What is Programmatic Advertising?

by | Mar 19, 2024 | 0 comments

What_is_programmatic_ads

Tired of investing in campaigns that fall short of expectations? 

Along with the ever-changing advertising industry, traditional methods no longer suffice. That’s when programmatic advertising comes into the picture.

Programmatic advertising—a sophisticated and automated approach designed to streamline your advertising efforts and deliver superior returns. 

Let’s join us as we explore the dynamic world of programmatic ads and uncover their potential to revolutionize your marketing strategies.

History of Programmatic Advertising

In the ever-evolving landscape of online advertising, programmatic advertising is a pivotal development that has revolutionized how marketers connect with their target audiences. Its origins trace back to the first days of digital advertising when advertisers and publishers negotiated ad placements individually. In the early 2000s, the burgeoning internet ecosystem prompted the emergence of ad networks. These platforms acted as intermediaries, facilitating the buying and selling of ad space across various websites. However, the manual process needed more efficiency to keep pace with the rapidly expanding digital landscape.

The landscape shifted dramatically with the advent of ad exchanges around the mid-2000s, introducing real-time bidding (RTB) technology and automating auctions for ad inventory. The advent of real-time bidding (RTB) technology marked a turning point in the evolution of programmatic advertising. RTB introduced a dynamic auction system where advertisers could bid on individual ad impressions in real-time, based on granular data insights. This innovation enabled advertisers to target their audience with unprecedented precision, leveraging data points such as demographics, browsing behavior, and site context. Additionally, it empowered marketers to make split-second decisions, optimizing their ad spend for maximum impact. 

This era also saw the rise of programmatic advertising platforms like Demand-Side Platforms (DSPs) and Supply-Side Platforms (SSPs), which automated much of the ad buying and selling process, further streamlining campaign management and optimization.

So, what is Programmatic Advertising? How does it work? How is it beneficial for publishers? Are there any drawbacks when using it? 

What is Programmatic Advertising?

Programmatic advertising is an automated process of buying and selling digital ad space. 

At its core, programmatic advertising streamlines the entire process of ad buying/selling, eliminating manual interventions by leveraging real-time bidding (RTB) technology. This innovation allows a comprehensive ad buying and selling control, as well as an insights report. 

Furthermore, programmatic advertising can support various ad formats across digital channels, like display ads, video ads, native ads, audio ads, and OOH ads.

What is Programmatic Ad buying?

As the name suggests, programmatic ad buying refers to the automated process of purchasing digital ad space in real-time through the use of technology and algorithms. Unlike the traditional method of negotiating ad placements manually with publishers, advertisers can reach higher-potential audiences with greater precision. 

Speaking of programmatic ad buying, let’s talk about the other side of it, which is programmatic ad selling.

What is Programmatic Ad selling?

Programmatic ad selling, also known as programmatic selling or yield optimization, is the automated process through which publishers sell their digital advertising inventory to advertisers in real-time auctions facilitated by ad exchanges or ad networks. It allows publishers to maximize revenue from their digital properties by efficiently monetizing their ad space while providing advertisers with access to highly targeted audiences.

What are the components of Programmatic Advertising?

Programmatic advertising involves several key elements that collaborate to automate the process of buying and selling of digital ad inventory. These elements include:

Demand-Side Platform (DSP)

A DSP is a platform utilized by media buyers (advertisers and agencies) to participate in real-time bidding auctions. DSPs provide tools for managing ad campaigns, targeting specific audiences, setting bid prices, and optimizing performance.

Demand-Side Platform (DSP)

A DSP is a platform utilized by media buyers (advertisers and agencies) to participate in real-time bidding auctions. DSPs provide tools for managing ad campaigns, targeting specific audiences, setting bid prices, and optimizing performance.

Supply-Side Platform (SSP)

An SSP is a platform where publishers put their ad inventory up for auction, maximizing their revenue opportunities. SSPs connect publishers with ad exchanges and DSPs, facilitating real-time auctions for ad space and maximizing revenue opportunities.

Ad Exchanges

Ad exchanges serve as digital marketplaces where publishers and advertisers sell and buy digital ad space without a third-party intermediary. The platform enables the automated buying and selling of ad impressions across various websites and digital platforms.

Real-Time Bidding (RTB)

RTB is a core component of programmatic advertising that enables an individual ad impression bid in real-time. With RTB, interested parties have the opportunity to bid on available ad space. The bidder with the highest bidding price wins the impression, making the process highly competitive and dynamic.

Data Management Platform (DMP)

A DMP is a centralized platform used to collect, analyze, and segment audience data for ad targeting and personalization. DMPs aggregate data from various sources, such as website visits, user interactions, and third-party data providers. The tool then examines these data to create audience segments that can be targeted in advertisers’ campaigns.

Ad Creative

Ad creative refers to the visual and interactive elements of an advertisement, including images, videos, text, and call-to-action. Programmatic advertising allows for dynamic and personalized ad creatives that can be tailored to specific audience segments and adjusted in real-time based on performance data.

