Programmatic advertising is the automated process of buying media. Unlike traditional methods, where you manually search online to buy ad space, programmatic advertising automates this process with tools. It also uses data and algorithms to deliver targeted ads to the right audience at the right time.
In this comprehensive guide, we’ll cover everything you need to know about programmatic advertising, including what it is, how it works, its types, associated costs, and more. We’ll also highlight the top programmatic advertising platforms for your business.
Table of Contents
- How Does Programmatic Advertising Work?
- 4 Types of Programmatic Advertising
- What Are the Best Programmatic Advertising Platforms?
- 5 Key Benefits of Programmatic Advertising
- Case Studies of Programmatic Advertising
- How Much Does Programmatic Advertising Cost?
- What Is Programmatic Advertising - Takeaways
- Programmatic Advertising FAQs
How Does Programmatic Advertising Work?
Programmatic advertising benefits both SMEs and global brands. In 2023 alone, programmatic ad spending reached $546 billion, with projections for it to exceed $778 billion by 2028.
Programmatic advertising works through several key steps:
- Connecting publishers and advertisers: Programmatic ads link publishers (those with ad space to sell) with advertisers (those looking to buy that ad space to promote their brand).
- Contacting the ad agency: When an advertiser wants to launch a digital campaign, they contact a programmatic ad agency or trading desk. This agency uses a demand-side platform (DSP) to automate the buying of ad impressions to meet the campaign's goals.
- Media buying: The DSP allows advertisers to purchase ad space from multiple publishers. It uses a data management platform (DMP) to manage audience data, such as location, user behavior, demographics, and online activity, to ensure the ads reach the right people.
- Ad auction activation: When a user lands on a publisher's website, the website sends an ad request to the supply-side platform (SSP). This helps the publisher sell ad space and connects with the DSP to run an auction among potential buyers.
- Ad bidding process: The DSP uses the received data to evaluate and match the ads with its target parameters. The bidding price of the first impression is then decided in real time. This process is held within the SSP and is referred to as real-time bidding.
- Ad placement: Once the impression is sold, the ad is sent for display on the publisher's website. The entire bidding process takes just 100 milliseconds to complete and repeats every time a user lands on the website.
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. In RTB, advertisers can participate in open auctions and place bids on available ad space across various publishers.
Meanwhile, publishers can set a floor price for an advertisement using real-time bidding. The highest bid wins, but there’s no guarantee of securing the ad space, as the final price is determined by market demand.
2. Private Marketplace (PMP)
A private marketplace, also known as a private auction, invitation-only auction, or private exchange, is a type of RTB that is more exclusive. Here, a publisher invites select marketers to participate in the auction, instead of being open to all marketers and publishers.
Advertisers need a time-sensitive deal ID to access the auction. Bidding starts at a floor price set by the publishers. As in an open auction, the highest bid wins, but, like RTP, there’s no warranty on inventory in this model either.
3. Preferred Deals
Preferred deals involve a direct, one-on-one relationship between a publisher and an advertiser. 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 guaranteed involves reserving specific ad space 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 with programmable automation, increasing efficiency and lowering error. In 2018, Nielsen shared that companies using programmatic guaranteed experienced an 11% increase in efficiency.
What Are the Best Programmatic Advertising Platforms?
Different platforms cater to the unique needs of publishers and advertisers. Let’s explore the key types of programmatic platforms and their roles:
1. Supply-Side Platform (SSP)
An SSP is used by publishers to sell their ad inventory. It helps publishers manage, price, and optimize the sale of ad spaces. Some of the most popular SSPs are:
1.1. Google Ad Manager
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.
1.2. Magnite
Magnite, previously known as 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.
Magnite also offers fraud detection and prevention measures, helping publishers maintain the quality and integrity of their ad inventory.
1.3. PubMatic
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)
A DSP is used by advertisers to purchase ad space across various publishers. Some of the most popular DSPs are:
2.1. Google Ads
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.
2.2. The Trade Desk
The Trade Desk is a self-service DSP that provides advertisers with 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.
2.3. MediaMath
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:
3.1. Google Ad Exchange
Google Ad Exchange (previously 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.
3.2. Xandr
Xandr (formerly AppNexus) is a Microsoft analytics and advertisement subsidiary that 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.
3.3. OpenX
OpenX is a global ad exchange platform that provides programmatic advertising solutions to publishers and advertisers. It offers a 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.
5 Key Benefits of Programmatic Advertising
Programmatic advertising offers many benefits that distinguish it from traditional advertising methods. These are:
1. Increased Reach
Programmatic advertising connects to multiple ad exchanges and networks. This gives advertisers access to far more ad space across hundreds of websites. Advertisers can advertise at a scale with no extra work and at affordable prices.
