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What Is Programmatic Advertising And Why Do You Need It?

What is programmatic advertising

If you’re like many of our clients, you’ve probably had great successes using digital advertising to help grow your business over the past few years. You’ve developed Google Ads campaigns that are a reliable part of your lead or sales generation machine, and have utilized paid social campaigns to expand awareness of your brand to keep fueling your sales engine.

But with a new decade coming, you may feel like you’ve maximized returns from your current platforms. Perhaps it’s time to evolve your advertising strategy to grow your business (and to bolster your job performance for your next review). If this sounds like you, you need to consider programmatic advertising.

No doubt you’ve heard about programmatic advertising over the past few years. Maybe your current agency has preached the powers of programmatic, or maybe you’ve heard speakers at a trade show urge the audience to consider the approach. But what is programmatic advertising, really?

By definition, programmatic advertising is the automated buying and selling of digital advertising. Programmatic networks rely on algorithms to place ads for advertisers, which allows advertising agencies like Raka and our clients to focus more of our human capital on strategy and analysis, rather than on operational tasks which typically result in minimal returns.

How did programmatic advertising arise?

In the early years of digital advertising, ad placements were bought and sold the same way that it had been traditionally: publishers sold ad inventory to agencies, who then re-sold that same inventory to advertisers. That’s where the term “agency” came from: agencies acted as broker for the publishers and buyer agents for advertisers, negotiating on behalf of both parties to place ads in print publications the world over.

As publishers, advertisers, and agencies became more savvy, two things happened: first, all parties realized that they could work directly with one another to buy and sell media, and the demand for a more direct buying platform increased. More importantly, publishers kept adding more pages to their sites, increasing the available digital advertising inventory in ways that agencies and advertisers couldn’t keep up with. Programmatic was borne out of the necessity to fill this “leftover” advertising inventory. If inventory could be bought and sold automatically, it was reasoned, advertisers could gain more exposure and publishers could make more money. Everyone would be happy. If it seems like this is where the agency part of this goes up in smoke, it’s not.

The reality is that the technology behind programmatic is expensive to run, which you’ll understand more about why in a few minutes. The costs to get in have also historically been high, although programmatic exchanges are increasingly seeing lower barriers to entry. Agencies help brands whose budgets may not be high enough on their own to get access to the world’s biggest and best programmatic networks by working with multiple brands to meet minimum thresholds, allowing more brands access to programmatic inventory than ever before.

How does programmatic work?

There are a handful of pieces involved in programmatic. Consider this a roster of all the pieces that are involved in implementing and executing a successful programmatic advertising campaign.

There are three main players in any programmatic effort: the advertiser, the publisher and the audience.

  • Advertisers are brands looking to promote their product, service or idea.
  • Publishers are the sites or apps with available ad inventory.
  • The audience is the group of potential buyers or investors that advertisers are looking to reach.

These three players have been present since the dawn of advertising, some 315 years ago.

Digital adds the extra layer of networks such as the Google Display Network, Facebook Audience Network or similar entities, who may buy up inventory on publisher sites or apps, and have the initial claim to this inventory. Because there is so much content online and so many potential ad placements as a result, it’s not uncommon for networks to be unable to sell all their inventory. For this reason, most networks allow programmatic vendors access to their networks as a failsafe to ensure that their ad space is always sold.

As we outlined above, it used to be that these were the only three entities involved in advertising, with the exception of agencies, who acted as intermediaries between publisher and advertiser. While agencies are still usually involved in programmatic advertising, their role as intermediary has been replaced by three things: the demand-side platform (DSP), ad exchange and supply-side platform (SSP).

Demand-side platforms (DSPs)

DSPs are essentially agents for the advertiser. Working in tandem with Data Management Platforms (DMPs), they’ll analyze the audience of a particular placement (often in real-time) and will algorithmically set a bid for the placement.

Supply-side platforms (SSPs)

If DSPs are agents for the advertiser, supply-side platforms are agents for the publisher. They ultimately select the winning bid for a placement and publish that ad to the page or app that an audience is served. Lest you think that all SSPs are programmed to automatically select the highest bid (i.e. maximum profit), there are many signals that SSPs consider when selecting a winning bid, including the relevance of the ad to the audience who will see it, which is one of the most unique factors about programmatic buying versus a more traditional approach.

Ad exchanges

Ad exchanged are where the bidding takes place. It’s easy to think of an ad exchange like the stock exchange, where competing brokers (advertisers and/or ad networks) place bids in an open market via DSPs on inventory, which are then purchased by SSPs and published. It’s possible that some programmatic sellers will utilize private exchanges, which are simply exchanges that restrict the advertisers who are eligible to win bids, typically due to budget but also due to audience relevance.

How is programmatic different from traditional display?

The biggest difference between traditional display and programmatic is the inventory: if an advertiser buys ads on the Google Display Network (GDN), they can only earn placements on the Google Display Network. In this situation, “only” is a bit of a misnomer, as the GDN includes over 3 million websites, but the point is that there’s a limit.

