Wayfair gets with the programmatic ad program

The e-retailer spends at least 50% of its monthly display ad budget on the highly targeted, data-driven—and often cheap—ad placements using programmatic platforms.

Computers increasingly trump humans when it comes to how e-retailers place online ads. Software can access thousands of data points to target ads to shoppers in real time and do a better job placing digital ads where and when they will be most effective.

The automated, or programmatic, advertising revolution is under way, and retailers are partially responsible for the shift. Retailers are the biggest buyers of online advertising, accounting for 21% of total U.S. online ad spending in the first half of 2014, according to the Interactive Advertising Bureau. And retailers are devoting a sizeable chunk of their ad spending to programmatic ad buys. 85% of advertisers in a 2013 survey said they deploy automated real-time bidding practices and 64% said they “aggressively” do so, according to research by the consultancy Winterberry Group LLC.

E-retailer Wayfair Inc. is shifting some of its ad buys to programmatic systems. The home furnishings e-retailer today dedicates at least half of its monthly display ad spending to automated advertising, including on retargeting ads shown to shoppers who’ve visited Wayfair but didn’t buy. In some months, that percentage is as high as 80%, says Bob Sherwin, Wayfair’s director of customer acquisition.

Wayfair, No. 33 in the Internet Retailer 2015 Top 500 Guide, spends the remainder of its display budget on premium ad space bought directly from publishers at a set cost per impression, such as home page placements on major sites like MSN.com or The Huffington Post.

Wayfair has found that direct buys often cost more per impression and require a much larger spend commitment than programmatically bought ads. Moreover, they also take time to negotiate and finalize a deal.

“If these [premium] ad units were in a real-time bidding environment, we would probably go through the bidding process,” Sherwin says. “But because they’re not, we keep the one-on-one relationship with the publisher.”

Despite this cost difference, Wayfair has been able to keep its return on investment manageable with direct buys the same way it does so with its programmatic buys by managing each campaign to the same goals. “Because there is virtually unlimited supply of both direct buys and programmatic buys, we are able to scale each type of program to the point where it hits our ROI goals,” Sherwin says.