Programmatic Advertising 101 [eBook] Essential Guide to Programmatic Buying
In today’s tech-savvy marketplace where millions of users access multiple digital platforms each day, it is a daunting task for digital marketers to choose the right digital channels for advertising.
This is where programmatic advertising comes into play. Replacing the traditional methodology of digital media and ad space buying, which are cost-ineffective and time-consuming techniques, programmatic marketing or advertising is the automated process of digital ad space buying and selling.
In these ever-changing dynamics of the digital world, the concept of programmatic advertising has already witnessed rapid growth in recent years. With more and more global shift towards mobile and tablets, digital marketers must realize the industry has already evolved and it takes a lot more to stay ahead of the game. Programmatic advertising and particularly mobile programmatic advertising is believed to be the future of digital advertisement marketing globally – with Google already having targeted around 60% of all digital advertising budgets spent on Programmatic in 2019. According to Forrester, eMarketer and a couple of other major research hubs, programmatic marketing will account for the majority of all digital advertising spending over the next few years.
However, everything sounds good and on-track so far – except for the fact that digital marketers’ knowledge and the pace to which they adapt to these changes could be the deal-breaker. Reluctance to accept this global transformation and dependability might cost businesses dearly. Yes, programmatic marketing could be a bit too complex for someone new to this – however, once you get a thorough understanding of the whole concept and all the details that are associated with this topic, it gets really easy to decipher programmatic advertising and even implement it realistically.
In addition to the basics of programmatic advertising and media buying, this guide will walk you through the various elements and aspects that are related to this phenomenon. The current market conditions, future expectations, technological shifts, KPIs, figures and stats – this guide will give you everything you need to fully understand the concept of programmatic advertising.
This guide will walk you through the concept of programmatic digital advertising – the way it has gained momentum the past few years and how businesses can make the most out of this phenomenon through well-researched tactics and action plans.
In this report/
- Programmatic Advertising
- Programmatic Advertising – The Definition
- How does it Work? – The Process
- Setting the Right Goals and KPIs
- Benefits of Programmatic Advertising
- Finding the Right Programmatic Model
- Successful Programmatic Ad Campaigns
- Top Programmatic Platforms
- Future of Programmatic Advertising
- Glossary of Terms
Programmatic Advertising – The Definition:
Programmatic advertising is the automated process of buying and selling ads online.
Back in the day, the majority of digital advertising used to be through manual insertions, Request for Proposals (RFPs), tenders, and various other human intervention. Today, software and advanced algorithms have taken over these methodologies in order to optimize the way digital advertising can be done globally to benefit both the advertisers and the publishers.
With that in mind, it is imperative to understand the fact that human intervention has not been completely eliminated or replaced. In essence, programmatic advertising means humans can invest their time in the optimization and efficiency of the advertising model instead of manually sending in proposals and requests.
“Programmatic is buying digital advertising space automatically, with computers using data to decide which ads to buy and how much to pay for them.” – Kenneth Kulbok, LinkedIn Programmatic
How Does It Work? – The Process:
In order to understand the way programmatic works, let us first take a look at the following three major components of programmatic advertising:
- Demand-side Platforms (DSPs) – A DSP is a virtual platform that is used by an advertiser as soon as a new user visits a publisher’s web page. Through this platform, the advertiser can make bids and buy ads on the publisher’s website on its behalf. Simply put, DSPs facilitate ideal ad space buying using the information they receive from the publisher’s SSP.
- Data Management Platforms (DMPs) – the main role of a DMP is to collect, manage and organize data received from first, second, and third-party online data sources and provide that data to the DSPs and SSPs. This is why DMPs are the core connecting mechanisms of digital advertising and hence why they are also known as the digital ad ‘pipes.’
- Supply-side Platforms (SSPs) – Similar to a DSP, SSP is a platform available to the publisher through which they can sell display and mobile ads on their respective digital channels.
Now, take a look at this illustration below. The process of programmatic revolves around a real-time system where DSPs, DMPs, and SSPs work in individual capacities, eventually connecting the advertisers and publishers and allowing them to make the best logical transaction.
What happens is:
- The user enters a query or visits a specific web page (publisher) that uses programmatic advertising.
- A request is sent to fetch an advertisement based on certain parameters.
- The publisher places the user on their SSP so that the DSPs can be informed about the user’s characteristics with the help of the website cookies.
- Using the data received from the DMP and Ad Exchange, the DSP places a bid on behalf of the advertiser using its pre-defined parameters.
- The bidding and auction process takes place.
- The SSP receives all bids placed by the DSPs.
- Finally, the winning bidder is selected, and the ad is shown to the user accordingly.
In layman’s terms, brands or digital agencies buy ads and impressions using DSPs – on the other hand; publishers sell the digital ad space to these agencies using SSPs. These two mechanisms work in cohesion in real-time to make a transaction.
