Programmatic advertising remains something of a mystery for many digital marketing professionals. It is understandable. Blending data science, automation, and machine learning, programmatic ad buying can be a difficult topic to wrap your head around. Programmatic marketing is a field that is notoriously jargon-filled, to the point it feels like programmatic marketers are speaking a different language.

To cut through the confusion, we are going to break down what programmatic advertising is and why you might consider it for your organisation. 

What Is Programmatic Advertising?

Programmatic advertising is the automated buying and selling of digital advertising space.

In the early days of online advertising, we handled digital advertising deals similarly to purchasing space in a magazine. Buyers (advertisers) and sellers (publishers) would negotiate to place ads on a specific website for a specific period.

It was a very inefficient system. Buyers and sellers often struggled with the management of ad space. There were very few options to target ads, measure performance, or monitor ROI, making it difficult to run effective campaigns. Decisions were often made on assumptions rather than data. It was also very time-consuming since we did manually everything.

Programmatic advertising offers a data driven alternative, where algorithmic software handles the sale and placement of digital ads in milliseconds. It can apply to a wide range of channels and formats.

Using marketing automation and machine learning, the system matches the needs of advertisers with the needs of publishers. It also incorporates site data and advance targeting methods to serve ads more accurately and at scale. The result is a better ROI for advertisers and publishers alike.

How Programmatic Advertising Works

There are a lot of moving pieces in programmatic advertising, with different tools and services you can include depending on your specific needs. Four major components make up the basic framework of a programmatic advertising ecosystem. A demand side platform (DSP), supply side platform (SSP), data management platform (DMP), and an ad exchange. Each part of the system works together to serve both publishers and advertisers and allow them to trade effectively.

Demand Side Platforms (DSP)

A DSP enables advertisers to buy digital ad space made available by media publishers automatically via ad exchanges. It allows buyers to target audiences based on data such as website category, physical location, age, online behaviour and more. The advertiser sets up their ad inventory and audience targeting preferences in the DSP. The platform then automatically seeks opportunities in the ad exchange or network that meet these parameters.

Supply Side Platforms (SSP)

While advertisers use DSPs to manage ad buying, publishers use SSPs to manage their ad space inventory. An SSP can connect to multiple ad exchanges to maximise the publisher’s exposure to potential buyers. Through an SSP a publisher can also control ad space inventory more effectively. For instance, setting minimum prices for different impressions and dictating specific formats or buyers (in the case of private marketplaces).

Data Management Platforms (DMP)

For programmatic to work, the system needs to match up appropriate ad inventory to ad space. This is where a data management platform (DMP) comes into play.

DMPs are an independent platform that acts as a centralised data warehouse for collecting, managing, and analysing data from a range of sources. It builds comprehensive user profiles used by programmatic algorithms to match the most relevant ad to the visitor on the publisher’s site. Advertisers and publishers both use DMPs to improve targeting, create reports, and build lookalike audiences.

Ad Exchanges

Ad exchanges sit in the middle of the programmatic ecosystem. Much like the trading floor of the stock market, it is where DSPs and SSPs meet to agree on a price and trade inventory.

Often people mix up ad exchanges with ad networks. The difference is that an ad network is a platform that bundles and sells inventory from different in-network publishers. Meanwhile, an ad exchange is a trading floor that can connect to multiple ad networks. It can also be a private marketplace in the case of direct selling (more on this later).

Here’s how these four pieces work together, in a nutshell:

• The publisher uses an SSP to list ad space inventory on an ad exchange.

• A pixel that the publisher includes on their website sends information (the website, user and ad space characteristics) to a DMP.

• Meanwhile, an advertiser uses a DSP to set up the targeting and budget parameters they have for their ads.

• The DSP connects with the DMP to identify inventory on the ad exchange that best aligns with the advertiser’s needs. It then puts in a request.

• The ad exchange uses algorithmic software to decide which ad to match to which impression opportunity.

• The DSP sends the ad to the SSP to display to the visitor on the publisher’s site.

Programmatic Buying Methods

There are three principal models for how advertisers can purchase inventory from publishers: programmatic direct, real-time bidding (RTB), and private marketplaces (PMP).

