Many of you might have heard the term called Programmatic Advertising in the digital/online marketing sphere or heard how programmatic advertising has changed the landscape of advertising and marketing.
For the people who haven’t understood the term and its concept or are confused about it, here is a complete breakdown of what programmatic advertising is, how it works, and its benefits.
Definition of Programmatic Advertising
In simple terms, #programmaticadvertising is buying and selling of ads. It uses software for real-time buying and selling of ad inventories in the digital advertising arena. This method is much ahead of the conventional method of buying and selling between the brands and agencies or publishers which included a request for proposals, human negotiations. The traditional method uses a manual process which is time-consuming, expensive, extensive paperwork.
On the other hand, programmatic advertising is an automated process that requires less human labor and more machine automated work. It will help in better optimization and efficient targeting in advertising. Programmatic-centric software uses algorithms to help execute campaigns conveniently.
Programmatic advertising uses different components to work in an ecosystem manner such as demand-side platforms (DSP), supply-side platforms (SSP), ad exchanges, ad servers, data management platforms (DMP), and ad networks. Let’s understand how programmatic advertising makes use of these components and how it works as a whole.
How does programmatic ad buying work?
The process of programmatic ad buying is between a publisher and an advertiser. Let’s look at the flow of the process in simple terms for you to understand better.
When any user wants to visit any website or clicks on a website that is configured for programmatic advertising space, the publisher or the owner of the page will then put up an auction for ad impressions in the marketplace through Supply-side platforms(SSP). The auction for various ad impressions gets visible to all the advertisers who are willing to bid for the ad space. The advertisers compete for this space and put up an offer to buy through demand-side platforms (DSP). Whichever advertisers bid the highest, wins the auction for an ad impression.
The planned and created campaign is then served on the site for the user to see by the advertisers. And hopefully, the user can then click and see the ad.
This whole process may sound tedious and long but it takes few milliseconds to complete the process with the help of programmatic advertising. The software uses calculated algorithms and puts up the result in the front desk more effectively and efficiently.
Types of programmatic advertising
Real-time bidding (RTB)
Real-time bidding is also known as an open auction or marketplace where the advertisers buy the ad spots on a real-time basis. The ad spots are opened for bidding and the one who bids the highest gets the ad spot. In RTB (real-time bidding), the advertisers who bid do not have to pay the amount. It uses the second-price auction system where the highest bidder is charged more than the second-highest bidder. Although RTB is an open-source auction and runs on a real-time basis, it lacks transparency.
The private marketplace is quite similar to RTB with a minute difference that is private marketplace uses a closed auction system i.e the bidding happens in private space. It is based on invite-only. Usually, many publishers have their own PMP (private marketplace) in which they preserve a few exclusive ad inventories for selected advertisers. PMPs are meant for websites with higher reach. While Real-time bidding lacked transparency, a Private marketplace allows advertisers to have complete information on which website to place the ad and who owns the website.
Advertisers have the liberty to choose the ad inventory even before it is available in the private marketplace and open auction. The preferred deal is also known as spot buying as it involves agreement on pricing, targeting, etc by both parties. In this, the advertiser is given a sneak peek into the ad inventory before buying or bidding.
Programmatic guaranteed also known as automated guaranteed follows the traditional approach. Here, the advertiser and publisher negotiate on bidding on a one-to-one basis.
Display ads are online visual ad which is placed inside the website at the header, footer, and sidebar of the website.
Programmatic social ads make use of social media platforms to collect vast user information and decide on who will see the ad, frequency of posting, ad formats.
DOOH (Digital Out-of-Home)
Digital out-of-home is a digital approach and a revolution to traditional out-of-home advertising. Programmatic DOOH is used by marketers for high targeting and engagement using geofencing.
Unlike display ads, native ads can be placed anywhere on the website or app. Few native ad formats are paid search, in-feed units, sponsored content, promoted listings, recommendation widgets.
What are the benefits of programmatic advertising?
#programmaticadvertising uses ad exchanges and ad networks which gives the advertiser access to reach a larger audience by placing ads on all different websites and other platforms. It becomes cost-effective and efficient and can help in generating greater ROI results.
There is transparency in programmatic advertising because the advertisers are aware of the publishers and the various ad spot available in a real-time environment.
It enhances more refined targeting because programmatic advertising uses data collected by tracking. The advertiser may use different methods for targeting such as retargeting, geotargeting, IP targeting, etc.
Insights and real-time tracking
Traditional advertising lacked the capability of tracking the results of an ad campaign but programmatic advertising enables to get real-time insights and tracks the progress of the ad campaign.
Better utilization of budget
As programmatic advertising provides real-time tracking and results of the ad campaign, the advertiser can better plan the budget revenues according to the results and optimize further.