Programmatic advertising is on the rise. The market is expected to be worth $142 billion in 2023 and 80% of all display advertising is now programmatic.
And the good news about programmatic advertising is that whatever size the organisation or budget, the ROI is universally proven to be greater than human led manual advertising.
So with this in mind, we’ve created an essential guide to programmatic advertising. We explain the process, variations and a glossary of terms to help make sense of this rapidly evolving approach to advertising.
What is programmatic advertising?
Programmatic advertising can trace individual interests and behaviour and match them to ensure specific ads are served to a relevant user. In other words, your ad could be creatively award winning but if it’s not in the right place targeting the right people, then your campaign won’t reach its true potential.
Programmatic advertising is defined as the automated buying and selling of online advertising space. But it’s much more than that. In the summary words of ‘Outbrain’, the market for digital advertising space is run by ad exchanges, who operate computerised auctions. These bring together advertisers (who want to buy online advertising slots) and publishers (the owners of advertising space to sell).
What are Ad Exchanges?
An ad exchange is a technology platform that facilitates the buying and selling of media advertising inventory from multiple ad networks. Prices for the inventory are determined through real-time bidding. The approach is technology-driven as opposed to the historical approach of negotiating price on media inventory. Ad Exchange Providers include Google, Microsoft, OpenX & Yahoo.
How much does programmatic advertising cost?
Programmatic advertising is traded on a cost per impression basis but costs will range widely depending on the quality and level of targeting.
Why is programmatic advertising valuable?
The simple answer is because it’s efficient, cost effective, targeted and scale-able.
Programmatic advertising global spend in 2020 topped $129 billion. It’s now expected to have surpassed $150 billion. The United States is the biggest spender on programmatic ads, but the UK and China are catching up fast. At the end of 2021, over 80% of display advertising was spent via programmatic advertising.
Programmatic advertising is the use of smart software to buy digital advertising. The old traditional method of placing advertising included a lengthy request for proposals, tenders, quotes and negotiation, followed by form filling, legal contracting and the (never perfect) human implementation! Programmatic advertising takes advertising to a whole new level of efficiency using algorithmic software that handles both the sale and placement of digital ad impressions through ad exchange platforms. And the whole process takes a fraction of a second.
This type of automated advertising also serves impressions more accurately, incorporating traffic data and online targeting methods to serve impressions. This means a better and faster return for advertisers and publishers alike and at scale.
The system works and is used because it’s an efficient use of both time and resources. Now with programmatic advertising, users can rely on an algorithm that will determine where ad money is best spent.
In effect, all users have to do is feed information about a campaign, audience, and key performance indicators and the algorithm will do the hard work! If a business is looking to optimise ad spend and boost business ROI, programmatic advertising can help deliver the goals.
How does programmatic advertising work?
Programmatic advertising uses traffic data and online display targeting to drive impressions at scale which results in a better ROI for marketers. It can also yield great results for businesses of all sizes from SMEs to global brands so it’s a valuable advertising option - even for small budgets.
However programmatic advertising is not a complete automation of the ad buying process. Traditionally, advertisers manually prepare insertion orders or ad tags, which can be time intensive. With programmatic advertising, marketers have more time for the optimisation and improvement of ads to further drive campaign success. So smart preparation and human judgement (and error!) is still involved.
There is a structure to programmatic advertising and this process happens in a nano second!
A visitor clicks on a website
The website owner puts the ad impression up for auction (SSP: Supply Side Platforms)
Advertisers offer bids for the impression (DSP: Demand Side Platforms)
The highest bidder wins the ad impression
The ad is served on the website to the user
Hopefully the user clicks on the ad and converts!
What are programmatic advertising features and tools?
What is SSP?
When publishers first began their conversion from print to digital, new ways to generate advertising revenue became visible and available. Display advertising came alive to replace print advertising and help commercialise websites - which is the core of digital media today.
At the same time, advertisers were constantly looking for relevant websites to place their advertising. Innovation led to ad technology platforms that are known as supply side platforms or SSPs.
What is DSP?
In every online ad space purchase, there’s a two way transaction. The buyers (advertisers) and sellers (publishers). Each side uses a digital platform to facilitate the transaction on the ad exchange. A DSP enables advertisers to purchase ad impressions on publisher websites made available via ad exchanges and ad networks.
What is an ad exchange?
Simply put, an ad exchange is a digital marketplace where advertisers and publishers purchase and sell ad inventory directly.
Ad exchanges are a part of what’s called a ‘programmatic ecosystem’ as they are powered by real-time bidding (RTB) technology - a form of programmatic buying. Unlike direct buying and private auctions, real-time auctions provide each participant with an equal opportunity to bid on the available ad inventory. The highest bid for each auction wins the impression.
What is Real Time Bidding?
Real Time Bidding or RTB is a way of buying or selling ads through auctions in real time - although transactions are automated and immediate. As a visitor enters a website, a request is sent to an ad exchange with information on the website along with visitor data.
