Programmatic Advertising has been reverberating around the digital media industry for over two years now; if you’re working in digital within any capacity you may have heard or read articles labeling this the future of online advertising. They may be correct, they may not, either way the reality is that this relatively new digital marketing channel still remains fairly complex for some to understand.
(Source: Chris Dlugosz | Flickr)
Today, we attempt to provide clarity around questions reverberating around the industry, including what programmatic advertising actually is, how exactly it works, and most importantly the advantages it brings.
1. What is programmatic advertising?
There are a number of definitions of programmatic advertising being circulated around the web, many referencing acronyms such as DSP and RTB (to be explained later in the post,) but for now we’ll get to the point.
Programmatic Advertising is using software to automatically purchase digital ad space across display, video, mobile and social channels.
Traditionally, media purchases across display, video, mobile, and social channels would involve a number of manual processes including negotiating price for a number of continuously served impressions. Programmatic advertising removes these manual processes meaning advertisers don’t have to purchase ad space for a set amount across a certain period. Instead advertisers may use software to purchase singular impressions more closely matching a company’s target audience.
2. How does programmatic advertising actually work?
Imagine a music enthusiast named Chris is visiting a webpage or watches a video on his computer. The webpage or video he accesses contains advertising space which is available to purchase. As the webpage or video loads, so will an advertisement in the available advertising space. This is known as one impression. To determine the advertisement shown on Chris’s visit, an ad exchange will receive data noting available ad space for purchase. The ad exchange will then make the impression on the ad space available to a number of interested advertisers. These advertisers have an auction to bid for the impression and the highest bidder will serve an advertisement to Chris. This entire process will occur in a series of milliseconds.
The next thing to explain is that impressions can be purchased in one of two ways:
- Reserve buy: an advertiser agrees to purchase a certain number of impressions on the website
- Real-time bidding: a reserve buy has already been served or does not exist and every impression is available to purchase
Real-time bidding is essentially specifying how much you are willing to pay for an impression while the webpage is loading. The top-bidding advertiser wins the impression and their advertisement is shown. It would be impossible to manually bid on these impressions since real-time bidding happens in milliseconds on billions of daily impressions. To facilitate this, bids are programmatically placed using software known as a demand-side platform (DSP) . Within a DSP, rules are set up to provide instructions upon how much an advertiser is willing to bid based upon the website being visited and the user visiting the webpage. In our example, a music retailer may be very interested in winning the bid to show an advertisement to Chris who is a music enthusiast.
As mentioned, a demand side platform (DSP) is the software used to automatically bid on impressions from an ad exchange. The majority of DSPs have a data store where information on users is housed. The ad exchange sends data through to the DSP (typically including the user’s ID), the ID is then reviewed to establish whether details about the user match the advertisers targeting criteria before a bid price is sent to the exchange for that particular impression. If the DSP wins the auction for the impression, then an advert creative including a tracking pixel is served. The user viewing the creative may then make a purchase on the advertiser’s site. Through this pixel details are sent back to the DSP allowing a return on the campaign to be captured.
A key point to note is that as an advertiser’s campaign runs over time the DSP utilizes algorithms to develop an understanding of which ad impressions best help achieve an advertisers objectives. This will also help determine which impressions to highly bid upon and attempt to buy.
There are a number of companies that are considered DSPs based on their utilizing of automated software to bid upon relevant impressions, the companies include:
3. What are the advantages of programmatic advertising?
Below are 5 key advantages of this programmatic advertising compared to traditional ad buying:
- Ability to increase qualified traffic to your website
Through the use of programmatic, advertisers can continually gather insights into the audiences that provide the desired actions for the objectives of campaigns. By utilizing this data, advertising campaigns can be automatically optimized to improve performance by bidding more aggressively on traffic that closely resembles the converting audience thus providing advertisers with more qualified traffic.
The use of programmatic advertising makes purchasing impressions an all-round easier, and more efficient process. There is no longer a requirement for negotiating prices or sending creative manually to all the different publishers you wish to advertise with. The entire process of ad buying through programmatic is streamlined, and will save an advertiser a lot of time and money on previous manually led processes.
- Heightened control of the ad buying process
Programmatic advertising provides advertisers with increased controls when running campaigns with the ability to easily adjust budgets or bids, through self-serve platforms. There is even the ability to stop and start campaigns when required, which can be very useful if the desired action is to sell a particular product which may be out of stock.
- Access to inventory at a lower price point
Through programmatic an advertiser will be bidding on remnant (left over) inventory rather than premium inventory. In purchasing premium inventory the price point is far higher, allowing programmatic advertisers to potentially have access to inventory at lower CPMs rather than purchasing premium, depending on competition. However, a key factor to also remember is programmatic campaigns should really focus on bidding on the user to ensure they closely align to your target audience; so I would not get too hung up on buying at lower CPMs.
- Enhanced tracking capabilities
The tracking capabilities available through programmatic advertising are becoming more sophisticated and provide advertisers with information around where an advert has been shown, viewability of the served impressions and characteristics of users most who completed the desired action. All of this data allows improved optimizations of campaigns and reinvesting budgets in the correct areas.
4. What KPIs should I focus on to analyze the success of programmatic advertising campaigns?
A key decision before running programmatic advertising campaigns involves how you will evaluate success. I recommend setting KPIs for your campaign. I have outlined some KPIs I would suggest tracking below, these should be tailored dependent on your objectives:
- Click-Through Rates
- Cost per conversion
- Return on Investment
- Click-through attribution
- View-through attribution
- Brand search uplift
- Audience awareness
- Uplift on social engagement
- Ad frequency
5. What are all the acronyms and what does this jargon really mean?
It can seem really daunting trying to navigate your way through the maze of terms associated with programmatic advertising; believe me, those who know them may try to bamboozle and intimidate you. I have provided some clarity on the jargon you will hear with some of the key acronyms defined below so you don’t need to be intimidated.
A digital marketplace that enables publishers to sell advertising space and advertisers to buy ad space. This advertising space is most commonly bought or sold across display, video or mobile media.
Real-time bidding (RTB)
An instantaneous bid which is placed on an advertising impression as soon as it becomes available to purchase. These bids happen in milliseconds before a webpage has even loaded. The highest bidder will win the impression much in the same way that an auction is run on eBay.
Demand-side platform (DSP)
A piece of software providing buyers and advertisers with a graphical user interface from which they can place bids for advertising space through different ad exchanges. Along with being able to purchase advertising space, the software enables advertisers to select targeting criteria, and set rules that automate how much they are prepared to bid for different impressions that are available to buy from the ad exchanges.
Supply-side platform (SSP)
A piece of software providing publishers with a graphical user interface from which they can sell advertising space they have available across display, mobile or video. Through the use of a supply side platform publishers can make their impressions available to ad exchanges, from here the impressions are bid upon typically through demand side platforms (DSPs). As publishers make impressions available to ad exchanges this increases the number of advertisers likely to bid upon them through the DSPs meaning publishers can maximise revenues.
Agency trading desk (ATD)
Agencies that purchase and resell media to advertisers on a large scale, helping to manage the buying of campaigns to a particular audience and also the optimization of campaigns using Demand Side Platforms. A trading desk will sell the media on at a premium making money for the service provided to help advertisers reach their target markets.
If you have additional questions about programmatic advertising, leave them in the comments below.