2. Transparency
Transparency, a primary issue for the industry today, is achieving openness in costs. Programmatic advertising addresses this by providing advertisers and publishers with real-time data on ad placements and activities. This ensures maximum transparency throughout the process.
3. Advanced Targeting
Programmatic advertising offers advanced targeting options, like lookalikes and interest-based targeting, to help advertisers reach high-quality audiences at scale.
With programmatic media buying, the process is automated, ensuring that your ads target the specific audience you need. The automated tool finds the right consumers and shows them the ad at the right time to increase traffic and profit.
4. Real-Time Data Insights and Reporting
Programmatic exchanges offer real-time data and advanced reporting on ad placements and performance. Publishers and advertisers get a quick analysis of the ad’s performance to fix any issues and optimize the campaigns accurately and quickly on a large scale.
5. Relevance
Programmatic ad buying provides advertisers access to a vast 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 that ads are highly relevant to the targeted audience, ultimately improving return on ad spend (ROAS).
Case Studies of Programmatic Advertising
Some of the most successful examples of programmatic advertising in boosting brand awareness, engagement, and reaching specific audiences, include:
- Google’s first-party data use
- The Economist’s “Intellectually Curious" ads
- TNT Sports’ Tip-Off 2016 “Endless Possibilities” ads
1. Google’s First-Party Data Use
In 2015, Google capitalized on the growing trend of programmatic advertising to promote its Google Search App. By using programmatic techniques, Google reached potential customers and responded to them in real-time while freeing up marketers to strategize and innovate. This strategy helped Google target 30% more people, engage them 3X more frequently, and reduce cost-per-thousand impressions (eCPM) by approximately 30%.
In a separate campaign for Google Play, using first-party and third-party data to target ads more effectively increased brand awareness by as much as 50% compared to control groups. Google surpassed its goal of buying 60% of brand display ads programmatically in 2014, with programmatic accounting for 73% of ad spend.
2. The Economist’s “Intellectually Curious" Ads
Another excellent example of programmatic display advertising is how The Economist, a news portal focused on business, finance, and politics, sought to attract a younger, more progressive audience.
David Abbott, advertising mastermind, created bold, modern red and white ads to engage people in debate and discussions while promoting The Economist’s content.
Afterward, the editorial team turned to programmatic advertising to display these ads. By redefining their target market as the “intellectually curious”, they were able to successfully change perceptions of the magazine and targeted 650,000 individuals.
3. TNT Sports’ Tip-Off 2016 “Endless Possibilities” Ads
Turner Sports, also known as TNT Sports, used programmatic video advertising to promote the 2016 NBA Season Tip-Off, increasing brand awareness and engagement among sports fans. 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 campaign achieved impressive results, reaching six million unique viewers in the U.S., a 17% increase in ad recall, and a 7% boost 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 thousand impressions), representing the cost for every 1,000 ad impressions. The cost typically increases as advertisers or publishers demand more specific advertising.
Several factors influence the price, including 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 marketing. This makes programmatic ads an affordable option, even for small businesses.
What Is Programmatic Advertising - Takeaways
Programmatic media is rapidly evolving, with spending increasing each year. This remarkable growth isn’t limited to display ads but extends to native advertising, mobile advertising, and more.
Given this potential, hiring a professional media buying agency can be a wise move. They can guide you through the process and make the most out of your advertising efforts.
Programmatic Advertising FAQs
1. What is programmatic media buying?
Programmatic media buying, also known as programmatic advertising, involves using automated tools to buy and sell media space for ad placements. It uses real-time data to target audiences more effectively, ensuring ads are shown to their target audience at the right time.
2. What is the difference between Google display ads and programmatic ads?
Google display ads are paid ads displayed on Google's network of websites, including Google search results, YouTube, and partner websites. Programmatic advertising, on the other hand, is a broader term that automates the buying and selling of digital ad space across various platforms, not just Google’s network.
Simply put, Google display ads are a type of programmatic advertising within Google's ecosystem, while programmatic advertising includes a wider range of ad buying and selling methods.
3. Is Google Ads a DSP or SSP?
Google Ads operates as a DSP, but it has one huge difference compared to other DSPs.
While other DSPs offer access to inventory from various suppliers, Google Ads provides ad inventory exclusively from its own website network, including Google search results, YouTube, and partner websites. This means that advertisers using Google Ads as a DSP are limited to purchasing ad inventory exclusively from Google's network.
4. 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.
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