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guide to programmatic advertising
Jul 13, 2023

Programmatic Advertising: The Ultimate Guide

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Author Niyathi Rao

For every business, going digital the smart way is key to excellent results. You could have a brilliant ad, but without the right targeting, the campaign will never reach the intended audience. This is where programmatic advertising comes into the picture. Programmatic advertising is set to represent over $96 billion worth of digital display transactions in the US alone, as per eMarketer

Programmatic advertising can be found everywhere: from the websites you visit to the ads that pop up on YouTube, or even new formats like interstitial podcast ads or short clips on your connected television. This guide on programmatic advertising is all you need to understand this method, how it works, and what’s next. 

What is programmatic advertising?

Programmatic advertising is the process of using technology to automate several aspects of purchasing and placing digital ads. Programmatic advertising makes it more efficient to purchase and optimize digital campaigns for businesses. The term programmatic refers to the process of how digital ads are sold or bought. 

Programmatic advertising can be applied for specific audience segments, geotargeting, or across channels like video, mobile, display, and Connected Television (CTV). 

Programmatic advertising is great if you want to yield results for companies irrespective of size; since it does away with the “hit or miss” results of traditional display advertising campaigns, the reliance and efficiency increase. An algorithm also helps marketers to better understand the best spots to spend their ad money. 

Programmatic advertising works especially well when you want to connect or resonate with your audience as a brand. There are increased chances of scalability, optimization, or improved results. With programmatic advertising, brands can place ads in relevant mediums and publications to increase results and improve ROI. 

The key terms in programmatic advertising are:

  • Demand-side platforms (DSP) are platforms that make it easier for media buyers to automate and optimize how digital ad space is purchased in the ad marketplace. 
  • Supply-side platforms (SSP) are at the other end of the spectrum; publishers can manage and sell the ad space that is available on their apps or websites. 

How does programmatic advertising work?

Programmatic ads connect publishers (those with ad space to sell) and advertisers (those looking to buy that space to promote their brand). Programmatic advertising lets users deal with ad inventory using software instead of manual negotiations. An advertiser can pay for the impressions of their advertisement instead of a flat rate across all platforms. Programmatic advertising also works on sell-side platforms and demand-side platforms so that advertisers can buy across the open network. For this type of advertising to work, advertisers need to properly manage their audience, placements, budget, bidding strategy, creative, and assets. 

Let’s see how programmatic advertising works with a real-life marketing example. 

A health tech company wants to sell its proprietary software to healthcare providers such as hospitals, clinics, and other related potential customers. The company uses a DSP to run the programmatic ad campaign. 

The company needs to mention and specify its target audience, interests, and more parameters in the DSP: 

  • Demographics: age, gender, location
  • Interests: medical news, new devices, health information, etc.
  • Devices: laptops, desktop computers, tablets
  • Behaviors: trends in the medical field 

The DSP will use this data to target hospitals and clinics that would be interested in the ads and/or company. The DSP bids for ad spaces on relevant apps, publications, and websites through real-time bidding. 

Once the relevant audience starts reacting to the ad, the health tech company can view core KPIs like sign-ups, click-through-rate, and impressions. 

 

What are the types of programmatic advertising?

The type of programmatic advertising is based on how ad inventory is purchased. The common types of programmatic advertising include: 

  • Real-time bidding: An open marketplace where bidding is open to all advertisers. Ad auctions happen in real-time: millions of microtransactions can take less than 100 milliseconds to complete. 
  • Programmatic guaranteed: In this form of programmatic advertising, there is no auction bidding. The ad insertion process is automated so that there is less chance of fraud. It is a fairly transparent process, buyers and publishers can both work to manage and regulate the inventory. 
  • Private marketplace: Most publishers set agreements with advertisers for ad space. This bidding allows websites to price their ad space at the best price possible.
  • Preferred deals: In this type of programmatic advertising, advertisers can choose the ad spots they want to place their ads before the spots go to the open market or private marketplace. 