Programmatic Direct

You may have heard the terms programmatic guaranteed, preferred deal, automated guaranteed, and programmatic reserved. They all fall under the umbrella of programmatic direct (but vary slightly in how they are executed).

Programmatic direct is a one-on-one deal where the publisher offers a fixed number of impressions at a guaranteed price. It is usually used for premium formats like full-page takeover ads or native content on high traffic sites.

Similar to traditional media buying, both parties sit together to negotiate a deal. However, the transaction and insertion orders take place through an automated system. Programmatic direct enables publishers to regulate the price of premium inventory. Meanwhile, advertisers can directly buy guaranteed ad impressions in a transparent process — however, there is less capability to fine-tune audience targeting.

Real-Time Bidding (RTB)

Originally designed to help publishers sell leftover inventory, RTB is a way of buying and selling ads through real-time auctions. Transactions complete within the time it takes to load a webpage (around 100 milliseconds).

With an RTB model, any buyer can bid on the inventory in an open ad exchange instead of dealing with a single publisher. This allows advertisers to purchase ad slots on a case-by-case basis whenever a viewer lands on a publisher’s site. However, there is no reserved inventory or guaranteed impression number which can make campaign planning more difficult.

In an RTB system, both sides can set parameters for what they are looking for regarding audience type, bid range, ad format, etc. However, compared to other purchase models, there is less transparency in RTB over which advertiser gets paired with which publisher.

Private Marketplace (PMP)

Also known as a private exchange or closed auction, PMP is an invitation-only model. This allows publishers to offer premium inventory to a select pool of advertisers. This allows publishers to have more control over who advertises on their property. While there is still an auction, a minimum price is set beforehand.

PMP auctions are more transparent than RTB since advertisers know what inventory they are buying. Depending on the auction, buyers might also be able to bid on guaranteed impressions.

How to Do Programmatic Advertising

There are four pillars to successful programmatic advertising: planning, technology, data, and expertise.

Planning

It is essential to always be clear about the aims you want to achieve with programmatic. Don’t jump into the field until you know why you are doing it. Start by gathering and analysing data from multiple sources to determine your advertising needs.

Figure out your business’ short and long-term marketing goals, then chart a strategy. It is very important to establish your primary and secondary KPIs from the outset - otherwise, you will quickly find yourself off track.

Technology

There is a wide range of different platforms in the programmatic world. Some offer fully managed services, others allow marketers to complete programmatic buying activities in-house.

Here are some key factors to consider when evaluating programmatic technology:

1. Will a DSP, DMP, or ad exchange offer the reach, segmentation, and channels necessary to connect with your target market?

2. How will the platform charge you? Will impressions be charged on a cost-per-thousand (CPM) or cost-per-click (CPC) basis? Are there any hidden fees?

3. What purchasing models will you need to support? Programmatic direct? RTB? PMP? If buying ads directly, will your platform be able to connect to the publisher’s system?

4. Will a DSP provider be able to integrate with your data management platform?

5. Will the platforms you’re considering be able to support a cross channel strategy?

6. Do you want to use a DSP with an agency style set up or do you want to build an in-house system?

It is important to do your research to find the right services and options that meet your organisation’s needs.

Data

Like any other type of marketing automation, effective programmatic advertising depends on having quality data. It is what allows brands to target ads effectively, model look-alike audiences, measure performance, etc.

However, the programmatic field is littered with non-human traffic sources (such as bots) that contaminate data accuracy. You want to ensure that your DSP works with a data verification vendor and have implemented measures like Ads.txt to minimise bot responses. Due to changing legal regulations on personal data, investigate cookie-less ways of collecting data, such as probabilistic tracking and contextual targeting.

Expertise

To succeed in programmatic, you can’t just rely on the algorithm alone. There are logistical, strategic, and creative factors that need to be considered, and this requires human input.

Couple the efficiencies you gain from technological automation with human innovation and insight. The advantages you can gain from programmatic are only as good as your ability to analyse the results. You want a skilled team of marketers and data scientists to plan, control, and optimise your campaign effectively.

Is Programmatic Advertising Worth It?

