile and local and national spending,
excludes social marketing/measurement platforms and services,
social commerce and virtual currency. * Branded content integrated
directly within a social network experience.
Source: BIA/Kelsy, “Annual U.S. Local Media Forecast: Social Local
Media 2012-2017” (Mid-Year Update) and eMarketer Report on U.S.
Social Media Ad Spending, Dec. 18, 2013.
Figure 11
Leading Marketing Objectives for
Native Mobile*
Ads
U.S. Social Media Ad Spending,
by Type, 2012-2017
84.4%
67.5%
53.2%
33.8%
24.7%24.7%
16.9%16.9%
0%
20%
40%
60%
80%
100%
AwarenessBrandingBrand
affinity
Purchase
Intent
Customer
acquisition
Thought
leadership
Lead
generation
Loyalty
Percent of respondents
$4.80
$7.50
$9.80
$12.40
$14.80
$16.90
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2012 2013
Billions
2014 2015 2016 2017
Display Spending Native* Spending

Looking Ahead
Digital advertising has reached an inflection point. The innovations described above will bring about
a tectonic shift in the way marketers go about planning their digital media strategy as well as how
they execute digital media campaigns. The consistent themes that span these innovations involve the
application of technology.
The future purchase of media inventory will be powered by programmatic ad exchanges run on
real-time bidding technology. Optimization delivered by analytical techniques will be carried out both
at a campaign level and at a creative level via DCO. In-app advertising will bring technology experts
such as mobile application developers into the gambit of digital advertising as advertisers will work
with the developers to build in-app advertisements at the conceptual design stage of an application.
Transactional ads will need mobile payment gateways to tighten the traditional AIDA cycle. Native
advertising will require that content writers, publishers and advertisers understand the audience’s
digital signature to tailor the right content and offer inconspicuous advertisements via the native app
medium.
In the backdrop, organizations must gauge their digital readiness by addressing the following pertinent
questions:
• Do we have enough data about our online customers to create a unique digital-identity, or “virtual
you,” for each target by distilling meaning from Code Halo intersections?
• Is our digital mechanism robust enough to serve experiences that are tailored to such identities?
• What are the different touch points that we can meaningfully engage with our digital customers to
make a brand connection?
• Is our technology-inertia keeping us away from innovating, resulting in loss of customers to the
competition?
• In the increasingly fast-paced and capital-intensive marketing landscape, how can we justify ROI
while improving customer interactions?
Footnotes
1 Google Rich Media Gallery, July-September 2014 data.
2 For more on Code Halos and innovation, read “Code Rules: A Playbook for Managing at the Crossroads,”
Cognizant Technology Solutions, June 2013, www.cognizant.com/Futureofwork/Documents/code-rules.
pdf, and the book, Code Halos: How the Digital Lives of People, Things and Organizations Are Changing
the Rules of Business, by Malcolm Frank, Paul Roehrig and Ben Pring, published by John Wiley & Sons,
April 2014, www.wiley.com/WileyCDA/WileyTitle/productCd-1118862074.html.

About the Authors
Vikram Mohan is a Senior Manager within Cognizant’s Digital Marketing Services
Practice. He has over a decade of rich experience ranging from leading mission-
critical assignments of national importance as a Major in the Indian Army, to
heading the marketing function of an emerging analytics firm and driving demand
generation as the APAC lead of Alcatel Lucent. Vikram holds an M.B.A. degree in
marketing from XLRI, Jamshedpur and a bachelor’s degree in economics from
JNU. He can be reached at Vikram.Mohan@cognizant.com.
Vivek Shah is a Senior Business Analyst within Cognizant’s Digital Marketing
Services Practice. He has four-plus years of experience in digital advertising
within different functions of business development and operations, and specializes
in digital media strategy and planning. Vivek holds an engineering degree from
Mumbai University and a post-graduate diploma in communications management
from MICA, Ahmedabad. He can be reached at Vivek.Shah@cognizant.com.
Sameer Kakar is a Manager within Cognizant’s Digital Marketing Services Practice.
He has over five years of experience across digital and social marketing, strategy
formulation and implementation, as well as process reengineering. Sameer has led
many digital marketing projects for Fortune 500 companies in the retail, travel,
healthcare and communications sectors. He worked with Infosys prior to joining
Cognizant and received his M.B.A. from MDI, Gurgaon. Sameer can be reached at
Sameer.Kakar@cognizant.com.

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