An Introduction to Programmatic Advertising 07.27.18

Are you new to programmatic advertising? Maybe you’ve heard people talk about it but don’t really understand what it is.

If you’ve browsed the internet today, it’s likely you’ve seen a digital ad that was placed using programmatic media buying, but what does that even mean? Most people only have a vague idea of what programmatic is, and this article will introduce you to the basics of programmatic advertising and how it works.

What is Programmatic Advertising?

Today, with digital advertising evolving in many directions, it can be difficult to explain the term “programmatic” without running the risk of getting trapped in jargons. Plus, sifting through the sheer number of digital media platforms and options — from display, native, social, video, digital out-of-home, streaming audio and even advanced TV (OTT) — can feel like a seemingly baffling process to understand. So, first, let’s strip it down to fundamentals.

We’re all familiar with the traditional way of buying digital advertising, which involves bidding through proposals, tenders, quotes, human negotiations, and decision-making in terms of what ads to buy and where to run them. It’s worked fine, but it’s a pretty manual process and there’s a lot of guesswork involved. You can think of programmatic advertising in terms of economics – put simply, it’s using software-driven technology to connect supply (seller/publisher) and demand (buyer/advertiser).

Publishers focus on yield and want to sell their ad space for the most money possible, and advertisers focus on their key performance indicators (KPIs) and want to pay the least amount of money as possible for the exact right audience. What’s so great about programmatic is that it connects buyer and seller, allowing for an open biddable marketplace, and essentially democratizes media buying. But perhaps the most important distinction is that instead of buying a specific site the traditional way, hoping you’re reaching your exact audience, programmatic is audience-based and data-driven, so the process uses advanced algorithms and rich data integrations to find your exact audience, regardless of site, across the internet. Because of this, you’re buying more efficiently and eliminating a lot of media waste.

Often, you’ll find programmatic advertising being explained with the mention of real-time bidding (RTB). However, it’s important to understand that not all programmatic ads involve RTB. RTB refers to ad buying through real-time auctions, but programmatic software also allows advertisers to purchase assured ad impressions from specific publisher sites in advance — a method known as “programmatic direct.”

Growth of Programmatic

In 2014, Forrester had rightly predicted that programmatic will account for the majority of all digital advertising spending over the next few years. Today, programmatic advertising is growing at a steady pace. With more than $65 billion estimated to be invested in programmatic advertising by 2020, over 86% of total digital display ads will be purchased programmatically in the US, according to the latest eMarketer report. The same report predicts mobile programmatic display spending to reach $48B in 2020, while digital video isn’t too far behind at $19B.

Some of the reasons why programmatic is on the rise include:

Ad buying efficiency: Programmatic allow for better cost efficiencies, real time reporting and optimizations and overall more flexibility to work with dozens of media outlets, data partners, and of course tactic and targeting types.

Speed and scale: Programmatic automates the ad buying and selling, eliminating the unreliability and slowdowns that humans bring to the process.

Targeting relevancy: Programmatic helps advertisers leverage data to serve users with ads that are more relevant to them based on demographic, behavioral and intent signals. It allows you to choose exactly who sees your ads, meaning that you only pay for those ads that your chosen audience gets to see.

How Does It Work?

Programmatic uses a mix of data sources to give advertisers the advantage to target audiences that are most likely to respond when an ad is displayed on the web page. This data may come from (1) cookies that websites use to track user behavior, (2) first-party data such as customer emails, types of products purchased, most recent purchases etc., and (3) third-party data such as demographic, income, credit score etc. from data aggregators like Acxiom, Datalogix, BlueKai, comScore, Experian, and LiveRamp.

When the cookie or any other identifier like login IDs match the targeting, criteria set by the advertiser, the ad buying system (a trading desk or demand side platform) will bid on the impression automatically. Among those competing for the impression, the advertiser that bids the most wins the right to display their ad. When a customer clicks on the ad, it gets converted into a sale for the advertiser. Programmatic advertising is one of the best ways to ensure clicks and traffic that can lead to conversations, and potential sales for your business.

Practically, there’s really no way a human can crunch through such large amounts of data to optimize your digital ad campaigns, while improving your ROI.

Get Started with Programmatic Advertising 

As programmatic closes in on larger and larger portions of the overall display market, it’s being seen by many as the future of advertising on the web. Thanks to efficiencies in programmatic targeting, cost and delivery, programmatic advertising is headed for a bright future. If you want to take advantage of programmatic for your marketing and ad campaigns, this is probably the best time to start.

New Angle Media offers programmatic advertising as a service to our clients. By adding this to our repertoire, we are positioning ourselves at the forefront of the technology and looking towards the future of digital advertising.

If you’re curious about programmatic advertising or want to discuss what it could mean for your business, we want to hear from you. Contact us today!