Ad Verification and Fraud Prevention

Programmatic advertising also includes measures to ensure ad quality and prevent fraudulent activity. Ad verification tools monitor ad placements to ensure they comply with brand safety standards and are displayed in suitable environments. Fraud prevention technologies detect and block fraudulent traffic, such as bots and invalid clicks, to protect advertisers’ investments and maintain the integrity of ad campaigns.

How does the process of Programmatic Advertising take place?

Programmatic advertising envolves an automated process with the participation of many stakeholders from publishers, advertising platforms to cutting-edge technology. Here’s how the process typically unfolds:

Ad Inventory Availability

Publisher makes its digital ad inventory available for sale through programmatic advertising channels. This inventory includes available ad spaces on the publisher’s website, mobile app, or other digital properties.

Integration with Supply-Side Platforms (SSPs)

The publisher integrates with SSPs, which are technology platforms that help publishers manage and sell their ad inventory programmatically. The SSP facilitates the auction of ad impressions to advertisers and connects the publisher’s inventory with demand-side platforms (DSPs) and ad exchanges.

Ad Request Generation

When a user visits a webpage or interacts with a digital property with available ad space, the publisher’s ad server generates an ad request. This ad request contains information about the user, the context of the ad placement, and the available ad inventory.

Real-Time Auction

The ad request is sent to the SSP, which conducts a real-time auction for the ad impression. Advertisers via DSPs bid on the ad impression based on targeting criteria, such as demographics, interests, browsing behavior, and bid prices.

Bid Evaluation and Winner Determination

Advertisers’ bids are evaluated based on factors such as bid price, ad relevance, and targeting criteria. The highest bidder’s ad is selected as the auction winner, and the ad server is notified of the winning bid.

Ad Serving

The winning ad is served to the user’s device and displayed within the available ad space on the publisher’s digital property. The ad server dynamically inserts the ad into the webpage or app, ensuring it appears seamlessly within the content.

Real-Time Reporting and Optimization

Throughout the campaign, the publisher monitors ad performance and revenue metrics in real-time through the SSP’s reporting dashboard. Publishers can track key metrics such as ad impressions, click-through rates, and revenue earned and make data-driven decisions to optimize their ad inventory and maximize revenue.

the_progress_of_programmatic_advertising

By leveraging programmatic advertising, publishers can efficiently monetize their digital ad inventory, reach a broader pool of advertisers, and maximize revenue opportunities while maintaining control over ad quality and user experience.

Types of Programmatic Advertising

Programmatic advertising encompasses various types, each tailored to specific formats and channels across digital media.

Real-Time Bidding (RTB)/ Open auction

RTB is one of the most widely used types of programmatic advertising. The buying and selling of ad impressions is completed in milliseconds. Advertisers bid on ad inventory based on targeting criteria and bid prices, and the highest bidder’s ad is served to the user’s device.   

Private Marketplace (PMP)

PMPs are invitation-only auctions where premium ad inventory is made available to selected buyers. Publishers offer exclusive access to their ad inventory to a specific group of buyers, typically at fixed prices or with negotiated deals. 

Programmatic Guaranteed 

Programmatic guaranteed involves the automated buying and selling of ad inventory through direct deals between advertisers and publishers. Buyers reserve ad space in advance at fixed prices, ensuring guaranteed impressions and premium placements.

Preferred Deals

Preferred deals are similar to PMPs but are non-exclusive and offer buyers priority access to premium ad inventory before it is made available to the open market. Buyers can review available inventory and negotiate pricing and terms with publishers before committing to buy.

Header Bidding

Another open auction that allows publishers to offer their ad inventory simultaneously to multiple demand partners before making ad calls to their ad servers, maximizing competition and revenue potential.

Open bidding (EBDA)

Open bidding is a Google product that allows external ad exchanges, SSPs, and ad networks to compete with Google  AdX demand in a single auction. The auction runs on Google servers rather than browsers, saving the progress’s loading time.

These are just a few typical types. With the ever-changing landscape, new technologies and strategies emerge to meet the shifting requirements of advertisers and publishers.

More to discover

Header Bidding: A Guide

Programmatic advertising trends

How much does programmatic advertising cost?  

Programmatic advertising encompasses various factors that determine its cost, such as:

  • Ad format
  • Ad placement
  • Type of industry
  • Device type
  • Traffic tier

The cost also depends on the CPM model it is priced. CPM refers to costs per 1,000 ad impressions.

Programmatic ads CPM, on average, cost between $0.40 and $2 or $3, which is significantly cheaper than other methods. 

This makes programmatic ads an affordable option for publishers and advertisers with limited budgets who want to include them in their marketing campaigns.

