Marketing | 11 MIN READ

What is programmatic advertising?

Programmatic advertising is now the dominant form of buying and optimising digital advertising. Knowing the basics of programmatic and how it works is essential for marketers.

Why? It’s a major component of modern advertising. In 2019, it’s predicted that 65% of all money spent on advertising in digital media will be traded programmatically and that advertisers will spend an astonishing US$84bn on the format worldwide.

In this article, we explain and define what you need to know regarding programmatic advertising through the following chapters:

  1. The definition of programmatic advertising
  2. How does programmatic advertising work?
  3. The top 5 reasons you should use programmatic advertising
  4. What are the different formats of programmatic advertising?
  5. How do you buy programmatically?
  6. How do you create programmatic display advertising ?
  7. What is the future of programmatic?
  8. Programmatic advertising: the glossary

Firstly, what exactly is programmatic advertising?

The definition of programmatic advertising

Programmatic advertising has been referred to by many as the ‘blackbox’ of online marketing, filled with jargon and almost exponential in its growth. It can be a difficult subject to wrap your head around.

So what is programmatic advertising? In its simplest form, programmatic advertising is the automated transaction of buying and selling advertising online. It’s the process of using different platforms to sell inventory on publishing sites and on the advertising side, buying inventory and place ads on a publishers site.

This used to be quite a manual process, that involved requests for proposals (RFPs), human negotiations, and manual insertion orders. Now, the whole transaction from beginning to end occurs in milliseconds and involves many different platforms.

How does programmatic advertising work?

As a digital marketer, you most likely will have heard of programmatic advertising. You may even have read articles on how programmatic advertising will improve ad performance for your brand.

Yet, we don’t blame you if you don’t quite understand how exactly the programmatic process works.

Therefore, here is a step-by-step guide to the most common format of programmatic, from beginning to end, to help you understand the process:

Step 1:

When a viewer lands on a website that uses programmatic advertising, it starts the automated bidding to serve an ad to this particular viewer.

Step 2:

The publisher lists the ad space for this viewer on their supply-side platform (SSP). The SSP acts as the seller for the publisher, letting advertisers know the characteristics of the site, user, and ad space that allows DSPs to make their bid. Essentially, they advertise the product (the ad space) for sale.

Step 3:

Once the SSP receives the information on the ad space, they analyse the user’s cookies to determine factors such as their geography, demographics, interests etc.

Step 4:

Next, the corresponding demand-side platform (DSP) reviews the information on the user provided by the SSP. DSPs act for advertisers to choose ad space that aligns with the advertisers budget and targeting parameters. It assigns the ad placement a value based on the website and user’s characteristics.

Step 5:

On behalf of the advertiser, the DSP makes a bid on the ad placement. All this happens in real-time which why programmatic advertising can often be referred to as real-time bidding (RTB).

Step 6:

Once the SSP receives the bids from various DSPs, the SSP will then pick the winner. There are different bid strategies out there for different SSPs. Waterfall bidding, Client-side, and Header bidding with header bidding widely considered the most efficient and fair. Read more here.

Step 7:

Once the winning bid is picked, the SSP displays that ad to the user on the publisher’s site. This entire process happens in milliseconds all while the page is loading for the user.

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The top 5 reasons you should use programmatic advertising

Still not convinced? Here are 5 good reasons why you should make your advertising programmatic.

1. Spend your advertising budget wisely

Programmatic advertising allows you to target users on a granular level. With access to incredible amounts of data at your fingertips (GDPR compliant of course), you can target viewers with the right message, in the right place, at the right time. This means you’re using your ad budget smarter, eliminating waste on viewers who are unlikely to be interested in your product.

2. Real-time measurement and optimisation

With programmatic advertising, the performance of each ad is measured in real-time. Now, advertisers need not wait for an excel sheet from their media agency weeks after the ads go live – too late to optimise a live campaign.

Programmatic allows advertisers to adjust and optimise ads there and then to test and improve results as well as have clear oversight on their ad spend.

3. A transparent way of buying media

In the days before programmatic advertising, brands would be forced to rely on agencies and third parties to handle their ad spend. Now, brands can have full transparency over fees. Plus, exactly where and how much of their money is being spent on what.

4. It’s not all about the data

Of course, targeting through programmatic advertising doesn’t have to involve knowing everything about a user. That’s where contextual targeting provides a seamless – and less intrusive – way of reaching your desired audience. This way, you can target users based on keywords and contextual relevance of a page.

