Home Guides and Tutorials What Is Programmatic Advertising and How to Use It?

What Is Programmatic Advertising and How to Use It?

by Adsterra Team

In any ad network, reports are automated, and there are tools for automating the selection of bids, etc. But before programmatic advertising, people had to travel personally and negotiate with partners (or call). As an advertiser or publisher, you may be wondering if programmatic advertising is worth your time, money, and effort. In this article, you will learn if it is the goldmine of digital advertising:

  • Main components of programmatic advertising
  • Advantages for advertisers and publishers
  • Drawbacks for advertisers and publishers
  • Popular concerns about programmatic advertising.


What is programmatic advertising?

The programmatic advertising definition is “the type of ad-selling and buying process that relies on automation instead of direct negotiations”.

The use of software in the ad buying process speeds up ad placement and connects millions of publishers and advertisers without direct interaction. It also allows advertisers to buy multiple ad spots simultaneously.

Types of programmatic advertising deals

Real-time bidding (RTB)

In RTB, ad inventory is bought and sold via an instantaneous programmatic auction. The ad slots are available for everyone to bid in an open auction and are awarded to the highest bidder. The entire process happens in real-time, and advertisers can choose from various ad slots as they become available. Although the highest bidder receives the slot in RTB, they are not required to pay their bid amount.

The highest bidder pays only $0.01 more for the slot than the second-highest bidder in the second-price auction. The second-highest bidder pays a slightly higher price than the third-highest bidder, and so on. Learn more about real-time bidding and test yourself with our free Guide to RTB.

Adsterra is your reliable partner for real-time bidding supply in terms of speed, scale, and flexibility.

Private marketplace (PMP)

Typically, this kind of programmatic advertising is used to distribute inventory on extremely popular, high-traffic platforms. Publishers usually set aside a premium ad inventory reserved for select advertisers in a private or closed auction.

A private marketplace embedded within a programmatic ecosystem allows buyers to benefit from automation while ensuring that deals adhere to their customization requirements. This transaction type facilitates the programmatic purchase and sale of ad slots, but only through exclusive partners.

Many DSPs have their PMPs that are only available to DSP users and customers. PMPs are primarily used by websites and publications with a large audience because of the benefits they provide to publishers. Unlike RTB, a PMP advertiser knows which websites their ads are served on, allowing them to measure the ROI of their ads accurately.

Preferred deal

This is one of the lowest-risk programmatic advertising types for business owners since they get to discuss the cost of impression beforehand and, in some cases, order access to the publisher’s analytics dashboards to ensure they still want to get the inventory. If an advertiser backs off from the deal, the ad spot is open to a public auction.  After an advertiser purchases the inventory, they can track the campaign’s progress using analytics dashboards built into demand-side platforms.

What Is Programmatic Advertising
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How does programmatic advertising work?

Since programmatic advertising strategies don’t involve interpersonal negotiations, publishers and advertisers need a robust infrastructure to acquire and put inventory up for sale, track the bidding process, and monitor the campaign results.

There are three main actors in the programmatic advertising process:

Demand-side platforms (DSP)

Demand Side Platform (DSP) is an automated buying platform used by advertisers and agencies to acquire digital advertising inventory. These include banner ads on websites, mobile ads on apps, and interstitial videos. Multiple ad exchanges integrate DSPs. DSPs allow advertisers to choose which platform they want to get an ad spot on, track their campaigns, and get involved in bidding wars.

SSP Supply-side platform

Helps publishers manage ad inventory and choose which ad spots they want to auction, sell on a private marketplace, or with a guarantee.

Data management platforms (DMP)

These tools keep track of what visitors do on a website. On the one hand, this information helps advertisers determine whether or not they are interested in a particular inventory. While publishers can assess the network’s ad revenue potential, determine which demographic and interest groups the website is most popular with, and develop content strategies accordingly.

Now that we know the basics of programmatic advertising let’s look at how it works step-by-step.

How much does programmatic advertising cost?

CPMs can vary greatly depending on how well the list is and how targeted it is. The price increases the better the items or, the more specific you want to be with your targeting. Prices also change by industry, device, format, and where on the page something is. 

