What is Programmatic Advertising?

Today’s digital advertising environment is crowded. Even more challenging is the complexity of digital ad networks, which can make it seem like you need a PhD just to get started. But once you dig below the surface of that jargon, you begin to uncover true benefits to your organization.

That’s what this guide is about. You might not exactly understand it, but programmatic advertising is the engine that makes modern digital strategies run. So we’ll break it down for you in plain English.

In this guide, we’ll do the following:

• Learn about the concept itself, along with a few programmatic advertising examples to make it real
• Understand the background of how these types of ads work, why they work, and how they came to be
• Read a primer on the platforms you can use
• Get some tips on how to get started

What is Programmatic Advertising?

We’ll start with a basic definition, brought to you by Marketing Week:

Put very simply, programmatic is buying digital advertising space automatically, with computers using data to decide which ads to buy and how much to pay for them, often in real time.

Stated differently, it’s a move away from the traditional, person-to-person way of buying ads. You don’t place your brand messages by contacting an ad representative for that specific spot in a specific publication. Instead, you use a platform that places your ads across a variety of channels, based on a specific definition of your desired target audience.

Think about the hypothetical Corner Barbershop. Twenty years ago, when wanting to reach potential customers, the owner would have called up the local newspaper to place an ad.

Today, using programmatic ads, he could upload a list of his existing customers delivering ads to them to return, and create geofences around the other local barbershops to deliver ads to their customers offering a first-time customer special offer.

That’s just one example, of course. Organizations today can place video, audio, and even TV streaming ads in this fashion. The advertiser plugs in some variables, and the platform automatically determines the placement and price—usually in the time it takes to load the website.

How Does Programmatic Advertising Work?

You have the basic definition. So let’s break it down further, using the same programmatic ad example mentioned above to help you understand how programmatic ads work.

The platforms placing ads on your behalf typically have a specified inventory that allows them to place ads across thousands of websites, within mobile apps and social platforms. Within that inventory, they’re constantly gathering extensive data about people’s behavior and actions. Additionally, using the native location features of mobile devices, they can leverage people’s physical location as a targeting factor. Through machine learning and other digital automation, they can take your ad and targeting specifications and deliver ads directly to people and devices that show intent or interest in your product or service. Individuals that exhibit the behavior identified in your targeting are then tracked across their digital devices, allowing you to deliver ads to them where they go instead of trying to guess where you think they may go online.

Most programmatic ads work on a concept called real-time bidding (RTB). Any organization that wants to place an ad through the platform specifies how much they’re willing to pay for it. The highest bidder gets the spot.

But the game is not over. Unlike channel-specific advertising, programmatic ads allow you to meet your impression goals in your campaign and deliver ads at lower cost because ads are delivered to your audience based on the sites and apps they visit.

The key thing to understand here is that, as an advertiser, you work with the programmatic platform instead of the actual publisher. That means you might not know which exact pages, websites, or content your ads will appear next to, but you also have control mechanisms target specific channels or eliminate specific locations from running your ads. Think of the platform as an automated middle-man, operating in real-time to get your ads placed and trafficked.

The Past, Present, and Future of Programmatic Ads

It all started quite simply. The 1990s saw the rise of digital ads that existed before programmatic systems, placed very much like your typical magazine or newspaper ads. Need it placed? Contact the publisher to get the ad up for a specific amount of time, regardless of visitors.

That simple process slowly evolved, first by allowing advertisers to place the same ads across multiple platforms. But there was a problem. Websites grew faster than companies realizing their commercial potential. As a result, digital publishers had a void of ads they were looking to fill.

Enter ad networks, which crossed channels and website ownership specifically to sell unused inventory at discount rates. But that would get unwieldy, too, with no way of knowing what websites your ads were actually running on.

Meanwhile, technology kept evolving. Finally, in the mid-2000s, the first programmatic ad networks began to pop up. Now, advertisers for the first time could choose specific audiences to advertise to. Meanwhile, publishers and ad networks no longer had to worry about unsold inventory because of discounted rates and a broader range of websites to advertise to.

The Current and Future State of Programmatic Ads

Fast-forward to 2020, and programmatic advertising has taken over. Countless platforms vie for advertiser attention, in nearly every form and shape. In total, an astonishing 83.5% of all digital ad spend happens through programmatic networks.

Break it down by channel, and it’s even more extreme. Almost 90% of digital display ads are placed programmatically. Meanwhile, programmatic ads shown on connected TVs (through apps like Hulu and Roku) broke $6 billion in revenue last year.

That number is not going to slow down anytime soon, either. eMarketer predicts programmatic ad spending to increase another 16.5% by 2021, rising to 86.5% of all digital ad spending next year.

In other words, the future of programmatic advertising is bright. One might even go so far as to say that programmatic advertising is the future of digital advertising. It’s already dominating the sector, thanks in large part to its clear-cut benefits.

