If your business uses online advertising, you must have heard terms like 'programmatic ads' or programmatic media buying and that the Internet of Things is disrupting digital marketing.
Your advertisement could be brilliant, but your campaign will never leverage its true potential if it is not appropriately placed to target the right audience. Programmatic advertising, in this regard, is a game changer.
This article breaks down programmatic advertising, how it works, and the programmatic advertising platforms available for businesses.
Table of Contents
- What Is Programmatic Advertising?
- How Does Programmatic Advertising Work?
- 4 Types of Programmatic Advertising
- What Are the Programmatic Advertising Platforms?
- Benefits of Programmatic Advertising
- Case Studies of Programmatic Advertising
- How Much Does Programmatic Advertising Cost?
- What Is Programmatic Advertising - Takeaways
- Programmatic Advertising FAQ
What Is Programmatic Advertising?
Programmatic advertising or programmatic ad buying is a marketing strategy of using software to buy digital advertising. Programmatic advertising uses algorithm software to buy and sell online display space.
Programmatic media buying is a sophisticated way of placing advertising. It uses traffic data and online display targeting to drive impressions at scale. This results in a higher ROI for marketers. It also yields better results for both SMEs and global brands, so it should be emphasized even if your organization is small-sized.
How Does Programmatic Advertising Work?
Programmatic advertising works in the following way:
- Programmatic ads connect the publishers – those with websites with ad space and inventory to sell – and advertisers who need to buy that ad space to promote their brand.
- When the advertiser is willing to launch a digital campaign, it contacts the programmatic ad agency or trading desk. The agency has a demand-side platform (DSP) to automate the ad impressions buying process to meet the campaign's goals.
- The DSP enables advertisers and their agencies to purchase inventory from several publishers. The platform ensures that the ads target the right audience using a data management platform (DMP) that manages the audience data. This data considers various factors, such as location, user behavior, demographics, and online activity, to target the right audience.
- When one of these right audiences lands on the publisher's website, the website sends an ad request to the supply-side platform (SSP). The publisher uses this platform to sell ads to maximize the value of an impression the publisher receives. The SSP connects with the DSP and runs an auction among the buyers.
- The DSP uses the received data to evaluate the ad and match it with its data and target parameters. The bidding price of the first impression is then decided. This process is held within the SSP and is referred to as real-time bidding.
- Once the impression is sold, it is sent for display on the publisher's website. The process repeats every time a user lands on the website. The entire bidding process takes just 100 milliseconds to complete.
4 Types of Programmatic Advertising
There are four types of programmatic advertising:
1. Real-Time Bidding (RTB)
Real-time bidding (also known as open auction, open marketplace or open exchange) is the most common type of programmatic advertising that became a synonym for it.
Any advertisers can participate in open auctions and place bids on any publisher inventory available for purchase. Publishers can set a floor price for an advertisement using real-time bidding; however, marketer demand still decides the final price, and the highest bidder wins. A guarantee of inventory doesn’t exist.
2. Private Marketplace (PMP)
A private marketplace (also known as a private auction, invitation-only auction or private exchange) is another form of RTB, but with one significant difference. Instead of being open to all marketers and publishers, one publisher chooses several marketers and invites them to participate in the auction.
These carefully selected marketers will require a time-sensitive deal ID to access the auction. Publishers establish a floor price, below which the bidding begins. As in an open auction, the winning bid is the highest. There is no warranty on inventory in this model either.
3. Preferred Deals
Also known as an unreserved fixed rate and a programmatic non-guaranteed, the preferred deal is a one-on-one relationship between publisher and marketer.
With a Preferred Deal, publishers provide the marketer with the premium inventory at a pre-agreed set CPM pricing. Although eCPMs are slightly higher, marketers pay to have the first right to exclusive ad space.
Before the inventory goes to an open auction, a marketer with a preferred agreement can place a real-time bid at the pre-negotiated fixed eCPM price when an ad request comes in.
In preferred deals, there is no warranty on inventory.
4. Programmatic Guaranteed
Programmatic Direct, Guaranteed Buy and Automated Guaranteed are all synonyms of programmatic guaranteed advertising.
In this type of programmatic advertising, the publisher offers a marketer a specified, reserved inventory at a fixed price. Publishers and marketers agree on pricing in exchange for a specific number of impressions or launch date.
This is comparable to a direct sale or purchase, but the human IO process is replaced by programmable automation, increasing efficiency and lowering error.
