Like all aspects of life, the advertising marketplace has been drastically transformed by automation, predictive learning, and artificial intelligence. And one not-so-recent development that is experiencing widespread use in the digital marketing landscape is programmatic advertising. In the same way as other forms of online advertising, it lets you target users with digital ads. However, programmatic advertising offers a unique system that makes it a superior option.
What is programmatic advertising?
As the term implies, programmatic advertising involves using software programs and algorithms to handle certain aspects of online advertising automatically. There are numerous benefits associated with programmatic advertising that cause many businesses to switch to it. It uses algorithms and data insights to target ads at the right time and at the right price to the intended audience. As a result of these data insights, marketers can drive various impressions, resulting in a greater return on investment.
In general, programmatic advertising refers to the automatic purchase, sale, and planning of ad inventory. In digital media, ad inventory refers to the online space available for advertisements. Before programmatic advertising, advertising was done manually.
During manual ordering, advertisers would contact a sales team for:
- Requesting for proposals: A document in which proposals are submitted for online ads
- Bidding: A price offered at an auction
- Quotation: An estimate for displaying online ads
- Human negotiation: The process of negotiating deals for the sale and purchase of online advertising space
However, programmatic advertising platforms use software to purchase digital advertising. In programmatic advertising, the software is used to prepare insertion orders (IOs) and ad tags.
IOs, or insertion orders, are written authorizations to publish/display ads. In general, it consists of
- Insertion date information
- The number of insertions in a given period
- Size and format of the ad
- A placement, such as over the content, header, side, or bottom of the ad
It is essentially a purchase order. A media representative or an ad agency issues it.
Before programmatic, this task was time-consuming. However, programmatic advertising can handle routine tasks efficiently, including:
- Providing publishers with insertion orders
- Maintaining a record of ad tags and tracking their usage
Programmatic advertising platforms
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A programmatic advertising platform facilitates advertisers as well as publishers in a significant way. In particular, with these platforms, publishers can easily find advertisers who fit their needs and the right services. The following are some programmatic advertising platforms that operate together to benefit both advertisers and publishers:
- Demand-side platforms
- Supply-side platforms
- Data management platform
Through ad exchanges, these platforms allow advertisers to bid on various publishers. In the process of advertising, these platforms maintain third-party data and user profiles. With the data, you can easily target an audience based on their demographics, including their online behavior, age, and location. Advertisers benefit from precise ad placement on demand-side platforms, whereas publishers benefit by winning high-bidding campaigns.
These platforms are usually connected to many ad exchanges to increase publishers’ exposure to potential buyers. So, publishers list their ad space on these platforms.
Additionally, publishers can submit web pages to the supply side platforms that track visitor behavior through pixel codes. The publishers set their own ad space rates based on different criteria and filter ads accordingly.
For programmatic marketing to be successful, you need accurate data. This platform helps publishers and advertisers match their needs, i.e., ad inventory and ad space. This platform primarily collects, analyzes, manages, and activates data collected from different sources. Advertisers or publishers can use the data management platform to target accurately, create similar audiences, and generate reports.
How programmatic advertising works
Advertisers who need advertising spaces for marketing their companies use programmatic advertising to connect with publishers who have ad inventory. Choosing a programmatic marketing agency is the first step for advertisers seeking to market their brands online. The agency will use the demand side platform to create an automated solution to help advertisers reach their business goals.
Advertisers will purchase ad inventory from publishers through demand-side platforms. By incorporating demographics such as online activity, behavior, location, etc., the data management platform that holds audience data ensures accurate ad targeting to target the right audience. Advertising requests are sent instantly to supply-side platforms when consumers who fall within an advertiser’s target demographic visit a publisher’s website.
Based on the impressions, the publisher can sell ads. Demand-side platforms then evaluate ads and match them with available data and parameters. Additionally, it determines the price for first impressions. In only 100 milliseconds, the whole bidding process is complete. As soon as the impression is sold, the publisher can display it on their site.
Types of programmatic buying methods
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In traditional advertising, advertisers and publishers would work together on a one-to-one basis to complete a transaction. In contrast, programmatic advertising does not work this way. Your ad will be delivered automatically if you choose a programmatic buying option. The following are some kinds of programmatic buying methods.
- Real-time bidding (RTB)
- Programmatic guaranteed
- Private marketplace (PMP)
- Preferred deals
Bidding in real-time is also called open markets or auctions. In this type of programmatic buying, real-time bidding on advertising space exists. The publisher of a webpage auctions off ad space after a user clicks on it, and the highest bidder wins the advertising space. It takes just a fraction of a second to complete the entire process.
The term also refers to programmatic direct or automated guaranteed. It is a one-to-one negotiation between both parties. In contrast to other forms of programmatic advertising, the advertiser is not required to place bids. A publisher sells the advertiser’s ad inventory immediately after the negotiations are over. Furthermore, advertisers can choose favorable parameters, such as target audiences, inventory types, frequency limits, and prices.
Programmatic guaranteed is a good option for advertisers with substantial advertising budgets. This option offers advertisers the advantage of knowing exactly where their ads will appear.
It’s also referred to as a private exchange or closed auction. Unlike open markets, private marketplaces offer a private setting for advertisers to purchase advertising inventory. Publishers have the freedom to limit their premium inventory to selected advertisers. Like an open auction, this auction has a set minimum price. Through the demand side platform, publishers can also access user data, and with this option, advertisers can choose the sites where their ads appear. That makes estimating and measuring the ROI of ads easier.
Spot buying or private access are other names for this method. In the ad auction process, the advertiser can choose which ad inventory they would like to use. Depending on the nature of the advertising, the parties may agree upon the terms and conditions upfront, such as the method of targeting and pricing. Advertisers can find out who their target audience is and make informed purchasing decisions by using demand-side platforms.
Programmatic advertising formats
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Programmatic advertising can be used in the following ways to promote your brand:
- Display: Display ads found on websites are usually displayed as banners and other similar ads. These ads can either be static or animated.
- Mobile: The importance of mobile ads for advertisers is increasing. These ads are featured on mobile websites and mobile apps.
- Native: The integration of native ads into website content is more seamless than that of other types of ads. The relevance of these ads can be determined, and target accuracy can be improved using analytics and artificial intelligence.
- Video: You can engage your audience with video ads. Video ads can be displayed before articles, in the middle of articles, or in-display on YouTube.
- Over the top (OTT): A wide variety of connected devices, including laptops, smartphones, smart TVs, gaming systems, and smart TVs, receive OTT advertising and video content via the Internet. While these ads are similar to TV ads, they can be targeted and analyzed in more detail.
- Interactive: In the past few years, interactive ads have become increasingly popular. Users are encouraged to interact with them through apps and websites by answering questions or playing simple games.
- Audio: Podcasts and digital radio allow marketers to reach engaged listeners via programmatic audio ads.
- Social: By collecting data about users, social media platforms can create personalized ads that enhance the user’s experience.
- Search: On search engine results pages (SERPs), search ads appear based on search terms entered.
Final Thoughts
The industry experts have hailed programmatic advertising as both the present and the future of advertising for a reason. During the last few years, programmatic advertising has helped unlock a great deal of potential. In comparison to traditional forms of online advertising,programmatic advertising is more cost-effective, easier to implement, provides access to a larger inventory of ads, and offers superior targeting.