5 Benefits of Programmatic Advertising

Why programmatic advertising? Simple — it’s the best way to spend your digital ad dollars. That’s especially clear once you understand these five benefits of leveraging programmatic ads:

1. Easy access to broad ad placements. You don’t need to be an expert or have a certain relationship needed to place your ads. Instead, you can place enough ads for your budget and target audience across various channels and websites, letting the automated processes do the heavy lifting in getting the details right.
2. Better targeting. When placing ads with individual publishers, you have to do the work of finding out their target audiences. Through programmatic ads, you start by identifying the behaviors and physical locations that indicate that someone is your product or service. That includes options like typical user behaviors, recent web visitors, IP address targeting, and more. You set the target, and the platform makes sure your ads follow your audience wherever they go online.
3. Real-time analytics and reporting. You don’t have to wait for a publisher to tell you (often unreliably) how your ads performed. Instead, programmatic platforms are set up specifically to give you analytics in real-time. Plus, the insights are more comprehensive and in one place, allowing for easier analysis and on-going improvement.
4. More budget-friendly. Programmatic ads are more cost-effective on average, but they also make sure your budget is spent more effectively. That’s because you get a 100% match on your target audience and the insights mentioned above help you continually analyze and improve your campaigns.
5. Increased credibility. Do you really trust that random website to spend your ad dollars effectively? Truthfully, it’s tough to be sure. Thanks to their drastically increased scope, programmatic platforms are, on average, more trustworthy and less likely to engage in fraudulent behavior.

Bring it all together, and you begin to realize just how effective programmatic advertising can be. It allows you to streamline your campaigns, making sure you spend your budget well in trying to raise awareness and meet your marketing goals.

The Inner Workings of Programmatic Advertising Platforms

Let’s get a little more specific. It’s tough to avoid jargon in this section, but we’ll try.

First, it’s important to distinguish between an ad network and an ad exchange:

• An ad network, as mentioned above, is a platform that connects to a number of predefined websites, allowing advertisers to buy space from those websites.
• An ad exchange is a platform that can tap into multiple ad networks. This is where programmatic advertising, which doesn’t require you to know all the nuances of those individual ad networks, comes in handy.

You might have heard of some of the most popular ad exchanges. AppNexus is among the most popular, but Microsoft Ad Exchange and Google Marketing Network are other popular programmatic ad platforms.

But this all happens in the background. The advertiser doesn’t sign directly into an ad exchange, but uses what’s called a demand-side platform. It’s the front-facing piece that organizations can use to specify their audience and budget. The ad exchange then kicks into gear in the background.

You’ve probably heard about some demand-side platforms. TradeDesk, Simpli.fi, DoubleClick, and Google Ads are among some of the most popular. All four are programmatic advertising, functioning precisely as described above. They’re just the front door to the concept.

Content publishers, meanwhile, connect into the ad exchange to sell their ad space through what’s called a supply-side platform. That’s not relevant to this guide, so we won’t cover it much further here. Still, it’s good to know the term in case you come across it.

So, that’s how the infrastructure works:

• You enter your targeting and budget parameters into a demand-side programmatic advertising platform like Simpli.fi or TradeDesk.
• The demand-side platform kicks the ad exchanges into high gear and places your ads through automated processes.
• You get your results and analytics and can make adjustments through the demand-side platform.
• Publishers can become a part of the (ad exchange) game through a supply-side platform on their end.

How to Get Started With Programmatic Advertising

If your head isn’t smoking yet, we’ve either done our job well or you have some serious marketing chops. Either way, it’s time to get practical. How do you leverage these benefits, and these platforms, into a digital ad strategy that actually works for you? That process tends to revolve around these steps:

1. Define Your Target Audience

If the entire digital strategy is based on effectively reaching your audience, you have to get this step right. Go through extensive brainstorming and research to define your target audience(s), going beyond simple demographics. The more you know about them, the more effective your programmatic strategy will become. Key questions to answer include:

• What keywords are they searching for or reading on websites?
• Where are they physically?
• Are they visiting your competitors?
• Do you have addresses for your prospects?
•  What categories of sites do they frequent?

By identifying the right triggers that indicate that a user is your likely customer, you can create a customized targeting strategy.

2. Define Your Budget and Marketing Goals

How much money do you have to spend on digital ads? And what are you trying to achieve by spending that money? The answers to both of these questions should be closely related. Your budget allows you to set clear parameters for the time you set up your campaign. Meanwhile, setting smart marketing goals helps you make sure that every dime you spend is well invested and has a good chance of positive ROI.

3. Find the Right Demand-Side Platform(s) for Your Audience, Budget, and Goals

Using your audience, budget, and marketing goals, it’s time to find a platform that works specifically for your needs. Warning: this is a complex step. You’ll need to bring at least a core knowledge of programmatic ads and the time to research each of the most popular demand-side platforms. LinkedIn or Facebook? Facebook or Google Audience Network? The choices are immense and not necessarily easy.

4. Place Your Ads and Monitor Against KPIs

With the right platforms chosen, place your ads. You’ll need to get the creative right, of course. But once you do, you can monitor their success based explicitly on the marketing goals and KPIs you’ve set up above. That helps you understand which metrics to monitor to achieve marketing success.

5. Work With a Partner to Get it Done Right

Let’s face it — none of the above is easy. The good news is that you’re not alone. In fact, the right partner can help you through each of these steps, from defining your target audience all the way to finding the right platforms and placing your ads.

As it turns out, we have extensive experience in all of these areas. Contact us to be your partner in creating effective, ROI-positive programmatic advertising campaigns that can help drive your marketing and organization forward.