5. Multi-channel and format reach

With the increasing number of digital touchpoints of your average user, your advertising should be keeping up. This is where programmatic advertising is leading the charge. It allows you to reach audiences across devices: on mobile, desktop, tablet, in-app, via TV and even out-of-home. The possibilities are endless!

What are the different formats of programmatic advertising?

Programmatic advertising now covers a range of different advertising formats. A decade ago it was mainly just display advertising but now there a range of different and growing options.

Display

The oldest format of programmatic advertising is display. However, rather than staying static, ads have gone dynamic! Constant technological developments, mobile optimisation and better use of data have seen new opportunities emerge. With the rise of new technology, many marketers have embraced programmatic creative strategies that target viewers, with the right offer, at the right time.

Read more about dynamic strategies for display advertising here.

Video

Buying and serving digital video programmatically – across channels – is now a key strategy for marketers. Indeed, programmatic Video ad spend is predicted to be $13.4 billion in 2019 and account 76.5% of how all digital video spent.

There are two distinct types of  programmatic video: instream and outstream (with in-banner video sometimes classified as a type of outstream ad). You can read more about digital video here.

Native and social

These are programmatic ads that blend into the content either on a website, social network or other application. For example, it could for sponsored content, so setting up contextual targeting as well as tailoring your ads is very important.

What’s more, DSPs now offer the chance for advertisers to buy programmatically across the major social networks – with social video particularly popular.

Voice

The development of Amazon’s Alexa and the rise of streaming apps such as Spotify, have seen the emergence (or reemergence) of another format: voice. This format offers a rich source of both contextual and user focused targeting. It is quickly maturing too, with Google offering advertisers the chance to buy programmatic audio ads through it’s DSP.

Digital out-of-home (DOOH)

Programmatic is entering the world of out-of-home advertising, with the adoption of digital signage. The cumbersome production process of advertiser, agency, media seller, and printer is set for extinction. In its place, integration across existing programmatic platforms is offering the possibility of real-time DOOH ad optimisation and reactivity.

Television

Currently, programmatic television ad spend is not big (in the US it accounts for just 2.5% of total ad spend). Yet, many large industry players, such as Google, SKY and Netflix, are building the infrastructure needed to support the move to programmatic TV. However, out of the programmatic formats mentioned, the format is in need of more development.

How do you buy programmatically?

Before you begin buying programmatic buying, it’s important to ask the right questions and get a clear strategy in place for what you actually want to achieve. Before you begin buying programmatic buying, it’s important to ask the right questions and get a clear strategy in place for what you actually want to achieve.

The three major questions you should ask yourself are:

  1. Can it help us reach our target audience?
  2. Should we use programmatic for brand awareness or for driving conversions?
  3. How will programmatic advertising improve my bottom line?

Once you know the answers to these questions, it becomes easier to determine exactly what you should prioritise when it comes to budget and ad placements for your programmatic advertising strategy.

Of course, after you have determined the right strategy, you must pick the right DSP for your brand. There is a multitude of providers out there so make sure you’re asking the right questions from your DSP too.

The key factors you need to consider when choosing a DSP

1. First, consider the audience you are hoping to reach. Which DSP offers the most reach, segmentation, and channels aligned with your target market? Remember, SSPs are better than others in some countries, so select the DSP that aligns most with your markets. And make sure to pay attention to what publishers your DSP associates within each target market.

2. How does your DSP charge you? Is it on a cost-per-thousand (CPM) or cost-per-click (CPC) basis? Typically, DSPs that charge on CPM are more transparent with their cost margins.

3. What support facilities does your DSP provide? You might prefer a DSP with an agency style set-up, where you can get the support you need in launching and optimising your campaigns.

4. Check whether your DSP can execute an effective cross channel strategy should you desire it.

5. Consider how a DSPs can integrate with your chosen data management platform (DMP) or creative management platform (CMP). Smaller DSPs are more likely to be flexible on integration.

6. Ultimately, as Bannerflow Product Owner, Jared Lekkas, states: “you get what you pay for”. Do your research on what you need in terms of targeting, optimisation, and control. Be ready to pay for it if you want quality! (You can expect hidden fees if the price is too low)

With your strategy and the right technology in place, your programmatic advertising campaigns work in a similar manner and best practice to any other digital marketing campaign. Make sure to test different messaging and creatives, target different personas, and experiment with new placements and bid strategies.

