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What is Programmatic Advertising or Programmatic Media Buying?

Programmatic advertising is using automation to buy and sell advertising space online. It uses data and algorithms to automate inventory purchasing to serve your ads to your target audience at the right time on the right platforms. Also known as programmatic media buying, it is one of the most efficient, and cost-effective ways of buying and selling ad space. As per Technavio, global spending on programmatic advertising will reach around $314 billion by 2026. Have a look at the below article to know more about programmatic advertising.

What are the Different Types of Programmatic Advertising Platforms?

Different programmatic advertising platforms have different roles to play in different stages of the programmatic advertising process. They do their jobs simultaneously and reduce human effort and save time by automating routine tasks. This results in ads getting served to the right audience at the right time thus increasing ROI for advertisers and revenue for publishers.

There are four types of programmatic advertising platforms. 

1. Sell-side Platform (SSP)

2. Demand-side platform (DSP)

3. Ad exchange, and

4. Data Management Platform (DMP)

Have a look at these 4 in detail below.

1. Sell-side platform (SSP)

The SSP is the platform where publishers sell their advertising space. Publishers offer up ad space on their website for advertisers to showcase different types of ads. These publishers are added to the SSP thus providing advertisers with a wide range of options to advertise their business. These ad spaces are automatically sold to buyers in milliseconds. This makes programmatic advertising, a quick and easy process for advertisers to find publishers who have available ad space in real-time. 

Some popular SSP platforms are: 

2. Demand-side platform (DSP)

DSP is the platform for interested advertisers to find advertising inventory to air their ads. Advertisers can purchase advertising space on the publisher’s site to reach their target audience. The Demand-side platforms help advertisers to reach their potential customers at the right websites through the use of accurate data like age, gender, location, previous online behavior, etc.

Some popular DSP platforms are:

3. Ad Exchange

An ad exchange is a programmatic ads buying platform where the demand-side platforms connect with sell-side platforms to facilitate the buying and selling of advertising space. It acts as a sort of central point for all programmatic media buying. Here advertisers can choose and purchase their advertising space at the agreed-upon prices between them and the publishers.

Some popular Ad Exchanges are:

4. Data Management Platform (DMP)

Data Management Platforms are independent programmatic media buying platforms used to collect, store and analyze 1st, 2nd, and 3rd party data user data. They offer valuable actionable insights by analyzing this data that enables advertisers to focus on their target audience and helps publishers to better understand their audience.  

Some popular DMP platforms are:

What are the Different Types of Programmatic Advertising?

Programmatic media buying includes multiple ways to buy and sell ads. The four main types of programmatic advertising are:

1. Real-time Bidding (RTB)

2. Private Market Place (PMP)

3. Preferred Deals, and

4. Programmatic Direct aka Programmatic Guaranteed

Let’s have a detailed look at these types of programmatic advertising below.

1. Real-time bidding

Real-time bidding is programmatic advertising that is available to any publisher or advertiser that wants to sell or buy advertising space. It is also known as the open auction where bids for ads happen in real-time and the advertiser with the highest bid gets the advertising space. In real-time bidding, advertisers can bid for ad impressions and buy ads in bulk. 

Pros: a. Advertisers get access to several websites and a large audience with better pricing precision.

b. Publishers get a better fill rate as the auction is triggered by the arrival of a visitor.

Cons: a. Advertisers do not know where their ads will appear and run the risk of ads appearing on unwanted or unrelated sites. 

b. Publishers also do not know which advertisers are bidding for the advertising slots. 

2. Private Marketplace (PMP)

A private marketplace is programmatic media buying where only select advertisers are invited to bid in an auction for the advertising space. It is also known as a private exchange, private auction, or invitation-only auction. A private marketplace allows publishers to control which advertisers can advertise on their websites. The publishers usually here are authority websites with high reputations and massive amounts of reach. These publishers set aside ad space for top-notch advertisers at premium rates. Advertisers in turn get access to a large pool of quality target audiences with high recognition and recall factor of their ads from getting featured in these authority websites.

Pros: a. Advertisers know exactly who their publishers are and where their ads are going to appear. This transparency allows advertisers to better reach their target customers. 

b. Publishers know who their advertisers are, therefore enabling them to be highly selective and get more revenue. This also allows the publishers to feature relevant ads for their viewers. 

Cons: Highly competitive for both publishers and advertisers to gain access to private marketplaces.

3. Preferred Deals

A preferred deal is a type of programmatic advertising where publishers set aside ad placements for specific advertisers of their choosing. Using audience data and website metrics, these deals have agreed upon fixed rates that benefit both advertisers and publishers. Advertisers have the first choice to bid on a high-performing inventory and a relevant audience. They have the first dibs on the ad space and can accept or decline it. If advertisers decline the ad request, then it goes to the open auction for bidding through automation. Preferred deals are also known as spot buying, programmatic non-guaranteed, and unreserved fixed rates.  