Programmatic CPMs are usually between $0.50 and $2 CPM on average. This saves much money compared to human-driven trading, where prices are usually $10 or more. So, programmatic can help you get 10 to 20 times more advertising for your money.

Programmatic advertising is a massive asset for brands that want to save budgets buying traffic from millions of websites because it is cheap.

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6 Steps in programmatic advertising

Step 1

Website visitors trigger the start of all programmatic advertising events. However, users don’t notice that the buying-selling process starts as soon as they visit the platform. The tracking stage is mind-blowingly fast — it usually takes milliseconds.

Step 2

As soon as the visitor chooses the website, the publisher lists the available inventory up for sale. On the other hand, an advertiser will be able to choose the spot using the supply-side platform. Remember that this process is automated — hence, you don’t have to choose inventory manually.

Step 3

To ensure that the platform matches the advertiser’s interests, the algorithms employed by the SSP analyze the user’s demographics, interests, and on-site behavior by reading cookies. By matching the inventory to advertisers’ needs this way, programmatic advertising allows business owners to get ads in the most relevant places.

Step 4

After analyzing the inventory and the platform’s users, the worth of every user is assessed. Based on that, a starting cost per impression is calculated.

Step 5

After knowing the user value of a given platform, an advertiser submits a bid to the demand-side platform. A publisher, on the other hand, sorts through all bids and chooses the winning one.

Depending on the type of real-time bidding a publisher chooses, an advertiser might have to pay the swimming bid or the second-highest one plus a fixed fee.

Step 6

After the owner of the inventory is known, both the publisher and the advertiser are notified. The ad is later redirected to a website’s server and published. It takes about 250 milliseconds to complete the entire process.

This is an overview of the programmatic advertising process. Naturally, it is slightly more complex than what we described above — you can find out more about “what are programmatic ads?” once you read up on its different types.

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Benefits of Programmatic Advertising

Programmatic advertising protects publishers and allows them to keep their readers in mind by serving relevant ads with the right tools. They can also use different types of bidding, such as header bidding and exchange bidding, to access deals that bring them higher revenues.

Right now, programmatic ad buying is one of the most efficient, convenient, and risk-free types of business promotion and ad inventory distribution.

Programmatic advertising benefits for advertisers:

1. Growth opportunities

Instead of being limited by ad inventory, programmatic advertising allows advertisers to reach a large audience by purchasing ad space from any available ad inventory.

2. Flexibility in real-time

Advertisers can adjust ads in real-time based on impressions and use a variety of targeting criteria.

3. Capabilities for targeting

Advertisers’ budgets can be better utilized and spent more efficiently with better targeting. 

4. Relevant users see relevant ads

Ads are shown to users when they are most likely to see and respond to them. There are many tools available to help business owners identify and reach their most profitable audience. For example, if a user searches for airline tickets, the platform will show him hotel booking ads, assuming he is also looking for lodging.

5. Efficiency

Through targeting, the process has been streamlined, and more relevant ads have been served. This means advertisers can get a better return on their investment, while publishers can also maximize their revenue. As an advertiser, you’re not limited to local publishers because programmatic advertising is borderless.

You can choose from millions of publishers who share their audience’s interests and drive traffic to their platforms. Programmatic advertising supports banners, text, and video ads. You can target desktop, smartphone, tablet, or multiple devices with your announcements. With so many options, it’s difficult for business owners to miss out on the right inventory.

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6. Fighting advertising fraud

According to statistics, in 2018 alone, global business owners lost over $19 billion due to ad fraud. From click farms to fake contact form filling, publishers use a variety of tricks to fool advertisers into thinking their ads are working.

Nowadays, we all benefit from recent programmatic advertising innovations that provide transparency and security.
Ads.txt is one such project that monitors publisher eligibility to sell inventory. Adsterra uses automated and manual traffic and campaign tracking. A combination of algorithms (like AdSecure) and our own security inventory helped us detect 99.99% of ad fraud.