The most astonishing fact about programmatic ad buying is the immense speed of these online auctions and transactions – it takes about a tenth of a second (100 milliseconds).
Well, it takes 300 milliseconds for you to blink, so now you know how quickly all this is taking place while the web page is being loaded on your end.
Setting the Right Goals and KPIs:
Digital marketers view this as one of the core elements that define the overall success or failure of programmatic advertising. If your goals are not aligned with the KPIs, the whole mechanism can fail. For example, using your digital methodologies, you might find your target or potential customer. However, if the cost is more than the value that the customer can add to your business, you have failed.
To avoid this, digital marketers set realistic and logical KPIs based on the nature of the programmatic campaign and/or business model. For example:
- Brand Awareness – Impressions
If your primary goal is brand awareness, your main campaign KPI would be impressions – how many people you were able to reach through your digital campaign. In other words, impressions mean the number of times your ad was shown to your potential or non-potential customer.
- Interested Buyers – Clicks
If you want to know the number of people who are actually interested in your product or service, you might want to track the overall ad clicks. The number of clicks is directly proportional to your traffic, so the higher the clicks, the more traffic you will get to your website or app.
- Potential Leads – Conversions
If you want to know how many interested buyers (click-throughs) filled out that online form or made a purchase, or any other action they took while on your website or app, your KPI would be conversion. The actions will be pre-defined by you, and your conversion numbers will give you the data you need for your strategic and tactical decision-making.
Benefits of Programmatic Advertising
In the modern digital world, if you are not using the right methodologies that give you the best value for your digital advertising efforts, you will not be able to compete for long.
Let’s have a look at the benefits of programmatic advertising:
- Helps advertisers and publishers to make decisions based on real-time and quantifiable data instead of predictions or assumptions
- Cost-effective as it achieves efficiency through machine learning (ML) for campaign optimization
- Allows you to target and re-target users across numerous digital platforms, devices, etc.
- Gives you immense campaign management and visibility across multi-devices and platforms.
- Allows advertisers to get ad space without price pre-negotiation.
- Increases ROI as the system’s efficiency leads to the best possible ad placement.
- Reliable and dependable algorithms will assist you in better current and future digital marketing and sales campaigns.
- Identifies areas of improvement
Finding the Right Programmatic Model
Another important aspect of programmatic buying is the programmatic model that is used. This is entirely based on the expectations and nature of a business entity. Programmatic models are based on the following criteria:
- Pricing (auction or fixed)
- Access (open or closed)
- Guaranteed Impressions
Based on these criteria, there are four programmatic models that digital marketers have at their disposal:
This is a real-time bidding model accessible to any advertiser or publisher. It allows advertisers to access the publisher’s media inventory and prices are set in real-time. The highest bidder wins it. Advertisers can reach a desired number of audiences through this model.
This is a similar model to the Open Auction model, except that publishers restrict the access to only selected advertisers while others can’t view it.
This is a model that is based on a fixed-price mechanism. Parameters such as price, audience segments, formats, etc., are mutually agreed upon by the advertiser and the publisher. Once the buyer accepts the terms, impressions can be bought without any guaranteed impressions.
In this model, price and number of impressions are pre-decided and shared between the publisher and the advertiser. The main goal of this model is to automate direct site sales, make media buying more efficient and optimize the overall advertising process.
Successful Programmatic Ad Campaigns
We are programmed in a way that regardless of all the information that has been fed to us through various sources, it’s hard for us to believe it to be true unless we see a few successful cases. That’s all right because digital marketers are humans, too! Let’s have a look at some of the best programmatic ad campaigns:
A non-profit organization, Amanda Foundation, is widely known for its programmatic ads campaign that was primarily aimed at finding the right people to adopt the cats and dogs they had at their facility. Using an extensive database of people within their target audience radius, they mapped potential adopters with their animals.
The Intercontinental Hotel Group (IHG), is another well-known success story when it comes to programmatic ads and how they can be made fruitful. This group conducted an in-depth analysis of hotel booking habits by its potential customers. Their study revealed that people use third-party booking sites that add 15-30% to their booking costs. This convinced them to use programmatic advertising – which they did. Using preferences such as travel date, hotel location, preferred pricing, etc., through the browsing history of the user, they created customized ads for their target audience.
Another programmatic ad success case is The Economist, a digital and print publication. Based on its subscribers’ use of the website or app and their preferences, they created separate look-alike audiences for different sections of The Economist such as Finance, Politics, Economics, Good Deeds, Careers, Technology, and Social justice. A customized ad was shown to the subscriber based on their relevant subject of interest.
According to the data shared by The Economist, this campaign generated 650,000 new prospects, and the return on investment (ROI) hit 10:1. In addition to this, the awareness for “The Economist” also increased by almost 65%.
