What Is Programmatic Advertising and How to Use It?
Now, when out of every five dollars business owners spend on ads, four will be dedicated to the programmatic promotion, it’s clear that new forms of brand promotion will have to do with online programmatic advertising technology.
As a business owner or a publisher, you might be wondering whether jumping on the programmatic bandwagon is worth time, money, and effort. This post is a “Programmatic Advertising 101” — you will find out what is programmatic advertising, what its benefits are, and how to implement programmatic advertising to promote your business or generate more revenue from a high-traffic platform.
Programmatic advertising consists of four major subsets:
- Real-time bidding (RTB) — the most common type of programmatic ad-buying; ad spots are distributed during a live auction between advertisers.
🎁 Make sure you know enough about real-time-bidding and test yourself with our free Guide to RTB.
- Guaranteed ad-buying — an advertiser and publisher agree on the deal choosing the inventory and ad budget beforehand.
- Private marketplace. This is a private auction for premium inventory — an advertiser can get in after getting an invitation. Typically, this kind of programmatic advertising is used to distribute inventory on extremely popular, high-traffic platforms.
- 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 purchased the inventory, they can track the campaign’s progress using analytics dashboards, built into demand-side platforms.
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 results of the campaign.
There are three main actors in the programmatic advertising process:
- DSP. Short for “demand-side platform”, it allows advertisers to choose which platform they want to get an ad spot on, track their campaigns, and get involved in bidding wars.
- SSP — a 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.
- DMP. These tools (data management platforms) track the actions of website visitors. On the one hand, this data helps advertisers make an informed choice whether they are interested in a given inventory. On the other hand, publishers can assess the lucrativeness of the network for advertisers, find out which demographic and interest groups the website is most popular among and build content strategies accordingly.
With the main programmatic definitions explained, let’s get straight into the most important aspects of the process, with a step-by-step answer to the question “how does programmatic advertising work”.
6 Steps in Programmatic Advertising
Step 1. The start of all programmatic advertising events is triggered by website visitors. Although users don’t notice that, as soon as they visit the platform, the buying-selling process starts. 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. An advertiser, on the other hand, will be able to choose the spot using the supply-side platform. Keep in mind that this process is automated — hence, you don’t actually have to choose inventory manually.
Step 3. To make sure 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 most relevant places.
Step 4. After the analysis of the inventory and the platform’s users, the worth of every single 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 chose, an advertiser might either 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.
Benefits of Programmatic Advertising
As a result of the tremendous growth of programmatic advertising, its infrastructure, and reach of opportunities for publishers and advertisers alike grows at an impressive pace. Right now, programmatic ad buying is one of the most efficient, convenient, and risk-free type of business promotion and ad inventory distribution.
Let’s take a closer look at programmatic advertising benefits for publishers and advertisers.
Programmatic advertising benefits for Advertisers
The algorithms of programmatic advertising are focused on ensuring that the ad is displayed at the time when a user is most likely to see and react to it. There’s a range of mechanisms that help business owners define the most lucrative audience and reach out to it with no obstacles.
Look-alike modeling is one of the examples of programmatic advertising’s high efficiency — for instance, if a user looked into airplane tickets, the platform will display hotel booking ads to him as well, considering that person would likely be looking for accommodation as well.
Since programmatic advertising is essentially borderless, you are not limited to local publishers. Instead, business owners can choose among millions of publishers that match the audience’s interests and attract a lot of traffic to their platforms.
Programmatic advertising platforms support all common ad formats as well — banners, text, video. You can choose what type of devices the announcements are aiming for — desktop, smartphone, tablet, or several of these.
Due to the abundance of offers, it’s next to impossible for business owners to not see the inventory that matches their needs.
According to statistics, in 2018 alone, global business owners lost over $19 billion due to ad fraud. There are multiple scams publishers use to make advertisers believe that ads attract more users when, in fact, the ad spot doesn’t convert at all — from click farms to fake contact form filling.
Lately, innovations in programmatic online advertising have been directed at creating a transparent and safe advertising environment for both publishers and business owners.