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7. Robust reporting infrastructure

When it comes to reporting, programmatic ads are unbeatable. They track real-time clicks, user age, location, device type, time spent on the advertiser’s website after clicking the ad, and so on. Typical metrics in a programmatic advertising report include:

  1. Click-through rate (CTR)
  2. Bounce rate
  3. Return on investment
  4. Brand engagement
  5. CTA

Benefits of selling ads programmatically for publishers:

1. It helps maximize the value of each bid

Programmatic advertising connects publishers with buyers. With so many advertisers vying for their inventory, publishers can maximize every ad spot on the platform. You won’t have to worry about being underpaid.

2. You can host relevant ads on your platforms

Publishers benefit from programmatic ad algorithms because they can post native announcements that meet editorial policies and are not off-putting to their audiences.

3. Programmatic ads are flexible

With so many programmatic ad options, publishers can manage their inventory in any way they want. Sell some inventory in real-time, distribute other inventory to pre-determined buyers via guaranteed programmatic ad distribution, and sort premium inventory in private auctions.

So a publisher always has control over the website’s inventory and can distribute it to maximize revenue.

4. IHands-off advertising management

Before programmatic ad buying, publishers had to spend a lot of time answering emails, discussing bids, and making arrangements. The platform is now visible to advertisers simply by listing inventory for sale.

Publishers can now focus on good content and platform promotion instead of managing banner spots to increase their CPM rate.

What are the downsides of programmatic advertising?

  • Some agencies profit from their client’s lack of understanding of this ad technology.
  • Data measurement and metrics are inconsistent, and agency transparency is lacking (pricing and hidden costs).
  • Poor visibility on third-party websites.
  • Ad viewability: a persistent problem in the programmatic ad space. Make sure you’re partnering with a digital ad agency that is actively working on solutions that can help.
  • Poor inventory

That isn’t to say that programmatic ads can’t be cost-effective and produce results. You should seek out reputable, experienced, and transparent programmatic agencies.

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Here are some important characteristics to look for in a programmatic advertising agency:

  • Determine if they have the appropriate technology stack as well as human expertise.
  • Ascertain that the team has prior experience with strategy and data analytics. On the team, they should have digital marketers and data scientists.
  • Make sure that pricing is transparent. There are no hidden fees, and you can rest assured that your ad budget is going towards buying ad space rather than paying tech taxes.
  • Learn about the strategies, methods, and processes of the agency you’ve chosen.
  • Check to see if they have a good track record with client projects. To see if they’re a good fit for you, ask to see their portfolio or case studies.
  • Check to see if your ad partner is actively assisting you in reducing ad fraud in your campaigns. As a result, you’ll have more accurate data for insights and a higher return on investment.
  • Ad viewability is a persistent issue in the programmatic space, so make sure your partner actively works on solutions.
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What are programmatic advertising examples?

Probably we’ve already said enough about programmatic advertising. Now is the time to look at the examples.

1. The Economist


The Economist used programmatic advertising successfully by referencing subscribers, cookies, and content data. Its campaign brought in 650,000 new leads and gave a 10:1 return on investment (ROI). 

They tried programmatic advertising to get curious but reluctant readers to give them a try. Since The Economist covers a wide range of topics, from business to technology, the company had to ensure that its ads were relevant to the magazine’s readers.

The publication looked at all the information it had about its readers and included information about how subscribers used the publication’s website and mobile app. The Economist used its data to determine what kind of content readers liked.

After this first analysis, The Economist divided its readers into Finance, Politics, Economics, Careers, Technology, and Social justice. Then they built audiences that looked like these segments.

Ads were made for each of these groups of people based on what they liked. For example, someone interested in technology would see an ad that showed one of the magazine’s most recent (or most popular) technology stories.

Overall, The Economist launched more than 60 different ads, which led to the following:

  • 6 million unique actions;
  • 1 million unique website viewers;
  • 650,000 more possibles;
  • $650,000 in ROI from ads;
  • The lifetime value of the 9500 new subscribers is $15 million;
  • 64% more people in the U.S. are “aware” of the issue;
  • 22% more U.S. audiences are “considering”;
  • U.S. audiences’ “willingness to recommend” went up by 10%;
  • 10:1 campaign ROI.

Source: Shortyawards

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What can your company learn from this programmatic ad example?

Use your website and user data to find out more about your audience. With that information, you’ll be able to make ads that speak to your audience and get them to do something.