How do you create programmatic display advertising?

Essentially, there are two different ways for marketers to create programmatic display advertising. It can be quickly summarised as with a creative management platform (CMP), or without one.

Without a CMP

It is entirely possible to manually design and then code display ads yourself. There are plenty of tutorials and templates online showing you how to do this. However, the process is extremely slow. It also means you need staff who possess knowledge of HTML5 and CSS, as well as, the creative skills of a designer!

What’s more, this process is repetitive, cannot easily be scaled, involves too many manual tasks, too many stakeholders, and is far too time consuming. Plainly, it is simply unworkable for modern programmatic advertising.

With a CMP

Alternatively, you can use a creative management platform such as Bannerflow. CMPs take care of any coding, and enable rapid mass production of dynamic display advertising.

CMPs also save time, produce better ads, and are favoured by marketing teams that do large, data driven display campaigns that are creatively ambitious.

The benefits of using a CMP

The reality is that a creative management platform decreases the time it takes to build, scale and publish a programmatic display campaign. It enables easy A/B testing of campaigns as well as the real-time optimisation and control of published ads.

Not to mention CMPs place the focus of display ad production firmly on design. Plus, a CMP, such as Bannerflow is integrated with all the major programmatic networks, meaning publishing to your favoured network is simple.

What is the future of programmatic?

Programmatic advertising is nothing new, yet it’s in constant change. New technologies, regulations, and best practice make this an exciting element of digital marketing. Yet, what should you look out for in the future of programmatic?

The battle continues over privacy: personal data and how advertisers can use it

In 2018, the European marketing industry was transformed with GDPR, it placed restrictions on the use of third-party data and how advertisers could use personal data for targeting use.

ePrivacy is set to shape 2019 and beyond. Indeed, the proposed extension to GDPR regulation will likely extend the reach and restrictions from governments on the use of cookies in particular. Read more about it here.

Cookie-less tracking

Thanks to increasing difficulties with tracking imposed by different browsers, cookies are becoming less and less effective for targeting.

Expect to see the rise of deterministic and probabilistic tracking in 2019 and beyond. Read more about the two different methods here.

The influence of AI on media buying and programmatic creative

Artificial intelligence has a number of uses in programmatic advertising. We’re already seeing a significant impact in personalisation and optimisation of creative with the rise of dynamic creative optimisation (DCO).

Plus, IBM Watson has proved that it can drastically reduce CPC using AI technology.

In-house programmatic advertising

96% of those surveyed from the Bannerflow/Digiday State of In-housing report stated that advertising technology was the driving force behind their move in-house.

In an age where transparency in digital marketing is a key consideration, brands taking control over their programmatic ad production and buying comes as no surprise.

Programmatic advertising is constantly evolving and staying on top of the latest technologies and strategies is an important part of an effective programmatic strategy. Click here to read the full list of trends to watch out for 2019.

Programmatic advertising: the glossary

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. Access to a variety of networks, exchanges, and platforms via one interface.

Demand-side platform (DSP): Interface where you can buy advertising inventory. They have access to multiple SSPs or ad exchanges. Uses algorithms to analyse bid requests and respond with bids and creatives in real-time auctions.

Ad tag: advertisers use ad tags to direct the browser to a particular ad. Determines the size, type and URL of each individual ad. What’s more, ad tags also collect campaign data and verify certain metrics, such as impressions and clicks.

Ad server: Aggregates all the campaign information (reporting, audience) across publishers, ad networks, search, social etc. Moreover, they verify whether the impressions were served properly and help perform creative optimisation.

Affiliate network: a program that connects advertisers and affiliate marketers. Affiliates are paid when an ad successfully converts a viewer on their site.

Ad network: Acts as a broker between a group of publishers and advertisers. It aggregates unsold inventory from publishers and sells impressions at a cheaper price (usually lower quality).

Conclusion

Knowing the basics of programmatic advertising is essential for digital marketers. While it may appear complex at first, it is a simple and refined process that has improved how digital marketing is performed.

Furthermore, it is the first step towards using more advanced forms of advertising. For example, in display advertising dynamic creative optimisation (DCO) takes programmatic to the next level.

Finally, if you’re interested in finding out how a creative management platform (CMP), such as Bannerflow, can aid your programmatic advertising then get in touch, or apply for a demo.

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