Why programmatic advertising is important for advertisers

Programmatic display advertising makes it easier for advertisers to access a greater inventory of ad space. Some of the benefits of programmatic advertising include:

  • Reach larger audiences: Programmatic advertising makes it easier for advertisers to reach larger relevant groups than having to purchase inventory from several disparate sources
  • Increased flexibility: Advertisers or buyers can make adjustments to ad campaigns in a transparent and flexible manner. 
  • Better targeting: There is no faulty ad spend as there is better targeting weighed against impressions. 
  • Efficiency: Both the seller and buyer can achieve better returns on their space and investments respectively. There is a large pool of publishers who can help advertisers place their ads and vice versa. 

 

What are the common methods advertisers use to target ads in programmatic advertising?

Programmatic advertising is based on efficient targeting. Here are some common methods advertisers use to target ads:

Audience targeting 

Ads are shown based on data and potential interest to users. When a user visits a website, cookies are stored which then help with relevant targeting. For example: If a targeted user has visited your site, they could be shown one of your branded ads later on when they are scrolling through YouTube. 

Contextual targeting 

In this form of targeting, ads are shown based on the website context and content. So if an advertiser is selling a health tech product, they have a better chance of finding users on health blogs, publications, or wellness-related platforms and apps. 

Location-based targeting or geotargeting 

Brands can also target customers based on their location. This is hyper-local and geo-based. Data from the current or past locations of users are used to target them with ads. This form of ad targeting ensures the right customers are reached in the right places. 

Keyword targeting 

This form of ad targeting is when you focus on specific keywords in order to reach the right audience. This is very similar to contextual targeting and its execution is often seen on the results pages of search engines and social networks. 

Retargeting

This method is simply the act of re-engaging with audiences that have interacted with your brand after they have already been on your website or another owned platform. This can be through cookies or a tracking pixel. 

 

What’s next for programmatic advertising?

The future and trends in programmatic advertising are vast and varied but ultimately exciting given the platform’s potential. Many ad-tech companies are using automation and artificial intelligence to help media buyers in their marketing journey. 

Automation 

Automation in programmatic advertising is already prevalent, however, advances in artificial intelligence technology have been helpful in increasing the efficiency, relevance, and profitability of ad placements. Big data insights, GPT-3, and augmented intelligence solutions also continue to impact marketing automation initiatives. 

More than a demand-side platform 

There is disintermediation on both the DSP and SSP side of ad tech. There is also a paradigm shift in programmatic advertising with both platforms stepping into each other’s traditional boundaries. 

For example, ad tech platforms like illumin focus on the entire consumer journey to holistically enhance overall marketing outcomes. illumin offers media planning, media buying, real-time intelligence, and more in a single platform, reducing marketing costs and enhancing desired business outcomes. 

Increased personalization 

Ad tech now requires high-level personalization and real-time measurement. It is more important than ever to drive decisions and personalize ads based on insights and data, which can be harder to obtain in an era focused on online privacy. Precise and correct messaging has become essential. Understanding the consumer and their journey will help match the best ads that deliver the right message for their intended audiences. 

Artificial intelligence and machine learning 

Artificial intelligence (AI) and Machine Learning (ML) are already leveraged to detect and find patterns, analyze them, and predict results with programmatic advertising. AI helps assess and predict the results of advertisements and helps find the best path to place ads and eventually lower the costs of acquisition. 

Prevent ad fraud 

Rising digital ad-fraud cases is another area of concern for the advertising industry at large. Programmatic advertising platforms like illumin include anti-fraud measures from providers like Verify and Peer39. Fraudulent players in the advertising ecosystem typically deploy bots, install malware, or use human fraud farms to increase clicks and impressions on campaigns. 

Bottom line 

Programmatic advertising is not a new technology and is essentially as old as the digital banner ad itself. The late aughts have seen a staggering evolution in what the platform can accomplish, and current technologies like AI and ML are just beginning to show how they will transform the medium for years to come. Programmatic advertising is a major facet of modern journey advertising; its ability to serve media to users at different points in their purchasing path is essential to the strategy’s success. It is critical to choose the right programmatic advertising partner to ensure that the consumer journey is addressed at each unique level.