What You Should Know About Programmatic Advertising

01 March 2016

Laurence Knopf


The world of digital marketing and advertising is an ever changing one. The advertising industry has put in great effort to make sure that advertising revenue is used efficiently. One of the latest innovations to do this is programmatic advertising.

The money spent on advertising is an investment, and like any investment, it needs to provide returns. Programmatic advertising promises to do just that – provide a measurable return on investment. The goal is to automate ad buying and target specific audiences. So, what is programmatic advertising?

The Basics of Programmatic Advertising

Basically, programmatic advertising is an automated way to use technology to buy optimised ads in real-time. In other words, a machine will buy the ads.

In the most basic form, Google Adwords is a form of programmatic advertising. This uses complex algorithms to target ads at viewers based on demographics, interests, browsing history, and other factors. However, programmatic advertising is much more complex than Google Adwords.

Programmatic advertising can now be used across a wide range of media platforms. So, the ad can show up in search results, social media platforms, on desktop, on mobiles, and even on TV! The bidding process is all cared for automatically. The beauty of programmatic advertising is that it is fully measurable. So, during a campaign, the ad buyer can monitor how ads are performing and then make adjustments accordingly.

There are 2 forms of programmatic advertising: direct advertising and real-time bidding (RTB). Direct advertising is not based on bids and with it you can ensure that your ad is guaranteed to show up. RTB is based on bidding (like Adwords).

The Trend in Programmatic Advertising

Since 2014, there has been a steady rise in the programmatic advertising, with more and more marketers using this. At the same time, there has been a steady decline in traditional display advertising. It is estimated that in 2016 over $20 billion will be spent in this type of advertising.

What does this mean? More and more brands are using programmatic advertising and seeing increase in ROI. This means that marketers will have to start using programmatic advertising if they want to continue marketing their brands successfully.

How Programmatic Advertising Works

It can be difficult to understand exactly how programmatic advertising works. What happens is that when a user clicks on a website, a relevant advert will be chosen and displayed on the page. This all happens in under 0.4 seconds. Let's break this down into the various steps to get a better understanding:

  1. A user clicks on a URL, and the publisher's page starts to load.
  2. The publisher then checks with the ad server if a relevant ad is available. If not, it goes to Ad Exchange.
  3. Ad Exchange then sends requests to various 'demand-side platforms' (DSP). This is the technology responsible for managing the ads.
  4. The Ad Exchange communicates with the various DSPs anonymous information about the user, page specifics and website category.
  5. The DSPs then use the information from the advertiser to determine which ad to show. This is based on the budget for ads and targeting information.
  6. The optimum bid is calculated and information relayed back to the Ad Exchange.
  7. The Ad Exchange chooses a winning bid from the various DSPs.
  8. The publisher's ad server tells the webpage which ad to display.
  9. The browser displays the winning ad, and the winning DSP is informed that the ad was shown.

This all happens in the space of time it takes for a webpage to load. It is a fully automated ad system that will save publishers and marketers a lot of time in constructing ad campaigns.

How to Use Programmatic Advertising

Before automated programmatic ad buying, it was necessary to spend much time in constructing an ad campaign. The website would have to be optimised, research was done on the audience, and a budget worked out. Then specific ads would have to be designed and optimised for the various media platforms – social media, video marketing, and mobile devices.

Programmatic advertising has the immediate advantage of freeing up more time, which can be used to focus on an ad campaign strategy.

How can you use programmatic advertising? Here are steps necessary in setting up your first ad campaign.

1. Decide on the campaign goals

Before starting on your campaign, you need to define what your goals will be. This is often referred to as the key performance indicators (KPI). So this could be:

  • Increase brand awareness.
  • Reach more users.
  • Engage with more people (i.e. having people click on the ads to your site).

2. What is your target audience

You now need to determine who your target audience is. This can take into account various factors:

  • Demographics.
  • Will the ads be displayed on desktop, mobile, or tablets? Or on a mixture of all of them?
  • What kind of sites will the ads be shown on? What kind of sites will they not be shown on?
  • What your budget is.
  • How many times will a customer be shown the ad.

You are now ready to start your ad campaign.

3. Optimise and analyse

You, or the company who is managing your ad campaign, should regularly analyse the campaign to make sure goals are being met.

It is always good practice to start small and do some A/B testing. So, have 2 ads and test to see which one has the best response. When you know which one performs the best, you are ready to increase your campaign activity.

You will be able to see which media is the most effective and what time of day is the best.

4. Review the results

Once the campaign is over, it is time to review the results and determine if there was an appropriate return on interest. Find out what worked and what didn't and put that information to use in your next programmatic ad campaign.

The Future of Digital Advertising

It seems that at least for the time-being, the trend in programmatic advertising will continue to rise. It's important that you embrace this form of advertising if you want to keep you business successful and attract new customers.


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