What Are the Programmatic Advertising Platforms?
Programmatic advertising platforms help the process of programmatic advertising. Several platforms are available for publishers and advertisers that match their unique needs.
We have already mentioned Demand-Side Platform (DSP) and Supply-Side Platform (SSP) in the previous section; let us now understand the value of each.
1. Supply-Side Platform (SSP)
Some of the most popular SSPs are:
- Google Ad Manager is a leading supply-side platform. It provides advanced features such as dynamic allocation, real-time bidding and programmatic direct, enabling publishers to optimize their inventory and maximize their revenue. Google Ad Manager also provides reporting and analytics, helping publishers make data-driven decisions and improve their ad performance.
- Rubicon Project is a global supply-side platform that offers programmatic advertising solutions for publishers. It provides access to an extensive network of buyers, including advertisers, agencies and trading desks, with advanced targeting options, real-time bidding and direct programmatic solutions. Rubicon Project also offers fraud detection and prevention measures, helping publishers maintain the quality and integrity of their ad inventory.
- PubMatic is another great supply-side platform that offers programmatic advertising solutions for publishers. This SSP provides access to several ad formats, including display, video and mobile, with real-time bidding and direct programmatic options. PubMatic also offers advanced targeting options (location, device and audience targeting), as well as detailed reporting and analytics.
2. Demand-Side Platform (DSP)
Some of the most popular DSPs are:
- Google Ads (formerly Google AdWords) is a leading DSP that allows advertisers to bid on ad inventory across the Google Display Network, YouTube and other Google properties. With its advanced targeting capabilities, Google Ads helps advertisers reach their desired audience precisely while providing real-time bidding and programmatic buying options. The platform also offers detailed reporting and analytics, enabling advertisers to optimize their campaigns for maximum ROI.
- The Trade Desk is a self-service DSP that provides advertisers access to a vast ad space inventory, including display, video, audio and mobile. It offers advanced targeting options (location, device and audience), as well as real-time bidding and programmatic buying solutions. The Trade Desk also provides reporting and analytics, whose valuable insights help advertisers optimize their campaigns and maximize ROAS.
- MediaMath is a global DSP that offers programmatic advertising solutions for marketers and agencies. The platform provides access to over 600 billion digital advertising impressions per day, with advanced targeting options, real-time bidding and programmatic buying solutions. MediaMath also includes reporting and analytics, fraud detection and prevention measures, helping advertisers optimize their campaigns and improve their ad performance.
3. Ad Exchangers
Some of the most popular ad exchange platforms are:
Google AdX is a Google Ad Manager integration that users can access through a Google Ad Manager account. This well-known ad exchange platform offers publishers access to a vast network of advertisers and buyers. Advertisers can access various high-quality ad inventories with options for programmatic targeting and real-time bidding. Publishers can maximize their ad revenue and better control their inventory thanks to its modern ad-serving technology.
Xandr (formerly AppNexus) offers real-time bidding and programmatic buying solutions. With its vast inventory and advanced targeting capabilities, it helps advertisers precisely reach their desired audience while publishers can efficiently monetize their inventory. This platform provides detailed analytics and reporting, enabling both buyers and sellers to optimize their campaigns and maximize ROI.
OpenX is a global ad exchange platform that provides programmatic advertising solutions to publishers and advertisers. It offers premium ad inventory, with access to over 2,000 publishers and various ad formats, including display, video and mobile ads. OpenX also provides advanced targeting options, fraud prevention measures and real-time reporting, helping buyers and sellers make data-driven decisions and optimize their campaigns for the best results.
Benefits of Programmatic Advertising
Programmatic advertising offers various benefits that have redefined the difference between conventional and modern-day advertisements.
It is also getting more sophisticated as new tech comes onto the scene. Some of the critical advantages of programmatic advertising are:
1. Increased Reach
Programmatic advertising supports a range of multiple ad exchanges and networks. These give advertisers access to far more ad space on hundreds of websites. Advertisers can advertise at scale with no extra work and at affordable prices.
The next step, a primary issue for the industry today, is achieving openness in costs. Programmatic advertising allows advertisers and publishers to access real-time data about ad placements and activities. This maximizes transparency.
3. Targeting Beyond CTR
Programmatic advertising supports advanced targeting like lookalikes and interest targeting to enable advertisers to reach high-quality audiences at scale. Businesses must remember that CTR is not a KPI.
So, irrespective of the number of clicks you get, they don’t count if they do not convert.
