You’ve probably heard the term “programmatic advertising” because it’s everywhere in marketing. Loads of blog content has been written about it. Several “TED Talk” type presentations have been done, etc. etc. To a lot of people it’s still a near meaningless buzzword though. Whatever it is the IAB (Internet advertising Bureau) estimates that from 2013 – 2018 programmatic advertising spend will have increased by 80%.
What Is Programmatic Advertising?
To put it simply, it’s a very granular way to Target an audience. It gives you the opportunity to target large groups of people using different metrics. Not only can you can target by age, location and annual household income, you can also target by people’s interests. This is extremely useful particularly in situations where you are trying to sell a product. You can directly target users who have shown interest in purchasing an automobile, exercise equipment, etc.
You Purchase Each Ad View Individually
Typically, when you bought display advertising in the past you paid a CPM rate. This is an acronym for the payment model: “cost per mille” or cost per every thousand views. This is common not only in digital but also in TV and print where an advertiser pays every thousand times the ad is shown. In programmatic advertising – impressions are sold on an individual basis. While there can be an eCPM or “effective CPM” this looks much higher than average in programmatic because each individual impression is being sold on a 1 to 1 basis. The advertiser pays this premium have targeting layered onto their campaign, ensuring that it’s shown to a specific type of user who is more likely to respond favorably to their brand. If you were a sports brand for example you’d want to target users with a known interest in sports – anyone else is most likely going to be a waste of your ad budget.
Programmatic Advertising is More Effective
The most important factor in programmatic advertising is overall effectiveness. This new method of targeting allows you to make sure that the majority of people seeing your ad are interested in what you offer. This is most likely going to increase your ROI and save you a lot of money that was previously wasted on uninterested people. Programmatic advertising allows you to target a specific message and creative to the right person at the right time in the right venue. It’s more about buying the audience itself than a large amount of visibility on a particular website. This is much different than the traditional media mindset where you’re essentially buying visibility in a place with a lot of eyeballs. Whether it’s a widely read newspaper, a billboard in a heavily trafficked area or a slot on a popular tv show you’re basically casting a wide net and hoping to catch some fish. Programmatic allows you to use data to specifically target a particular audience where before you were just putting your brand in front of a huge audience and hoping some of them responded.
Machine Learning Algorithm Optimization
Another benefit of programmatic advertising is the efficiency of the optimization process. These types of campaigns tend to optimize better because it’s done by machine learning algorithms collecting data across a wide network of websites and campaigns. The overall learning that a DSP retains from running a variety of different campaigns can be useful to advertisers. For example, if you’re a lawyer and your programmatic buyer has run successful campaigns for lawyers in the past you have a really great head start using that data.
What Does RTB Mean?
RTB is an acronym for real-time bidding. Real Time Bidding is just the way that programmatic media buys are executed on a DSP platform. A DSP or “demand-side platform” is a software platform that enables websites to sell advertising inventory to the highest bidder. They put their unsold inventory up for auction and media buyers can then come in and buy this unsold inventory at a discounted rate. The DSP is able to plugin to data providers and add layers of targeting via their technology. So essentially real-time bidding is just a name for the type of technology used to execute a programmatic campaign.
How Does It All Work?
Here’s a quick step by step run down of how a programmatic ad is sold:
- A user visits a website with a tag from a DSP on it.
- The DSP makes a call to the user’s browser and identifies their unique ID
- The DSP sends this ID to several data providers that return data sets attached to the ID.
- The DSP scans it’s database for all of the advertisers looking to show their ad to a user that fits these data sets.
- The DSP serves whichever ad is willing to pay the highest dollar amount for a view from a user with these attributes.
This entire process happens within a fraction of a second as the users page loads.
This is a pretty good summary of what programmatic advertising is. Whether or not it’s right for your brand really depends on a lot of different factors. A programmatic campaign usually requires a large budget so if you are just getting started it may not be a fit for you. Brands who are looking to spend several thousand dollars to target the right users online can benefit heavily from investment in programmatic display. While a larger budget is needed in order to see real results a larger return is almost guaranteed.