The other chief difference is the pricing model. Advertisers buying into display networks like GDN or the Facebook Audience Network can be billed when ads are viewed, clicked or even when users convert, depending on their preference. Advertisers buying into programmatic networks are charged based on the number of people who see the ad.

What types of things can programmatic do?

Traditional placements

Programmatic is used by some brands to supplement their existing display placements. Because programmatic is a network-agnostic tactic, brands who want more impressions (or more intelligent impressions) often turn to programmatic to help grow their audience. This inventory isn’t always on the highest quality sites or in the most viewable locations, but because of this they’re often exceedingly cheap, sometimes costing fractions of a cent. Taken as  supplemental tactic to existing advertising efforts, using programmatic to earn more traditional display placements can absolutely be a winning tactic.

Real-time bidding (RTB)

RTB is what a lot of people think about when they talk about programmatic, and for good reason: it’s what a lot of programmatic is. Most programmatic placements are bought and sold in real time (i.e. in the time it takes a site or app to load) via the ad exchanges mentioned above, which allows brands to earn the most relevant placements in front of the most valuable audiences.  

Hyperlocal placements

As long as it’s done intelligently, all digital advertising is geographically targeted. But targeting a country or a state isn’t always the best way to get in front of your ideal audience. Hyperlocal, geo-fenced or geotargeted ads allow advertisers to bid on inventory being served to users within a very small geographic area, from a 100-mile radius around a location down to a 10-meter square around that same location. It’s a great way to serve a custom message to users attending an event, boarding a flight or even waiting in line for some fried dough at the beach.

Digital out-of-home (OOH)

More and more out-of-home ads are turning digital, from billboards to TV screens in public transit to taxi-cab monitors and more. Like so much other inventory, this ad space is often sold programmatically, meaning there are lots of opportunities for brands to reach their audiences even when they aren’t looking at their phones or computers.

Connected TV

The growth of over-the-top (OTT) viewing platforms like Roku, AppleTV and Chromecast coupled with the ubiquity of digital streaming services like Netflix, Hulu, Amazon Prime and more have created a whole new world of opportunities for advertisers. More recently, standard cable services have embraced smart advertising, opening up even more advertising placements for users watching standard television programming. Premiums on standalone connected TV campaigns often start in the six figures, meaning that programmatic may offer opportunities to access this inventory at a more reasonable cost.

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What are common concerns about programmatic?

Viewability

Because programmatic is occasionally used to sell inventory that exists at the bottom of pages or buried deep within apps, there have traditionally been concerns about how many programmatic placements are actually viewable by audiences. Over the past few years, many more checks–namely, a billing model around viewable impressions–have been implemented by programmatic platforms to ensure higher levels of ad viewability. As a result, viewability rates are increasing almost universally.

Ad fraud

Historically, spam and bot clicks have made fraud a concern for all digital advertisers, and while some platforms like Google have a team dedicated to reviewing fraudulent clicks and refunding advertisers impacted by fraud, programmatic platforms have been a bit slower to catch up to the need for fraud analysis and prevention. This doesn’t mean that there aren’t failsafes in place to prevent fraud, but because programmatic is so widespread and there are so many publishers and sites where ad inventory exists, fraud will always be a concern, just as it’s always a concern for any digital advertising network.

Placements/brand security

Programmatic has largely been a managed service, although self-service programmatic is becoming more and more ubiquitous. One of the drawbacks to the managed service component–and to programmatic in general–is the inability to control for placements that could be blacklisted via other tools, such as Google or Facebook. This means that brands could be buying ad space on sites whose audiences are in direct contrast with the types of services or products they provide, or whose content is generally objectionable to begin with.

What are the advantages of programmatic?

Guaranteed volumes

The viewability and quality of some impressions may be in question, but a huge benefit to programmatic campaigns is knowing how many impressions a campaign will generate before the campaign launches, which is never a guarantee with standard display, search or paid social campaigns. This helps to control costs and to plan other components of your marketing budget, with the comfort of knowing that at least one channel won’t require incremental budget to meet its goals.

Greater audience insights

Because programmatic campaigns require data management platforms to run, every single impression means that audience data is reviewed, evaluated, and optimized against. This information in time becomes available to the advertiser so they may gain a better understanding of their audience, including what types of message and creative that audience is more likely to respond to.

Real-time reporting

Of course, with so much bidding taking place in real time, results are also available in real time for advertisers and publishers alike. Typically, data in Google Ads, Facebook Ads and other popular platforms is delayed by at least a few hours, but programmatic data can be reviewed within seconds of a placement being earned. While this is definitely a pro compared to waiting for data, it can also be a con in that strategic reports should be composed of data gathered over a period of time, not just an hour, afternoon or day. That said, having real-time insight into whether a certain placement, creative, or message is or isn’t performing can be a boon to advertisers, and there’s no other approach that can deliver this sort of reporting. Now that you know what programmatic is all about, it’s time to get your feet wet and explore if this medium is right for you. And if you’ve tried it in the past and didn’t get the results you wanted, it’s worth exploring again. The landscape has changed dramatically, even in just the last year. If you have questions about programmatic advertising or are interested in learning more about how Raka can help your brand grow using programmatic, contact us today. We look forward to hearing from you!

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