What Is Programmatic Advertising?
- What Is Programmatic Advertising?
- The definition of Programmatic Advertising
- The birth of digital advertising
- The programmatic advertising ecosystem
- Demand Side Platforms vs Supply Side Platforms
- How programmatic advertising works
- Sculpt your audiences
- Programmatic advertising tips
Remember the old days of digital marketing - before programmatic buying and SEM? Display advertising was easy and just like any kind of offline advertising. But as technology got more advanced and publishers needed to squeeze every dollar out of their ad inventory, digital advertising got a lot more complex.
The landscape of programmatic advertising seems very complicated. In this blog post, I’ll explain the various parties and platforms involved with programmatic advertising. Let’s start at the beginning, shall we?
The definition of Programmatic Advertising
Programmatic advertising is a highly automated form of digital advertising, whereby advertising space is bought and advertisements are placed through an auction across campaigns from a large number of advertising platforms, and where bids are calculated in real time per individual ad placement, using a set of advanced algorithms, historic data, and a number of parameters and tactics.
The birth of digital advertising
Once upon a time, there was a web site called www.hotwired.com, from Wired Magazine. They started a trend which revolutionized advertising. On October 27, 1994, they were the first in the world to add a banner to their web site. This is what it looked like (and no, it does NOT lead to the original landing page):
The banner space was bought by AT&T to promote their new technology. It was extremely effective: CTR was about 12%, which is insanely high, judging by today’s standards. Perhaps people were really curious to find out what this thing was about? It makes you wonder what the bounce rate was…
Display advertising - evolved
When Display Advertising arrived on the marketing scene, it was managed the same way as offline advertising. A marketeer or an agency picked up the phone to call the owner/publisher of a website (which was usually affiliated with an off-line magazine or newspaper). They negotiated a price, signed an agreement, and the advertiser sent the banner to the publisher. Easy peasy.
However, as more banners, web sites, and advertisers entered the market of digital advertising, two groups of actors emerged: the agencies (running campaigns for their clients) and sales houses (selling ad inventory to the agencies). Over time, this landscape fractured with the rise of affiliate marketing, search advertising (SEA), remarketing, and more exotic ways of generating brand awareness, leads or revenue online.
The programmatic advertising ecosystem
Sales houses (or ad networks)
Sales houses (or ad networks) are organisations that are responsible for selling advertisement space for a number of web sites. They try to maximise the revenue from the available impressions and help their clients by optimising campaigns to optimise results. Many of these sales houses come from traditional content aggregators, such as Corus Entertainment (managing tv brands such as Disney, W Network, and Nickelodeon), or even Rogers (Rogers Media manages Chatelaine, Hello! Canada, and The Medical Post, to name a few).
Sales houses can manage the inventory of 3rd parties, but also manage inventory on their own websites (which can lead to publishing bias). All this advertising space is being made available through a Supply Side Platform (or SSP - more about that later).
At the other side of the digital advertising spectrum, there are the advertising agencies (or media agencies). They manage campaigns for their clients, optimising them to make the most out of the available resources. As advertising priorities shifted from offline channels (print, television, and bill boards), the emphasis of the agencies shifted towards promoting and managing digital advertising.
In addition to the agencies, there are the trading desks. These are specialist agencies, often focused on a part of the marketing mix, such as SEO, SEM or social media (or a combination thereof). Searchify is a trading desk, as it operates independently of other agencies, with a focus on digital marketing only.
Increasing competition in digital advertising
Online advertising went through a huge growth. Websites popped up left, right and centre, and both demand and inventory grew. As advertising budgets shifted from offline to online media, banner sales skyrocketed. The sky was the limit.
However, new online media entered the market. Search marketing - with a very high ROI - started eating into the budgets that were formerly reserved for display advertising. Digital marketing campaigns provide an unparalleled level of advertising transparency, igniting a new industry of advertising optimisation. On the other hand, other forms of online advertising emerged: remarketing, behavioural targeting and affiliate marketing opened op new opportunities for advertisers and publishers.
As the digital domain became increasingly entangled with new display opportunities, advertisers were increasingly held accountable, and publishers needed to squeeze every single dollar out of their advertising inventory to remain competitive, the online advertising industry needed a new way to connect advertisers with advertising space.
Demand Side Platforms vs Supply Side Platforms
What are DSPs (Demand Side Platforms)?