Programmatic Ad and Media Buying – In Numbers
According to a report published by Magna Global a few years back, it was observed that digital media buying was being replaced by programmatic media buying. As per their findings, growth was expected to remain strong over the next four years, with an average annual growth rate of 31%, forecasted to reach $36.8bn by 2019.
Globally, programmatic display advertising and video ads were expected to have a 50% increase by 2019. The US represented 54% of the global programmatic market in 2015. Programmatic transactions already represented 43% of total display and video dollars in the US, with expected growth to 62% by 2019.
As per findings of eMarketer, 2019 was predicted to have US advertisers spend nearly $60 billion on programmatic display. By 2021, they estimate almost 88%, or $81 billion, of all US digital display ad dollars, will be programmatic.
In addition, 84.9% of the US digital display ad market is programmatic ($59.45 billion) in 2019. Out of this number, two-thirds are mobile automated ads while one of every two ad dollars belong to video.
Top Programmatic Platforms
A programmatic advertising platform allows marketers and advertisers to automate their digital advertising campaigns. This includes, but not limited to, ad media buying, ad placement, tracking, and overall optimization.
Publishers can also manage and optimize their ad inventory through these programmatic advertising platforms.
Let’s have a look at the current top programmatic advertising platforms:
This platform offers great value to the brand, agency, and publisher. This platform has a Demand-Side Platform (DSP), Data Management Platform (DMP), Supply-Side Platform (SSP), and an ad exchange. In addition to this, this platform also offers a white-label option to its clients.
This specific marketing platform allows ad inventory buying on more than one RTB ad exchange. With its proprietary DSP, DMP, and SSP, Simpli.fi’s reporting suite provides more than 60 templates that come in quite handy for ad-hoc reports creation.
This is another renowned programmatic platform that facilitates advertisers with end-to-end campaign management. MediaMath’s DMP assists digital marketers by integrating data sets from other first party and third party sources. Using the MediaMath Audience option, advertisers have access to their most valuable audience.
Future of Programmatic Advertising
Zenith has already predicted that advertisers will spend a whopping $98 billion on programmatic advertising in 2020, accounting for 68% of total annual digital media advertising spend. It had already contributed US$25.48 billion to the digital advertising market in 2016; this was up from $17.5 billion the previous year. So, if we analyze the trends of programmatic advertising over the past few years and the way more and more businesses, agencies, and marketers are adapting to this major digital transformation – yes, programmatic advertising is already the answer to pretty much everything that takes place in the digital marketplace.
In addition, through programmatic TV and other relevant digital channels, marketers can disseminate information about a specific brand, product, or service to their target market with optimized KPIs yielding even better results. Furthermore, advancements in the fields of machine learning (ML) and artificial intelligence (AI) have paved the way for a favorable environment for advertisers and publishers to achieve success via programmatic advertising.
Let’s have a look at what some of these well-known people have to say about programmatic advertising:
“Private setups give buyers and sellers greater control over their automated buy.” – emarketer principal analyst Lauren Fisher
“Programmatic advertising is designed to do away with old-fashioned, hit-or-miss campaign design. That system was notorious for costing marketers way too much money.” He goes one further to say, “The system will not only launch your campaign, but it will also monitor your ad spend to look for areas of improvement.” – John Lincoln, CEO and founder of SEO company Ignite Visibility
“The effectiveness of programmatic advertising cannot be disputed. Programmatic allows us to understand the media journey better than ever before and have one-to-one conversations with individuals.” – Tim Webster, co-founder of The Exchange Lab
Is Facebook Programmatic?
- Yes, Facebook Advertising is categorized as Programmatic advertising.
Is Facebook a DSP?
- Yes, Facebook’s Ad Manager is categorized as a DSP that only sells Facebook inventory.
Is Google AdWords Programmatic Advertising?
- Google Adwords (now known as Google Ads) is not programmatic advertising mainly because it only uses Google platform.
What is CPM?
- In digital marketing and advertising, CPM stands for ‘Cost Per Mille’ (cost per thousand impressions). In technical terms, this is defined as the price a digital marketer would pay in return for 1000 impressions for his campaign. CPM assists digital marketers in making large calculations and basing their strategies and action plans accordingly.
What is Unsold Ad Inventory?
- All those ad impressions that have not been sold to the advertisers are categorized as ‘unsold ad inventory.’ Various strategies can be used in order to gain the maximum output from these unsold ads.
Glossary of Terms
Publisher: a corporation that distributes digital publications. Examples include Facebook, Schibsted, New York Times, Sanoma.
Supply-side platform (SSP): enables publishers to sell their inventory.
Demand-side platform (DSP): Interface where you can buy advertising inventory.
Ad tag: advertisers use ad tags to direct the browser to a particular ad.
Ad server: Aggregates all the campaign information (reporting, audience) across publishers, ad networks, search, social, etc.
Affiliate network: a program that connects advertisers and affiliate marketers.
Ad network: Acts as a broker between a group of publishers and advertisers.