2. Kellogg’s

In 2014, Kellogg’s started using programmatic advertising to boost store sales. Kellogg’s was able to target their ads 2–3 times better.


Digital advertising is hard for companies like Kellogg’s that make most of their money from in-person sales. This is why they review KPIs like viewability and frequency. These businesses need to see a link between an online ad and an in-store purchase.

Viewability measures whether a user sees an ad or not. While frequency measures how often a user sees an ad.

Kellogg’s got the most out of these KPIs by using programmatic advertising. They teamed up with an ad management service, to improve its audience targeting and make more effective hyper-targeted ad campaigns.


  • Viewability rates went up by 70%;
  • 2X to 3X better at targeting the right people.

Source: Thinkwithgoogle

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What can your company learn from Kellogg’s programmatic ad example?

You shouldn’t ignore digital advertising even if you run an offline business. People spend almost 24 hours a week online, which is a lot of time.

3. The Intercontinental Hotel Group (IHG)

IHG started using programmatic ads to compete with third-party booking sites like Trivago. IHG looked into how people book hotels and found that most people use third-party sites because they think they are getting the best deal.


IHG, on the other hand, knew that travelers usually paid 15–30% more when they booked through these sites than when they went straight to the hotel. Their programmatic ads showed users how much it would cost to book directly with hotels like Holiday Inn. IHG also made these ads specific to the user by using the user’s browsing history to pull the hotel location, date, and price.

These ads performed very well because they were clear about how much they would cost. Users knew right away how much it would cost to spend a night at that hotel, and they could easily compare that price to the price on a third-party booking site.

These ads didn’t try to convince users that booking with the hotel was cheaper—they just showed them.

Source: MarketingWeek

What can your company learn from this programmatic ad example?

Tell people how much your item or service costs or how long a service takes, like fumigating a house for 1 hour. It helps your business if users get the information they need to make a well-informed choice.

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Is programmatic advertising the future of marketing?

Programmatic ads are undeniably popular nowadays. Soon, you may wonder if programmatic ads will survive or if marketers will develop something better.

According to statistics, the next five years will be highly productive for the field, with total spending reaching $29,800 million by 2025.

What are the most impactful industry trends that will define programmatic advertising of the future?

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Even more personalization

Programmatic advertising’s success relied on segmentation and personalization. Ad exchanges use demographic, behavioral, and other data to target relevant ads. Machine learning and AI will increase the number and precision of insights an advertiser receives, improving ad placement relevance.

Security is the community’s number-one priority

Programming advertising would have been near-perfect if not for scammers duping business owners into paying exorbitant fees for ineffective ads. The threat of traffic manipulation and click-generating apps is real, but more advertisers are taking action. Advertisers will benefit from stricter regulatory policies determining whether a publisher is eligible for programmatic ad inventory distribution.

Voice-driven programmatic ads

By the end of the year, every second search will be voice-based. Advertisers and publishers will adapt to the new medium, building a market and infrastructure for voice-based programmatic ad exchanges.

How to get started with programmatic advertising (for advertisers)?

If you are an advertiser eager to use programmatic advertising to get exposure and promote your brand yet don’t know where to start, these are steps to take.

  • Define a budget. Other than determining the bid cap, keep in mind that most programmatic advertising platforms charge fees and factor these expenses in.
  • Choose a real-time bidding network. Make sure the DSP platform you are considering has a wide range of campaign settings, is transparent, and doesn’t charge a high subscription fee.
  • Develop creatives and start bidding. Once you decide on the type of ad you want to use for promotion, create several posts you would use as an announcement and test them either by running a low-budget campaign or by creating a focus group at the office.
  • Track your campaigns. It’s vital to have the upper hand in programmatic advertising — this way, you will make sure the ad budget doesn’t go down the drain.
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Programmatic advertising is a complicated concept that can be difficult to grasp at first. Both demand and supply-side platforms, on the other hand, are user-friendly, and you will be guided through the process.

Adsterra is a team of leading advertising and marketing professionals who can help you choose the right platform for promotion or sort through bids from business owners. We also develop performance-based solutions that connect business owners and content platform managers.

To take your business to the next level, join us — we help advertisers and publishers make the most out of their projects.

Join Adsterra

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