What is Programmatic Advertising: Understanding the Benefits, Process, and Platforms

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 platforms available for businesses.

Let's delve deeper.

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What is Programmatic Advertising?

Programmatic advertising or programmatic ad buying is using software to buy digital advertising. Conventional advertising involves proposal requests, quotes, tenders, and negotiation. Programmatic advertising, on the contrary, 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.

However, programmatic advertising does not imply complete automation of the ad buying process. With programmatic advertising, marketers can work harder towards optimizing and improving the ads to drive the success of a campaign.

This is opposed to traditional advertising, where marketers must engage in time-consuming and labor-intensive tasks like preparing insertion orders or ad tags.

How Does Programmatic Advertising Work?

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, he 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 are targeted at 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.

Now, 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.

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.

Programmatic advertising platforms are helpful because they form an integral part of the system required for the programmatic advertising process. Each piece of the system works together to serve advertisers and publishers to ensure they both benefit.

We have already mentioned DSP and SSP in the previous section; let us now understand the value of each.

Supply-Side Platform (SSP)

Supply-Side Platforms hold the publisher's inventory. The publisher submits a webpage as a source of the advertisement following an agreement on the ad exchange. The publisher will also put a pixel code on the page to track visitor behavior.

The code delivers anonymous data about visitors and their actions. The SSP is programmed to maximize the value of the ad impressions for the publisher. The platform also enables the publishers to filter the ads by the advertisers per other criteria while setting different rates for ad spaces to define the cost.

Demand-Side Platform (DSP)

A demand-side platform is a type of programmatic platform for advertisers. Advertisers make their bid to a DSP while the platform decides for them.

A DSP stores third-party data and user profiles and combines information with bids from advertisers. The platform decides which ad to serve when visitors land on the web pages. It must consider the bid, the highest winning one, the ad's content, and the advertiser's cost.

The publisher includes a pixel on the website that provides data, so the audience segments are created, sending the information to the DSP. On the other hand, the DSP has advertisers ready to make their bids automatically so that suitable ads are shown to the right audience.

Advertisers benefit from the placement of the ads, while the publishers profit from the highest bidder winning. When the ad exchange and the DSP have decided which ad to match to which webpage, it is communicated to the SSP.

Programmatic advertising using these platforms is also helpful in supporting stealth marketing.

Benefits of Programmatic Advertising

Programmatic advertising offers various benefits that have redefined the difference between conventional content marketing 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:

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.

Transparency

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.

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.

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.

Relevance

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.

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 offline and online marketing and advertising budgets can also use programmatic ads as part of their digital marketing strategy.

What is Programmatic Advertising Takeaway

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 video advertising.

By 2023, programmatic video advertising spending in the US alone is expected to reach $75 million.

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