Benefits of Utilizing Programmatic Advertising for Publishers

Increased Revenue Potential

Programmatic advertising allows publishers to maximize their revenue potential by leveraging real-time auctions and competition among multiple demand partners. Through programmatic advertising, publishers can access a larger pool of advertisers, resulting in higher demand for their ad inventory. This increased competition often leads to higher CPMs and fill rates, ultimately driving ad revenue.

Improved Operational Efficiency

Publishers can automate tasks such as ad placement, campaign management, and reporting, reducing manual labor and operational overhead. Additionally, publishers can adjust pricing, targeting, and ad placements in real-time based on performance data.

Enhanced Targeting Capabilities

With advanced targeting capabilities, programmatic advertising delivers more relevant and personalized ads to users based on detailed targeting of user demography, device type, or user behavior. This not only improves user experience but also lead to higher engagement and conversion rates.

Diversed Demand Sources

Programmatic advertising allows publishers to reach a great pool of demand sources, including ad exchanges, DSPs (demand-side platforms), and ad networks. This helps publishers sell their ad space more effectively, increasing ad revenue.

Monetization of Unsold Inventory

This is the best way to monetize unsold or remnant inventory more effectively. Through real-time auctions, publishers can simultaneously offer their remaining ad impressions to multiple demand partners, increasing the likelihood of filling ad slots and generating revenue from otherwise unused inventory. This helps publishers minimize wasted ad space and optimize revenue across their digital properties.

Ad Fraud Prevention

Numerous ad networks, SSPs, and exchanges incorporated sophisticated fraud prevention systems into their platforms to counteract ad fraud while increasing yield. Initiatives such as ads.txt by IAB were introduced to combat domain spoofing alongside Google Analytics’ built-in traffic tracker, which effectively filters out invalid traffic.

Also read

How to Master Programmatic Buying in 2023? A Complete Guide

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Challenges while using Programmatic Advertising

While programmatic advertising offers numerous benefits to publishers, such as increased efficiency and access to a larger pool of advertisers, it also presents several challenges. 

Monetization Concerns

Programmatic advertising can lead to downward pressure on ad prices, as inventory is often sold through automated auctions where prices are determined in real-time. Publishers may find it challenging to maintain or increase their ad revenue per impression, especially if their inventory is perceived as lower quality or lacks differentiation.

Ad Fraud 

Ad fraud is one of the biggest concerns of both publishers and advertisers when running programmatic advertising. 

According to Juniper Research, the loss of digital ad spend to ad fraud could be $172 billion in 2028. 

Publishers must implement robust measures to detect and prevent ad fraud, as well as ensure brand safety by vetting advertisers and monitoring the content of ads displayed on their sites.

Lack of Control Over Ad Placements

Programmatic advertising may result in ads being displayed in contexts that are not aligned with a publisher’s brand or editorial standards. Publishers may struggle to maintain control over where their ads appear, especially in open exchanges where ad inventory is sold to the highest bidder without pre-approval.

Ad Blocking

The prevalence of ad-blocking software poses a significant challenge to publishers, as it can reduce the visibility and effectiveness of programmatic advertising campaigns. A solution called Adblock Adrecovery was introduced in Geniee to solve this concern. 

Contact us to get the demo of Ad Recovery here.

Dependency on Third-Party Intermediaries

Publishers may become overly reliant on third-party intermediaries, such as ad exchanges and ad networks, which can impact their relationships with advertisers and diminish their bargaining power. Publishers may also face challenges related to revenue sharing and fee structures imposed by intermediaries.

Addressing these challenges requires publishers to adopt a proactive approach to programmatic advertising. The approach includes implementing robust ad fraud detection measures, enhancing brand safety protocols, and investing in technology and talent to optimize monetization strategies while ensuring compliance with data privacy regulations.

FAQs

1. What is the difference between Programmatic Advertising and Real-Time Bidding?

Simply put, programmatic advertising is the process in which selling and buying digital ad inventory is automated with the support of new technologies. 

Meanwhile, real-time bidding is a technology protocol that facilitates that process. In real-time bidding auctions, ad impressions are sold and bought in milliseconds.

2. Are there any Disadvantages of Programmatic Advertising?

Although programmatic advertising is a preferable online monetization method with numerous advantages, it still has some drawbacks, like:

Ad Fraud and Brand Safety

Technical knowledge 

Reliance on Third-Party Intermediaries

However, these can be minimized if things are done right and get adequate attention.

3. Top Programmatic Advertising Platforms

Ad networks

Supply-side Platforms (DSPs)

Demand-side platforms (SSPs)

Ad exchanges

Data management platforms (DMPs)

4. What’s The Difference Between Programmatic And Display Ads?

Programmatic advertsing and display advertising are related concepts in digital marketing; however, they refer to two different facets. While display ads refer to a specific format of online advertising, programmatic advertising is a method of buying/selling that can include display ads among other formats. Programmatic advertising has transformed how display ads and other types of digital advertising are bought and optimized, offering precision targeting and efficiency gains.

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