This information is then matched against available advertisers and a hyper speed real-time auction takes place between the advertisers that match the criteria.
For example, when someone visits a website selling running gear, they may browse but not buy. Later they visit another website and see ads about running gear everywhere. This has been achieved by Real Time Bidding. The winning advertising bidder gets to display their advertisement to a potential customer on a publisher's website.
What is an ad network?
Ad Networks contact publishers, gather their inventory details and pass them to advertisers/agencies to place their bids.
In other words, an ad network is an aggregator that collects ad inventory from publishers and sells it to advertisers. It acts as an intermediary.
What is the difference between Adsense and Ad Exchange?
AdSense can automatically place ads on a website, Ad Exchange gives publishers more control over the way ads are sold and displayed. By way of example, publishers can't dictate base prices for impressions and they cannot sell ad space directly to advertisers.
What is a data management platform?
A data management platform (DMP) collects, organises and activates audience data from various online, offline, and mobile sources. It then uses that data to build detailed customer profiles that drive targeted advertising and personalization initiatives.
What are the key benefits of programmatic advertising?
-Volume and Reach
Programmatic advertising enables publishers to sell ads at a greater volume and even small scale publishers without full fat sales teams can still make money on ad exchanges. Programmatic advertising also supports multiple ad exchanges and networks, which gives advertisers access to far more ad space on thousands of websites at once. Advertisers can advertise at scale at affordable prices and with no extra work.
Advertisers can direct ads at users who fit their consumer demographics and so in effect they pay for performance. This hyper targeting is valuable because it helps erase wastage. If ads are not turning into conversions, they’re not working.
Programmatic advertising supports what is known as advanced targeting, such as ‘lookalikes’ to help advertisers reach highly relevant mass audiences. Programmatic ad buying gives buyers access to a massive ad inventory across multiple ad exchanges and networks with high-quality traffic. With a programmatic approach, advertisers can make sure they optimise the relevancy of their ads for specific targeted audiences.
Programmatic exchanges provide access to real-time data and advanced reporting about ad placements and performance so advertisers and publishers can optimise campaigns quickly and accurately.
Users say programmatic advertising means fair prices for both publishers and advertisers. By participating in auctions, publishers know they’re getting the optimal price for their ad spaces, at least among the ad exchange’s advertiser community.
And advertisers can make purchasing decisions on a case-by-case basis, reducing mistargeting, showing ads to users who are unlikely to buy their products.
Another feature of programmatic ads is that advertisers will pay based on how well an ad performs. Traditionally, advertisers could only be sure ad campaigns were successful if the business saw an increase in sales.
Programmatic advertising introduced the idea of paying for ads only if they are successful. With those types of ads, called “pay per click” (PPC) or, more broadly, “pay for performance” (P4P) ads — the advertiser only has to pay if the user performs a desired action, such as clicking on the ad or making a purchase from the advertiser.
What are the different types of programmatic advertising?
Using the Playwire categorisation, programmatic advertising can be categorised as follows:
Programmatic Guaranteed is like traditional insertion ad buys but it’s automated. Publishers and buyers negotiate over ad inventory that the publisher has guaranteed for a specific buyer. So the billing is still handled manually but the delivery is handled through automation.
Here publishers agree to provide specific buyers preferential access to their packages but it’s not exclusive to any buyer.
Private Programmatic Marketplace
A private marketplace is an invitation-only digital marketplace where a limited set of buyers programmatically buy and sell ad inventory. PMPs are part of the programmatic advertising landscape designed to give digital publishers more control over their ad inventory.
Open Programmatic Exchange
This is not really a type of programmatic advertising but more of a location where ad buying and selling happens. An open exchange provides a collection of publisher opportunities to buyers who can purchase ad impressions through an automated process.
How to make programmatic advertising work for you?
Now we’ve established the benefits of programmatic advertising, let’s explore how to apply this approach in digital marketing campaigns.
1. Know your marketplace
This first point is pretty simple: Research your customer, marketplace and competitors. To paraphrase ‘The Art of War’ - win the war before you go to battle! As a marketer venturing into this new area of advertising. take the time to get to know the full toolbox. The Digital Marketing Institute has a useful glossary of terms and descriptions.
2. Know Your Customer
The value of programmatic advertising is it’s ability to hyper target. However advertisers need to deep dive on customers first using market research to establish the profile & behaviour of their customers. Collecting data from past campaigns, competitors and even surveys can help reach a granular understanding of who customers are.
3. Set goals
As with any goal in digital marketing, it’s important to have targets defined from the start that are measurable. Ideally use existing data to determine the type of advertising awareness you need and who your customer is. That knowledge will help you to determine short and long term goals.
3. Consult the experts
At this point, it’s useful to allocate skilled marketers to plan, control, and optimise your buying. Ultimately to enjoy the best outcome, find the perfect marriage between automation and experienced human intervention. Don’t rely on the algorithm alone to yield the best results for your campaign.
We’re here to help!