Everything You Need to Know About Programmatic Advertising

May 3, 2021
6 min read
“All the forms of programmatic trading will become the key to the automated movement.”
Everything you need to know about Programmatic Advertising

You might have heard from other people in different organizations about how programmatic advertising has changed the landscape of the digital era and not fully understand it.

Programmatic advertising is like quantum physics in marketing, everyone has heard of it and talks about it, but only a few people understand it.

Here, we will explain programmatic advertising, the process, its benefits, and why digital marketers turn their campaigns programmatic.

What is Programmatic Advertising?

In simple terms, programmatic advertising is the use of software to buy Ads. It makes buying and selling Ads automatic by replacing human interactions with artificial intelligence and machine learning.

Advertising effectively and catching the attention of the right audience is a tough job. This is where programmatic marketing comes to play.

Since it started in 1994, it has gained immense popularity with a high success rate for running advertisement campaigns. Using an algorithm to boost advertisements takes digital marketing to a different level. This process increases the efficiency, accuracy, and transparency of the buyers and sellers.

The entire process happens within a few milliseconds. Surprised? Read more to learn how the process works.

How Does Programmatic Advertising Work?

Programmatic Advertising

The designed algorithms, like machine learning and artificial intelligence attribute to the efficiency of programmatic advertising.

Machine learning is a process to improve computers to learn and enhance through gained experience without the need of any explicit coding. You can understand it as extra supplements to enhance them to be artificially intelligent, like human beings.

Although computers’ artificial intelligence isn’t comparable to a human’s cognitive abilities, it is rapidly advancing and gaining popularity in every sector, even digital marketing. The simplest example is when search engines like Google predict search suggestions close to what you might need rather than what it would generally anticipate based on your past searches.

How is AI used in Programmatic advertising?

Artificial Intelligence analyses the user’s behavior, which optimizes the marketing campaigns so that the users are more likely to convert into customers.

Let us try understanding this concept through an example.

You are an owner of a clothing brand that you wish to advertise digitally. You supposedly make use of software or a platform to run your ad campaigns programmatically. Here are a few details about the possible consumers that the software will help you recognize.

· Location

· Demographics (Age or Gender)

· Interests and Hobbies

· Time or Weather

· Your Goals

· Device (TV, smartphones, etc.)

After receiving data on these factors, the campaigns are organized with alignment to the above elements so that the chances of visitors converting into potential customers are higher.

The flow of programmatic buying goes like this:

1.  A person visits a website that advertises programmatically.

2.  The automated biddings start, and the publisher puts an auction for an advertisement on a supply-side platform (SSP).

3. This platform lets the buyers know about the website, user, and Ad space. Interested advertisers offer bids.

4. The Ad space allows Demand Side Platforms (DSP) to make bids. When the SSP receives information about the Ad Space, it gets data about the user’s cookies and analyses it.

5. The analyzed data gets shared with the DSP. It acts on advertisers to choose Ad Space according to the user’s interests and advertiser’s budget.  

6. The highest bidder with the most suitable bid gets the ad placed on the website. The various DSPs placed their bids on behalf of the advertiser, and the SSP chooses a winner.

7. The SSP displays the winning Ad bid on the website. If the Ad interests the user, they click on the ad and turn into customers of the advertiser.

Flow of Programmatic Advertising

All this process happens in milli-seconds when the user clicks the website, and the webpage loads.

Types of Programmatic Media Buying

There are 4 types of Programmatic Media Buying.

1. Real-Time Bidding (RTB)

This is a real-time open auction environment open to everyone. In this process, bids on an Ad Space place, and the highest bidder gets the slot. RTB is easy to set up and optimize, but this process lacks transparency. The advertisers don’t know the exact websites where their Ads get placed.

2. Private Marketplace

This process is similar to RTB except for a few points. It is only open to the advertisers who get invited to the auction. Also, the advertiser knows precisely where the Ads get published.

3. Preferred Deals

Before the Ad impressions are made available for open and private auctions, advertisers choose them at a fixed price. Both parties negotiate the pricing and targeting. The advertiser gets a look at the publisher’s Ad inventory and isn’t bound to make purchases.

4. Programmatic Guaranteed

This process is a bit traditional that doesn’t have any auctions. Here, both the parties negotiate on a one-on-one basis. After a successful negotiation, the Ad impression is directly sold to the advertiser.

Programmatic Guaranteed is opted by advertisers with a substantial budget. They have options to choose from Ad space inventories to prices, audience, and frequency.

There are a few places where you can run marketing campaigns.

§ Display Ads (online visual Ads published on the header, footer, or sidebar of webpages)

§ Video Ads (Ads that appear while playing YouTube videos, pops up in online articles, or appears in search suggestions )

§ Audio Ads (Ads on apps like SoundCloud, Pandora, and BBC)

§ Social Media Ads (Ads displayed on social media platforms)

§ Native Ads (appear in different locations of a webpage)

§ Digital Out home Ads

How Much Does Programmatic Advertising Cost?

Programmatic advertising costs way less when compared to traditional methods for advertisements. The price ranges from 0.50$ to 2$ CPM (cost per mile). Traditional campaigning costs a minimum of $10.

However, it a rough figure and depends on several factors and parameters.

If you wish to have a rough idea about the cost of advertising programmatically, you can use the IAB Programmatic Fee Transparency Calculator.

Benefits of Programmatic Advertising

There are many benefits of programmatic marketing besides low-cost, automation, machine learning and artificial intelligence.

1. Real-time Insights

When you opt for traditional advertising techniques, it takes a lot of time to get results, and you cannot determine the efficiency.

These problems get solved with programmatic advertising. It provides insights into your marketing campaigns and the target audience.

2.     Enhanced Targeting Abilities

One of the best things about programmatic marketing is personalization. Using the user’s cookies regulates strategies to gain more conversions.

3.     Greater Transparency

The advertiser knows about the Ad impression, the target audience, and the Ad performance through this system. They can also easily track the spent amount and optimize their campaigns for better results.

4.     Reduction of Ad Frauds

Due to the greater transparency of the advertising process, Ad frauds have reduced. There are major programmatic advertising platforms that block bot traffic and ad frauds in their system.

5.     Less Wastage

Your campaigns reach your target audience efficiently, and fewer ad impressions get wasted on the wrong audience. Also, tackling Ad frauds more effectively ensures the least wastage of campaigns.

The Future of Programmatic Advertising: Final Thoughts

The Final Thoughts on Programmatic Marketing

Programmatic advertising is one of the most growing sectors of the market. Talking about the future, it has already arrived. According to a report, almost 88% of display Ads in the United States will be forecasted programmatically in 2021.

Not only does programmatic marketing eases the campaigning process through automation, but it also is more efficient as it recognizes and targets potential users. Also, small brands can opt for programmatic marketing even if they have a low budget.

Programmatic advertising is expanding exponentially every year. Predictions expect that most of the advertisement campaigns will use this within two years.