Among such, there is Ads.txt — a project that monitors the eligibility of publishers to sell inventory. At Adsterra we implement automated+manual traffic and campaigns monitoring. A complex of algorithms (like AdSecure) plus our in-house developed security inventory has helped us reach 99,99% level of malvare detection.
Compared to other types of advertising, programmatic ads are practically unbeaten when it comes to reporting.
Most ad exchange and demand-side platforms have built-in analytics dashboards that track the number of clicks in real-time, discerning the age group, and location of the user, along with the type of device, time spent on the advertiser’s website after clicking the ad, and so on.
A typical programmatic advertising report includes the following metrics:
- Click-through rate (CTR)
- Bounce rate
- Return on investment
- Brand engagement
- User engagement
Benefits of selling ads programmatically for publishers
Programmatic advertising strategies connect publishers with thousands of buyers. With such a selection of advertisers who are after their inventory, publishers can make the most out of every ad spot on the platform. You will not have to worry about the risks of underpaying.
Programmatic ad algorithms are helpful to publishers since you can post native announcements that meet the website’s editorial policies and will not be off-putting for your audiences.
Because there are so many programmatic ad modalities, publishers have no limitations in managing their inventories. You can sell a part of your inventory on a real-time bidding auction, distribute other spots between pre-defined buyers using guaranteed programmatic ad distribution, and sort through premium inventory on private auctions.
Thus, a publisher always has the upper hand over the website’s inventory and can distribute it in a way that generates the most revenue.
Before the invention of programmatic ad buying, publishers had to work a ton to find an advertiser for an empty spot — answering emails, discussing bids, and making arrangements. Automation made things considerably easier — now listing inventory for sales is all it takes to make the platform visible to advertisers.
Instead of managing banner spots, a publisher can now focus on providing audiences with good content and promoting the platform so to increase its CPM rate.
Is Programmatic Advertising the Future of Marketing?
There’s no denying that programmatic ads are extremely popular these days. However, thinking of the nearest future, you may be wondering whether programmatic ads are here to stay or marketers will come up with something more relevant instead.
To start with, digital programmatic ads are not going anywhere. In fact, according to statistics, the next five years will be extremely productive for the field, with total spend reaching $29,800 million by 2025.
What are the most impactful industry trends that will define programmatic advertising of the future?
Trends That Define Programmatic Advertising
- Even more personalization. Segmentation and personalization were two cornerstones that helped programmatic advertising rise to power. Right now, ad exchange platforms use demographic, behavioral, and other insights to match relevant ads to target audiences. With the development of machine learning and AI, the number and precision of insights an advertiser will be able to get instantly will increase, improving the relevance of ad placement.
- Security is the community’s number-one priority. Programming advertising would’ve been nearly perfect if not for fraudsters abusing it and tricking business owners into paying a fortune for ads that aren’t efficient. Traffic manipulations and click-generating apps are a threat — however, the good news is, more advertisers are proactive about dealing with it. In the future, there will be stricter regulatory policies that determine whether a publisher is legible for programmatic ad inventory distribution, creating a safer environment for advertisers.
- Further development of voice-driven programmatic ads. By the end of the year, it’s estimated that every second search we make will be voice-based. Considering such a proliferation of voice-only tools and interfaces, advertisers and publishers will adapt to the new medium, building both a market and the infrastructure for voice-based programmatic ad exchanges.
How to Get Started with Programmatic Advertising?
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.
- Defining a budget. Other than determining the bid cap, keep in mind that most programmatic advertising platforms charge fees as well — factor these expenses in.
- Choose a vendor to mediate your programmatic ad exchanges. 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 decided 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 crucial to have the upper hand in programmatic advertising — this way, you will make sure the ad budget doesn’t go down the drain.
Programmatic advertising is a complex concept — grasping it may seem difficult at first. However, both demand- and supply-side platforms are user-friendly — you will be guided every step of the way.
Whether you are an advertiser or a publisher who is new to programmatic advertising, bringing in qualified professionals to help you choose the right platform for promotion or sort through bids from business owners. Adsterra, for one, is a team of leading advertising and marketing professionals. We develop performance-based solutions that connect business owners and content platform managers.
To take your business to the next level, leave us a message — we help advertisers and publishers make the most out of their projects.