Programmatic Advertising (sometimes also referred to as Programmatic Marketing or Programmatic Buying) is an automated process of buying and selling of a digital ad inventory across a wide range of websites. Being exclusive only to display and search ads in the beginning, programmatic now includes many more mediums such as video, mobile, in-app and social, across different platforms and channels. Some programmatic buying systems nowadays have access even to traditional TV inventories, making its way to users’ households.

The term merely means “automated”. Programmatic must not be confused with real-time bidding since RTB is just one of the possible buying methods. In fact, the purchase may happen as well through programmatic direct – in this case, the inventory is guaranteed or reserved on the fixed terms between the publisher and advertiser. In a nutshell, a programmatic media buying is any ad purchase that involves machine and software processing.

Programmatic always implies the use of multi-sourced data involving real-time systems, formulas, and algorithms to automate the delivery of data-driven, personally-tailored and relevant experiences to consumers as they interact with the brand across multiple touchpoints. Such experiences include targeted offerings, messages and content across paid, owned and earned channels.

Programmatic marketing as opposed to the traditional media buying that involves RFT (request for proposal), human negotiation, manual insertion of orders, invoicing and payment. With programmatic, the ad buying, placement, and the optimization are executed by machine learning algorithms, making the process time-efficient and cheaper, eliminating inconsistency and human errors.

Although it may seem that programmatic exclude humans from the process of digital media buying, in reality it is not really so. In fact, programmatic marketing still heavily relies on people, who customize campaigns and adjust settings to get the most out of it.

What are the Major Benefits of Programmatic Advertising?

Focus on audience buying, rather than site buying:

Traditional online marketing focuses on displaying advertisements on specific websites to random users, whereas programmatic advertising ensures the serving of ads to relevant users, regardless of the website they are visiting. Therefore, programmatic ad buying allows finding potential customers in the environments outside of the typical websites – it is all about “audience buying”.

Mutual benefit for advertisers and publishers:

In comparison to traditional media buying, programmatic is a more efficient solution due to the automated nature of the technology. By avoiding manual operation tasks, advertisers can spend their marketing budgets more expeditiously, displaying ads to the audiences, which are most likely to be interested in those ads. Advertisers minimize the amount of wasted media, enhancing the overall efficiency of the campaign by exposing an ad to the right person at the right time and context.

Meanwhile, publishers also benefit from maximizing the value of their inventory by selling it to the highest bidder in RTB auctions. Publishers are in charge of what kind of advertising will appear on the web page in terms of content, format, product design, and even colors. By the way, here is the guide to website and blog traffic monetization for publishers.

Transparent pricing and cost efficiency:

With programmatic buying, advertisers are in charge of how much they are willing to pay for each impression. Since every impression is unique, prices may vary depending on the user, his/her relevance to the targeting settings. Therefore buying one impression at a time is a cost-efficient solution.

Precise metrics of ad campaigns:

Due to the extremely targeted nature of automated ads, advertisers get a better ability to measure the efficiency of advertising campaigns by evaluating the lead conversions and the quality of click-through rate (CTR) (learn more about SmartyAds RTB targeting solutions). Programmatic buying allows tracking of what is bought, at what price and to whom. Programmatic and machine learning allows predicting the performance of future campaigns.

Scalability of campaigns:

Due to programmatic, advertisers get access to a large number of impressions available on publishers’ websites all over the world. Programmatic advertising allows reaching a wider audience across multiple websites, platforms, and channels in a timely and efficient manner. 

How Does Programmatic Advertising Work?

Major components of programmatic buying are DSPs, SSPs, Ad Exchanges, Ad Servers, and DMPs. Marketers and advertisers use DSPs (demand-side platforms) to set the purchasing parameters for ad campaigns. DSPs facilitate the process of buying ad inventory on the open market and provide the ability to reach out to target audiences due to the integration with DMPs (also, you can read about DSP features is and how the DSP works). Data management platforms collect and evaluate a massive amount of cookie info to provide marketers with a clearer picture of their audience and help to make decisions more informed when targeting.

From the publisher’s perspective, SSPs (supply-side platforms) collects data about the web page viewers such as demographics, location, interests, browsing behavior, etc. and submit this data when listing a publisher’s ad inventory on an Ad Exchange. SSPs will be ultimately in charge of selecting the winning bid during the RTB auction and serve the winning banner ad on the publisher’s website.

Ad Exchanges represent a large pool of available inventory that advertisers can buy programmatically from a broad list of publishers. Ad Exchanges run auctions based on one impression at a time via RTB. Ad Servers store ad content that is used in online marketing and delivers that content onto various digital platforms such as desktop websites, mobile, tablet websites, and apps when requested through a URL load.

Ultimately, the programmatic technology unites buyers and sellers of digital ad space via an automated process based on the campaign parameters of the advertiser and publisher audiences.

  • User visits website or app. The browser collects user data (cookies: IP, geo, browser type, gadget OS, behavioral data).

  • Information about the available ad impression is sent to SSP. Via SSP the publisher (website or app owner) sets the bid floor (minimum amount of money a publisher is willing to accept for 1000 impressions on their inventory).

  • SSP sends a bid request to DSP with info about the user collected by the website and info about the bid floor.

  • Agencies pre-set campaign parameters (on behalf of brands) on DSP: add creatives, configure frequency capping, set targeting, daily budget spend, and preferable CPM (price for 1,000 advertisement impressions), etc. 

  • Auction starts. DSP evaluates impression value: (targeting, budget, +other campaign parameters), makes a bid response on the bid request/impression and sends it to an ad exchange. 

  • Auction continues: ad exchange processes the bids from DSPs. The highest bid wins. 

  • Winner’s ad is sent to the publisher and displayed to the targeted user.

Check out SmartyAds programmatic advertising solutions for advertisers & ad agencies and monetization solutions for publishers!

Written by
January 2020