Some marketing techniques are more advanced than others, and this is one of them. Programmatic advertising is a form of marketing that uses computer automation to purchase advertising space in real-time.
In this article, we’ll help clarify what programmatic advertising is, the parties involved in it, and the types of programmatic advertising you can employ for your business goals. Keep on reading to learn more about this valuable digital advertising strategy!
What Is Programmatic Advertising?
Programmatic advertising is an automated process of buying and selling digital marketing space.
There is no negotiation between actual people. Instead, advertisements are realized via ad exchange platforms that operate through algorithms.
While “programmatic” advertising sounds odd, it is common in digital marketing today. Every ad you see on Facebook or Instagram results from programmatic advertising. The annoying unskippable ads in mobile apps, video ads on YouTube, banners on a web page, and many more fall into this category.
This is the indicator that the number of advertisers who are shifting to this marketing model is increasing.
Key Takeaways
Programmatic advertising is a process that uses AI systems to buy and sell ad space on the Internet;
An ad exchange platform is a middleman between advertisers and publishers;
RTB type operates through AI auctions, while direct programmatic offers guaranteed ad impressions on a specific website;
Programmatic advertising provides benefits that are essential to any digital marketer today.
How to Define Programmatic Advertising?
Programmatic advertising is the process of buying and selling ad inventory through real-time auctions, as opposed to traditional methods of buying and selling ad inventory.
There are two parties in every advertising agreement:
- Advertiser (provides ads)
- Publisher (provides marketing space).
Now, with programmatic advertising, there is a middleman in the form of an ad exchange platform. Consider ad exchange an online trading place for advertisers and publishers where ads and marketing space are sold and bought.
How does this work?
Well, there are three elements of an ad exchange that make this happen. Let’s review them in more detail.
- Demand-Side Platform (DSP): A DSP enables advertisers to submit their ad content, information about their desired target audience, and their budget plan. For example, Facebook Ads Manager offers these options.
- Supply-Side Platform (SSP): Publishers (e.g., website and mobile app owners) can sell their ad space easily and quickly through an SSP. OpenX, BounceX, and Google Ad Manager are prime examples of where publishers can monetize their digital ad space.
- Data Management Platform (DMP): The role of DMPs is to store and categorize all ad-related data. Websites typically use cookies to collect information about the user (e.g. location, IP address, login information…). Advertisers can access this information to create a target audience for their ads. Some of the most popular DMPs are Salesforce, Lotame, and SAS Data Management.
- Ad exchange: An ad exchange platform is a supply-side platform (SSP), although the term “ad exchange platform” is also commonly used.
Why Is Programmatic Advertising Important?
Programmatic advertising can greatly enhance your overall marketing efforts and the whole team’s daily workflow. Also, it fosters marketing automation and reduces the time for operational work.
1. Saves time
First and foremost, programmatic advertising is a time-saving practice for digital marketers. They do not have to contact many potential publishers and negotiate a good deal. Instead, digital marketers can rely on automation services that programmatic advertising provides.
2. Has a wider reach
Another critical benefit is high reach. Advertisers have access to more ad space, and publishers have access to more advertisers. In this way, both parties benefit from programmatic advertising.
3. Enhances targeting
Then, programmatic advertising allows for hyper-targeting. As described earlier, cookies collect multiple types of information about Internet users. Programmatic advertising platforms use these data to enable the advertiser to determine who exactly should see their ad.
On the analytics side, programmatic advertising offers in-depth insights for advertisers. You can measure your campaign while it is still running. This can help digital marketers evaluate their strategy and adjust specific parameters for future campaigns.
What Are The Best Strategies for Programmatic Advertising?
There are two types of programmatic advertising:
- Real-time Bidding (RTB);
- Programmatic Direct.
1. Real-time bidding
With RTB, an auction occurs in a fraction of a second. Namely, when a user clicks on a website, the SSP to which the website is linked creates an auction to sell the website’s ad inventory (e.g. banner space).
The SSP gathers information about the user from the website’s cookie and determines what type of advertisement the user should see. Then, DSPs place their bids on that ad space, and the highest bidder wins. This all happens in the period between when the user clicks on a web page and when that web page loads. How is this possible? Artificial intelligence.
2. Programmatic direct
On the other hand, programmatic direct gives advertisers more control over where they want their ads to be displayed. Programmatic direct includes no auction process. The main advantage of programmatic direct for advertisers is that it enables them to choose which sites to generate impressions for their ads.
While there are multiple subcategories of programmatic direct (like programmatic guaranteed and programmatic reserved), they all function more or less similarly.
How does Google do it?
While the relationship among DSPs, SSPs, and DMPs may seem confusing, let’s briefly overview Google’s advertising options to understand better how this all works.
Google has everything under one roof. They offer advertising solutions for both advertisers and publishers. Advertisers can use their DSP (Google Ads), while publishers can opt for one of their two SSPs (Google Ad Manager and Google Ad Mob).
In addition, Google works with third-party DMPs to collect as much data about users as possible. With all these features, Google can successfully satisfy programmatic advertising needs for both advertisers and publishers.
Related Terms
Want to dive deeper into digital advertising? Learn about Cost Per Click, Geo-Targeting, and Rich Media to broaden your understanding and improve your campaigns.
Additional Tips & Tricks
- 84.9% of ads displayed in the US are programmatic;
- Take advantage of advanced targeting options. These include geolocation, device type, time of day, and contextual targeting;
- Frequency capping is also an important part of programmatic advertising. It means setting frequency caps to limit the number of times an individual sees your ad within a specific time frame.
The Bottom Line
Programmatic advertising is the automated buying and selling of digital advertising. It uses algorithms to purchase online advertising space through real-time auctions. This allows for greater control and accuracy in targeting the right audience and optimal placement of ads that best fit the brand’s message.
Today you’ve learned more about programmatic advertising and why it is important for your future marketing campaigns. This knowledge will help you determine if programmatic advertising is the approach you need to take for your company or organization.
Programmatic Advertising FAQs
Programmatic advertising offers benefits such as efficiency, cost-effectiveness, and precision. It automates the buying and selling of ad space, reducing manual efforts and errors. By leveraging data, it allows advertisers to target specific demographics, improving the relevance of ads. Real-time analytics help optimize campaigns for better performance and ROI.
Programmatic advertising can enhance consumer experience by delivering more relevant and personalized ads. However, it can also raise privacy concerns as it relies on consumer data to target ads. The experience can be negative if ads are intrusive or overly frequent.
Businesses can use programmatic advertising to reach their target audience more efficiently and precisely. They can utilize data to refine their campaigns, ensuring ads are displayed to the most relevant audience at the optimal time. Also, real-time analytics help businesses adjust their campaigns for improved performance and ROI.
Programmatic advertising challenges include privacy issues, ad fraud, and viewability concerns. Some consumers are wary of the extent of data collection. Ad fraud is also a significant concern where bots, instead of humans, view ads. Ensuring ads are viewable and seen by humans is another challenge.
Digital advertising is a broad term that includes any advertising that happens online across devices. Programmatic advertising, on the other hand, is a specific method of buying and selling digital ad space using automated processes and algorithms. While programmatic advertising is a part of digital advertising, not all digital advertising uses programmatic methods.
No, programmatic and Google Ads are not the same. Programmatic advertising is an automated buying and selling process of digital ad space across various platforms. Google Ads is a specific platform provided by Google where advertisers can bid to display their ads. Google Ads can be part of a programmatic strategy, but programmatic extends beyond just Google’s platform.