Pros: Publishers can work with advertisers of their choice and get high rates for their ad spaces.  

Cons: Preferred deals are mainly for sites that have an extensive reach. 

4. Programmatic Direct

Programmatic direct is also known as programmatic guaranteed and automated guaranteed. In this type of programmatic advertising, there is a direct sale of ad space between advertisers and publishers through automation. Publishers invite advertisers to their site without involving ad exchange thus forgoing the bidding and auction process. Both parties negotiate directly on a fixed price for a guaranteed volume of inventory. The publishers reserve a selected premium inventory for the advertiser’s ads to air at a specific time. 

Pros: a. Advertisers have more control and can target their audience better and get premium ad inventories at fixed rates.

b. Publishers get the highest rates for filling their premium inventory.

Cons: a. Advertisers need a higher budget for their ad’s exact placement.

What are Different Programmatic Advertising Channels?

These are some of the popular programmatic advertising channels. 

1. Display ads

2. Video ads

3. Native ads

4. Voice ads, and

5. Social media advertising

Let’s have a detailed look at these programmatic advertising channels below.

1. Display ads

Display ads are the most common programmatic ad formats advertisers use to get leads. These are non-intrusive static visual ads that you see in the header, footer, or sidebar of a webpage. They do not impact the site speed as well as the user experience and usually operate on a cost-per-click model. 

2. Video ads

Video ads, as the name suggests are programmatic ads that feature videos. These programmatic ads can appear in three places:

a. Instream- As an advertisement before, during, or after the video content that a viewer is watching. These are embedded in the video player.

b. Outstream- Video advertisements that exist outside of the video content. These exist anywhere within the content and may appear in the middle of an article, between two articles, as pop-ups or drop-down videos.

c. In-display: Video advertisements that appear in search results or as recommended video panels in streaming platforms or websites. 

3. Native ads

Native ads are programmatic ads that may feature on any part of a 3d-party website. Publishers offer ad inventory through SSPs and advertisers purchase this ad space through DSPs. These programmatic ads exist dynamically throughout a web page. Native ads can appear in the header, footer, or sidebar of the webpage. These ads can also appear as in-article ads, in-feed ads, sponsored content, paid search units, rewarded video ads, promoted listings, and recommendation widgets among others. 

4. Voice ads

Voice ads are programmatic ads that appear in audio content. Voice ads are also called audio ads and feature in podcasts, music streaming services, and digital radio among others.  

5. Social Media Advertising

Social media platforms analyze user data and use programmatic advertising to offer premium ad inventory to advertisers when their target audience is online. 

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How do Programmatic Ads Work?

Here is a brief summary of the programmatic ads buying process without any technical jargon. This entire programmatic media buying happens within a fraction of a second in real-time. 

1. User visits a website with ad space. 

2. Information about the ad space available on the site goes up to SSPs. 

3. Supply-side platforms interact with demand-side platforms through Ad exchanges.

4. An auction takes place in real-time where advertisers bid for the ad space. 

5. The highest bidder wins the ad spot and their ads appear on the website for the viewer. 

How Much Does Programmatic Advertising Cost?

 

Programmatic ads are usually bought on a CPM (cost per thousand impressions) basis with CPMs ranging from $0.50-$2.00. This means that programmatic advertising is viable for both small businesses as well as for those with high advertising budgets. Do keep in mind that the cost of CPMs also depends on the target audience, competition, and the demand-side platform chosen. The more niche the audience is, the higher CPM costs will be.

What are Different Programmatic Advertising Channels?

Programmatic advertising channels or ad formats are critical to the success of both advertisers and publishers. These ad formats differ in elements like location or media type, but their goals are the same. Initially, for advertisers, it is to get the viewer’s attention and overcome banner blindness, and for publishers to make the ads a part of an enhanced user experience. The final goal for advertisers is to reach a higher target audience thus getting a higher ROI and for publishers is to get paid higher rates for their ad space. 

Google Display Network Vs Programmatic Ads

Google Display Network and programmatic advertising are somewhat similar as both are auction based. Both use display advertising to reach a specific audience and allow versatile targeting options like the audience, demographics, topics, interests, keywords, behavior, etc. Other than these similarities, here are the major points of differences between them.

1. Audience reach

Google Display Network has an approximate reach of 70% while programmatic advertising has an approximate reach of 95% of all websites, making the latter a clear winner.

