What is programmatic advertising? Programmatic advertising refers to the automated process of buying and selling online ad space in real-time through algorithms and data. This is a bidding auction is done on ad exchanges in milliseconds of time. Unlike traditional ad buying, which often involves negotiations and manual processes, programmatic advertising uses technology to deliver ads to the right audience at the right time, optimizing both reach and spend.
Have you ever shopped for a car online, have you noticed that the ad for the car you want will follow you around on apps, websites, streaming TV and radio? This is the power of programmatic advertising; it taps into the subliminal consumer journey.
In the ever-evolving world of digital marketing, programmatic advertising has emerged as one of the most impactful innovations, offering advertisers unprecedented efficiency, relevance, and cost-effectiveness in their advertising strategies.
This article will explore how programmatic advertising saves money, delivers more relevant ads, is more efficient, and how the underlying technology works.
Why Programmatic Advertising?
At its core, programmatic advertising is the use of software and algorithms to automate the process of buying and displaying online ads. It involves the use of real-time bidding (RTB) to purchase digital advertising space across websites, mobile apps, and other digital platforms.
Advertisers use data and targeting parameters to reach specific audiences, and ad placements are made automatically, rather than manually negotiating deals with publishers. Programmatic advertising is about reaching specific consumers WHILE they’re shopping / in their “research” stage of the buying cycle.
Identify the problem – most may not know they have a problem.
Research – visiting websites and different brands & pricing, location & more to determine a fit. Reviews and ratings are a big piece of this as this is known as social clout. Other customers have left their opinions.
Awareness – the consumer is aware of YOUR BRAND and considering a purchase.
Purchase – the consumer has decided and made a purchase.
Programmatic advertising encompasses several forms of automated ad buying, including RTB, private marketplaces, and programmatic direct. RTB, the most common form, allows advertisers to bid on individual impressions in real-time, with the highest bidder winning the ad placement. Private marketplaces, on the other hand, offer exclusive, invitation-only access to premium inventory, while programmatic direct allows for the purchase of guaranteed ad space at a fixed price.
Audiences and who they reach –
Within the programmatic ad space there are many ways to reach specific audiences and demographics. Identifying an ICP (Ideal Customer Profile) is the first step in finding the best targeting strategies. Working with an agency or media buyer who has access to a swath of ad networks is best practice.
Targeting can be behavioral with off-line buying & social patterns, keyword searches and more. Contextual targeting which targets the context of the websites users are visiting. If the consumer if visiting car sales websites and reading reviews on car sales, chances are they need a new car.
Location targeting and geo-fencing are tactics used to reach consumers in a specific location or event. If you’re at the Super Bowl you may be receiving ads for ticket sales, merchandise sales, food sales, all because you’re in the location.
How Programmatic Advertising Saves Money –
One of the key reasons that programmatic advertising is so appealing to businesses is its ability to save money. Here are several ways it achieves this:
Cost Efficiency through Real-Time Bidding (RTB) –
RTB allows advertisers to bid for ad placements in real-time, ensuring that they only pay for impressions that meet their targeting criteria. The auction-style nature of RTB means that ad space is often bought at a lower cost than traditional direct ad buying methods. Advertisers can set their maximum bid for each impression, ensuring that they never overspend on ad placements. Moreover, because the process is automated, there are no middlemen involved, which reduces the overall cost of purchasing ad space.
Reduced Waste of Ad Spend –
In traditional advertising, businesses often purchase ad space based on broad demographic categories, which can lead to wasted ad spend on audiences that aren’t interested in their products or services. Programmatic advertising, however, enables hyper-targeting using data-driven insights, ensuring that ads are shown only to users who are likely to convert. By eliminating wasted impressions on irrelevant audiences, programmatic advertising ensures that every dollar spent on advertising is maximized. Ad campaigns can increase effectiveness, frequency and saturation by utilizing DOOH (Digital out-of-home) advertising.
Dynamic Budget Optimization –
Programmatic platforms often include advanced machine learning and AI tools that can optimize ad budgets in real-time. These systems can automatically adjust bids and allocate budget to the highest-performing ads and placements, ensuring that the most effective ads receive the most funding. This means that advertisers don’t have to manually monitor and adjust their campaigns, as the technology can make these adjustments automatically, leading to more efficient use of ad budgets.
Delivering More Relevant Advertising –
One of the most compelling advantages of programmatic advertising is its ability to deliver highly relevant ads to the right audience. This relevance is driven by data—programmatic advertising uses first-party, second-party, and third-party data to create detailed audience profiles and deliver personalized ad experiences.
Targeting –
Behavioral Targeting –
Programmatic advertising allows for sophisticated behavioral targeting, where ads are shown based on a user’s past behavior, such as website visits, search history, and interactions with previous ads. For example, if a user has recently browsed a clothing website, programmatic advertising can target them with ads featuring products they have shown interest in, or similar items. This type of targeting ensures that ads are not only relevant but also timely, which significantly increases the chances of user engagement. Campaign effectiveness is tracked via website analytics, call tracking numbers, purchases and more.
Geographical and Contextual Targeting –
In addition to behavioral targeting, programmatic advertising can also leverage geographical data and contextual signals to serve highly relevant ads. Advertisers can target users based on their location, showing them ads that are relevant to their region, such as promotions for local stores or services. Contextual targeting allows for the delivery of ads based on the content of the page a user is viewing. For example, if a user is reading an article about fitness, they may be shown ads for sports equipment or health supplements.