4. Real-Time Data Insights and Reporting
Programmatic exchanges offer access to real-time data and advanced reporting about ad placements and performance. This enables the publishers and advertisers to optimize the campaigns accurately and quickly at scale.
Programmatic ad buying provides advertisers access to a massive ad inventory across multiple ad exchanges and networks. This includes private marketplaces and premium inventories with high-quality traffic.
With programmatic advertisement, advertisers can ensure maximizing the relevance of the ads for the specific targeted audience and improve the ROAS.
Case Studies of Programmatic Advertising
Some of the most successful examples of programmatic advertising increasing brand awareness and engagement, and reaching specific audiences, include Google, The Economist and Turner Sports.
In 2015, Google noticed the growing trend of programmatic advertising and saw an opportunity to promote its Google Search App.
Programmatic advertising allowed Google to reach potential customers at any moment and respond to them in real time while freeing up marketers to strategize and innovate.
Using programmatic advertising, Google got 30% more people 3X more frequently and decreased their cost-per-thousand impressions (eCPM) by approximately 30%.
In another campaign for Google Play, using first-party and third-party data to target ads more effectively increased brand awareness by as much as 50% above control groups. Google surpassed its goal of buying 60% of brand display ads programmatically in 2014, with programmatic accounting for 73% of ad spend.
An excellent example of programmatic display advertising is how The Economist, a news portal focused on business, finance and politics, attracted a younger, more progressive audience.
In the first attempt David Abbott, advertising mastermind, created bold, modern-looking red and white ads to promote the idea that reading The Economist makes young people wiser and more successful.
After the fiasco with the ad, the editorial team created programmatic digital display ads to target 650,000 individuals and change their perspective of the magazine.
The Economist changed their definition of their target market to "intellectually curious" to get readers to reevaluate their perception of the magazine's content.
3. Turner Sports
Turner Sports used programmatic marketing to increase brand awareness and engagement among sports fans.
To promote the National Basketball Association Season Tip-Off for 2016 events, they used programmatic video advertising to reach six million unique viewers in the U.S.
The ads featured real-time videos of fans and athletes from tip-off events nationwide and advanced targeting using audience data from previous Google Ads campaigns.
This approach led to a 17% growth in ad recall and a 7% growth in brand awareness for “NBA on TNT.”
By researching and adjusting its audience, Turner Sports created hyper-targeted ads, resulting in significantly better results.
How Much Does Programmatic Advertising Cost?
Programmatic advertising costs vary widely depending on CPM (cost per mile). CPM, in online advertising, means costs per 1000 ad impressions.
The cost typically increases as advertisers or publishers want more specific advertising. The price depends on factors like the type of industry, targeted device, ad format, and page placement.
On average, programmatic ads CPMs are cheaper than social media advertising methods. They also offer greater value than traditional offline approaches.
This implies that small businesses with limited and advertising budgets can also use programmatic ads as part of their digital marketing strategy.
What Is Programmatic Advertising - Takeaways
The future is already here when it comes to programmatic advertising. Programmatic media buying spending is increasing each year. This remarkable growth extends beyond display ads to native advertising, mobile advertising, and advertising.
Professionals can also help you with this process, so we advise looking for the right advertising agency to partner with for your project.
Programmatic Advertising FAQ
1. What is the difference between Google display ads and programmatic?
Google display ads are paid ads displayed on Google's network of websites, including Google search results, YouTube and partner websites. At the same time, programmatic advertising refers to using technology to automate the buying and selling of digital ad space.
Simpler said Google to display ads are a specific type of ad that advertisers buy and place programmatically through Google's ad network. Still, programmatic advertising encompasses a broader range of ad buying and selling methods that may or may not involve Google's display network.
2. Is Google Ads a DSP or SSP?
Google Ads operates as a DSP, but it has one huge difference compared to other DSPs.
While others offer access to inventory from various suppliers, Google Ads sells ad inventory exclusively from its own website network, including Google search results, YouTube and partner websites. Therefore, advertisers that use Google Ads as a DSP are limited to purchasing ad inventory exclusively from Google's network.
3. What is the difference between digital advertising and programmatic advertising?
Digital advertising is a broad term encompassing all forms of online advertising, including display ads, social media ads, search engine ads, and more. Programmatic advertising is a subset of digital advertising that uses automated systems and algorithms to purchase ad space in real time, optimizing ad placements and targeting based on data.