2. Variety

Programmatic advertising allows rich media ads that the Google Display Network does not. Rich media ad formats are not limited to static images or videos. These ad formats can react to user behavior like hovers, clicks, etc. In terms of video, Google Display Network is confined to YouTube and its viewers, unlike programmatic ads, which have no limitations. 

3. Targeting Opportunities

Programmatic advertising has more precise targeting opportunities as it allows second and third-party data to be purchased from specialized Data Management Platforms while Google Display Network only uses its own data. So, all types of remarketing are possible with programmatic advertising, which is not the case with Google Display Network.

4. Campaign Results and Reporting   

In Google Display Network, the campaign statistics are available within a few hours, and sometimes up to a day for some metrics. In programmatic media buying, the campaign statistics are available almost immediately allowing for more effective activity optimization. 

5. Settlement Models

Programmatic media buying operates on a CPM (Cost Per Mille) model and opts for real-time bidding in a vendor-neutral environment. Google Display Network, on the other hand, offers several settlement options like CPC (Cost Per Click), CPM (Cost Per Mille), and CPA (Cost per action)*. This makes Google Display Network a more viable and cost-effective model. However, programmatic advertising offers more precise targeting, which can be more cost-effective than GDN if properly utilized.

*CPM charges a predetermined fee for every thousand ad impressions. 

CPC charges a predetermined fee each time a viewer clicks on the advertisement.

CPA charges a fee for each preset action taken by the viewer.

6. Ease of Handling

The Google Display Network is easy to use and allows small and big advertisers as well as newbies to run online advertising campaigns. On the other hand, programmatic advertising platforms especially DSPs, require specialised ad agencies and experts to handle them. 

7. Entry Threshold 

Google Display Network has a lower entry threshold where small and individual operators can buy advertising for any amount of money and then scale them proportionally to their needs. While programmatic advertising usually requires a minimum amount of money to spend on a chosen programmatic ads platform.

8. Creative Potential

Programmatic advertising allows for more creative freedom and formatting choices. Advertisers have more control over the placement of ads along with targeting and retargeting options. Google Display Network is more restrictive in this respect.

What are Some Effective Examples of Programmatic Advertising?

 

Programmatic advertising allows advertisers to curate their content as per their target audience. Some well-executed programmatic ad campaigns that leveraged consumer data to achieve success are as below.

1. The Economist 

The Economist targeted potential readers by analyzing their subscriber data along with 2nd and 3rd-party data and other data subsets. They segmentized their content into 7 parts that included politics, finance, careers, economics, social justice, technology, and wellness. With the help of programmatic advertising, they served appropriate ads to different consumers, linking the ads to the articles of specific interest to the consumers and inviting them to subscribe. With this strategy, their ROI jumped tenfold on a £1.2m media budget with 650,000 new prospects generated.

2. Geico Insurance

Geico insurance uses programmatic advertising to reach its viewers through engaging content and ads. Their content and ad formats are based on the platforms these are served on, whether they be website banner ads, TV commercials, or social media ads, among others. This allows them to create advertising campaigns that are popular across platforms. 

3. AirAsia

AirAsia used programmatic advertising to target 3 specific sets of AirAsia clients with its display and video ads. Their FB ad campaign targeted frequent AirAsia flyers as well as customers who had never flown AirAsia before or avoided the airline since an AirAsia plane crash in 2014. All these customers were served with different ads. Regular AirAsia travelers were served with ads that showcased the ticket costs on the travelers’ frequent routes. On the other hand, the other two subsets of flyers saw ads focused on airfares for trips they searched for recently. This programmatic ads campaign was a roaring success with a 17-point lift in ad recall and more than 30 times return on ad spend. 

How To Setup a Programmatic Advertising Campaign? 

Here is how you can set up an effective programmatic advertising campaign in 6 easy steps.

1. Set your advertising goals by setting your KPIs and the creative approach you want to take.

2. Decide on your demand-side platform.

3. Set your campaign parameters including budget and duration among others.

4. Analyze data to define and target your core audience to maximize your revenue. 

5. Select your traffic sources, upload your ads and prepare to go live.

6. Analyze data and campaign result reports to continuously optimize your ad performance and fine-tune your campaigns.

Final Thoughts

Programmatic media buying is an efficient and effective way for advertisers to reach their target audience and for publishers to earn serious revenue. Programmatic advertising is the advertising of the future with immense benefits to the practitioners of this art. If you want to learn programmatic media buying along with other aspects of digital marketing, then look no further than DADE ( Digifine Academy of Digital Education). With a repertoire of quality and acclaimed digital marketing courses that include programmatic advertising, get the knowledge, skills, and technical know-how to make it big in the world of digital marketing. Get in touch today to know more.