DSPs, or Demand Side Platforms, are platforms that enable agencies to buy online advertising space and optimise their programmatic advertising campaigns. DSPs combine the input from thousands of agencies and organisations in order to streamline their campaigns and aggregated demand for ad space.
What are SSPs (Supply Side Platforms)?
Supply Side Platforms (SSPs or Sell-Side Platforms) enable publishers to make all their digital ad inventory available for programmatic advertising. As the volume of online advertising grew, a few large publishers developed software to manage and sell their online inventory. Over time, these evolved into SSPs. SSPs are usually combined with a Demand Side Platform, enabling highly automated digital advertising campaigns.
Every time when someone loads a web page, DSPs and SSPs connect with each other and perform a live auction for every single ad on the page. Within milliseconds, the platforms run their algorithms, compare millions of ad bids, and serve the appropriate ads.
What is a DMP (Data Management Platform?
A Data Management Platform (or DMP) is an interface between a DSP (Demand Side Platform) and an SSP (Sales Side Platform) that enables advertisers to share and manage their own data (1st party data) and enriched data (3rd party data) with publishers in programmatic advertising.
This allows advertisers to show more personalised advertisements on the publisher’s website. For example, the advertisement could show products that the user recently looked at but didn’t buy yet.
How programmatic advertising works
The DSP does not only unlock ad inventory to buyers, it also allows agencies to manage their campaigns. Many agencies use DSPs to find the cheapest possible ad placements across a vast inventory, but that is just one of the many ways to use programmatic advertising.
For instance, programmatic advertising allows you to target:
- Users that show certain behaviour (e.g. look for mortgages);
- Users that visited your site before (remarketing);
- Existing buyers for cross- and upselling;
- Audiences based on demographics;
- People in a certain geographic location (geo-targeting);
- People who have searched for certain keywords (search retargeting);
- Browsers or devices of your choice;
- People to be excluded from your campaigns (e.g. existing customers or employees);
- People who are engaging with certain content (topic targeting);
- People during certain times of day;
- …or any combination of the above - and more.
Sculpt your audiences
All these possible criteria enable advertisers to create profiles of ideal audiences. These audiences can be based on consumer personas and ‘translated’ into a set of parameters. For example, a profile for an upper-market real estate buying campaign could be:
- Gender: male or female;
- Demographic: 30-50 years old;
- Location: Toronto, Ontario, Canada;
- Device: desktop;
- Content: looked at condos that are for sale, with a minimum price of $500,000;
- Behaviour: Did not yet apply for information.
All this data is stored in (and read from) cookies that are stored on the user’s computer. The DSP reads all the cookie information and compares it to the parameters set by the campaign and provided by the SSP. If there is a match, the DSP sets a bid based on historic conversion information. If the bid is successful, the advertisement will be served. This way the advertiser is ensured that it will buy the ad space that is most relevant, and at the best price, for their campaign.
The advertisers have other benefits from programmatic advertising. It allows them to:
- Sell all of their available inventory;
- Approach a much larger market;
- Improve their revenue per ad impression;
- Automate advertisement sales;
- Set criteria for ad placements (e.g. preference for ads that are sold in-house, with a higher profit margin;
- Increase demand through new forms of marketing (e.g. remarketing, search retargeting);
- Block certain advertisers or advertisements.
In short, programmatic advertising enables both publishers and advertisers to manage their ad placement process more efficiently.
Programmatic advertising tips
To conclude this blog post, here are a few tips to get you started with a programmatic advertising campaign:
- Pick the right KPI. Programmatic advertising is all about effectiveness. Without the right target, you won’t get the desired outcome (how to choose the right online marketing KPI);
- Try different advertising strategies. Create multiple campaigns based on a variety of advertising strategies and measure them separately, to see what works best (how to measure on- and off-line campaigns in Google Analytics) ;
- Sculpt your audience. You have a vast array of targeting opportunities at your disposal. Try to create extremely relevant audiences and see how well they perform. Expand from there. If you start with a broad campaign, the quality of your campaigns will be low and deteriorate even further over time.;
- Implement AB-tests. Never run a campaign without a proper hypothesis and AB-test, to see how you can improve it in the future.
This article was written by:
Sr. Marketing Consultant, Owner
Award-winning marketing geek. Analytics advocate. Passionate about performance. With almost 20 years of agency and marketing consultancy experience, I help organizations increase their marketing success through innovative, data-driven performance marketing strategies.