Programmatic advertising can be an incredibly efficient use of both time and resources. The ability to automate media buy and personalise ad delivery to viewers is a big draw for brands. Programmatic buying can often stretch ad budgets further than traditional options. There is a reason it now accounts for over 93% of total display advertising spend in the UK.

In the 2020 State of Programmatic Advertising survey, 70% of respondents saw at least some success from their programmatic campaigns. And 23% reported their programmatic efforts as being very successful at achieving strategic objectives. Meanwhile, programmatic ad spend in the UK continues to grow strongly and is expected to surpass 9.3 billion (USD) by 2022.

While more often talked about for B2C, programmatic advertising also applies in the B2B context. For example, say you want to increase brand awareness among c-suite members. You can work with industry news publishers to run native ads on their sites. A 2021 report by Aptitude Research found that programmatic can also be a highly effective tool for tasks like recruitment and talent acquisition. 

Advantages of Programmatic Advertising

Programmatic advertising provides a host of benefits, including (but not limited to)...

• Multi-channel and format reach. Programmatic advertising supports multiple ad exchanges and networks granting advertisers unprecedented reach. It also supports multiple channels and ad formats. These include display ads, video, mobile, native and social, voice, digital out-of-home, and even television.

• Relevancy. Programmatic ad buying offers advanced targeting capabilities. Interest targeting and lookalike modelling, for example, help advertisers to maximise the relevancy of their ads for specific targeted audiences at scale.

• Real-time data insights. With programmatic advertising, the performance of each ad is measured in real-time. This allows advertisers to adjust to changing market dynamics and run tests to optimise live campaigns.

Disadvantages of Programmatic Advertising

No system is perfect and there are disadvantages to be aware of when considering programmatic advertising.

• Ad fraud. Fraud is a prevalent issue in the programmatic world that costs advertisers billions in revenue every year. According to Imperva’s 2021 Bad Bot Report, a non-human source generated 40.8% of all internet traffic in 2020. 25.6% of said traffic came from malicious bots.

• Brand safety. Another disadvantage of programmatic advertising is brand safety. The use of algorithms without human oversight can lead to your programmatic ads appearing in the wrong place. For example, your brand might appear on fake news sites or appear alongside inappropriate (or even scam) content. Programmatic advertising hit the headlines in 2017 as major brands pulled their ads from Google's ad network after they appeared on extremist YouTube videos. And in 2021, there has been more controversy as consumers reacted to brands’ adverts appearing on GB News. To preserve brand safety, monitor and regularly update blacklists (banned sites) or whitelists (approved sites) to control where your ads show. Doing so will narrow your reach, but it will also help prevent your brand from being associated with unsavoury material.

• Lack of fee transparency. Another key issue facing the industry is the continued lack of transparency regarding platform fees (called the ‘ad tech tax’). Compared to traditional digital media buying, programmatic advertising involves many players. There are agencies, publishers, DPS and SSP providers, ad exchanges, data verification vendors, etc. Many of these participants play an integral role in the programmatic ecosystem, but each of them also takes a cut from ad spend. A 2020 transparency study of the UK programmatic market found that only 51% of advertiser spend reached publishers. However, understanding the fees being collected by each party can be extremely difficult. For instance, the same study reported that an ‘... unknown delta, representing around one-third of supply chain costs — could not be attributed’.

How to Measure Programmatic Advertising

There are a lot of variables at play in programmatic advertising, which makes accurate performance measurement absolutely vital. Therefore, it can be beneficial to have a trained data scientist involved in campaign management. According to the 2020 State of Programmatic Advertising survey, the top three most meaningful programmatic metrics were: 

• Return on Investment (ROI)

• Return on Ad Spend (ROAS)

• Click-Thru Conversion (CTC)

However, instead of sticking to industry standards, analyse different metrics to show which ones are reliable indicators for your specific business goals. Also, consider using multiple approaches to gain real campaign insights. For instance, integrated survey tools to generate real-time feedback on factors like ad recall and brand awareness. Or set up experiments to measure incremental uplift.

Keep Learning

If you want to succeed in programmatic advertising, it is important to take time to educate yourself, ask questions, work with experienced peers. We hope this primer on programmatic advertising has been helpful to you. If you have questions or want to learn about other effective B2B marketing approaches, please contact us!