These forms of targeting ensure that the ads align with the user’s current context and interests, making them more likely to resonate. Addressable geo-fencing is a common practice mirroring direct mail but instead of targeting your mailbox, it targets your IP address.
Dynamic Creative Optimization (DCO) –
Another way programmatic advertising delivers more relevant ads is through dynamic creative optimization (DCO). DCO is a technology that allows for the creation of personalized ad content based on user data. This means that an ad’s creative elements—such as images, copy, and offers—can be dynamically tailored to each user in real-time, ensuring that the ad resonates with the individual. For example, a user who has previously shown interest in running shoes may see an ad featuring running shoes in their preferred color, size, and style. The ad is customized immediately to reach the user that had intent or was shopping and viewing the exact same product in an earlier search session.
The Efficiency of Programmatic Advertising
Programmatic advertising is not only cost-effective and relevant, but it is also extremely efficient. Here’s why:
Automation and Time Savings –
Traditional advertising often involves a lengthy, manual process of negotiating rates, securing ad space, and coordinating with publishers. Programmatic advertising automates these tasks, significantly reducing the time and effort required to manage an ad campaign.
Advertisers no longer need to manually contact multiple publishers or deal with complex paperwork. Instead, they can access a wide range of inventory through a single platform, set their targeting criteria, and let the system do the work.
Real-Time Insights and Optimization –
Programmatic advertising platforms provide advertisers with real-time data on how their campaigns are performing. This data includes metrics such as impressions, clicks, conversions, and engagement rates, allowing advertisers to monitor the effectiveness of their campaigns and make adjustments on the fly. No more wasted ad spend on impressions delivered to users that won’t convert/buy.
With traditional advertising methods, it could take days or even weeks to gather this kind of feedback. The ability to act on real-time insights means that campaigns can be continuously optimized for better performance, ensuring maximum efficiency.
Cross-Channel Reach –
Programmatic advertising allows advertisers to reach users across multiple digital channels, including display ads, video, mobile, social media, and even connected TV. This cross-channel reach helps ensure that advertisers can engage their target audience wherever they spend their time online. By leveraging data across multiple platforms, programmatic advertising enables advertisers to create a unified, omnichannel strategy that enhances the overall efficiency of their campaigns.
Cross-Device Matching –
Studies have proven that the more saturation and frequency a consumer sees an ad, the more likely they’ve been to buy. With cross-device matching technology ads are served on the consumers phone, TV, computer and any device attached to the home wi-fi. This allows multiple devices to see the ad on different digital channels. One study reported it took an average of 4 days for a consumer to make a purchase after receiving ads on 4 devices, PC, tablet, mobile, Connected TV.
How Programmatic Advertising Works –
At the heart of programmatic advertising lies sophisticated technology that automates the buying and placement of digital ads. Let’s break down how the process works:
Data Collection and Targeting –
The first step in programmatic advertising is the collection of user data. This data comes from a variety of sources, including user behavior, demographic information, browsing history, location, and device type. Advertisers use this data to define specific audience segments that they want to target. When location targeting is enabled, local cell towers are targeted in the area the advertiser agrees to. You can learn more about geo-targeting here. The more data points an advertiser has, the more accurately they can target users, ensuring that their ads are shown to those most likely to engage.
Real-Time Bidding (RTB) –
Once a user visits a website or app, an ad impression is made available for purchase through an RTB auction. Advertisers bid on this impression in real-time, and the highest bidder wins the placement. The entire process—from the moment the user lands on the page to the time the ad is displayed—takes mere milliseconds.
Ad Exchange and DSP (Demand-Side Platform) –
RTB auctions are facilitated through ad exchanges, which act as marketplaces for buying and selling ad space. Advertisers use demand-side platforms (DSPs) to place bids on impressions. A DSP is a technology platform that allows advertisers to manage their bids, budgets, and targeting criteria in real-time. The DSP sends the bid to the ad exchange, where it competes against other bids, and the winning bid gets the ad placement.
Ad Delivery –
Once the ad is purchased, it is delivered to the user in real-time. The ad may be displayed in the form of a display banner, video, or native ad, depending on the campaign’s objectives and the available inventory these ad formats are served on connected TV, Smart TVs, phones, computers and tablets.
Path’s to Conversion –
Advertisers can track when they’re ads are seen via a variety of tracking mechanisms such as UTM codes and Google Tag Manager. Line items on a list, advertisers can see when the consumer was viewing their site and when they were served an ad, down to the second. This tech allows advertisers to use machine learning to place more calculated bids in the future thus saving the advertiser more ad budget and creating more efficiency.
Conclusion –
Programmatic advertising has fundamentally transformed the way digital ads are bought and sold. By automating the ad-buying process, programmatic advertising offers businesses the ability to save money, deliver more relevant advertising, and achieve greater efficiency in their marketing efforts.
The technology works by leveraging data and algorithms to deliver highly targeted ads in real-time, ensuring that every ad dollar spent is put to its best use. As the industry continues to evolve, programmatic advertising is expected to grow even more sophisticated, offering advertisers even more ways to connect with their target audiences and optimize their ad campaigns for maximum impact.
