Programmatic Advertising

By the end of 2021, it is predicted that 88% of all digital display advertising marketing in the United States will be done through programmatic advertising. So, what is programmatic advertising? 

What is Programmatic Advertising? 

Programmatic advertising, unlike traditional digital advertising methods, is the use of automated technology to buy ads. Programmatic advertising uses data analytics and algorithms to serve ads to the right user at the right time and the right price. 

We can summarize it as ad exchanges under human control but mediated by software. 

 Programmatic advertising is available across a wide variety of digital channels, including display, mobile, video, and social. 

 To understand buying in programmatic advertising, we need to know the terminology related to this process. Firstly, we can categorize buying in programmatic advertising into three different types:

1. Real-time Bidding (RTB): Also known as an open auction that everyone can participate in, RTB is the time when inventory prices are determined in real-time through an auction. As the name suggests, this is open to any advertiser or publisher. RTB is considered a cost-effective way to buy media with a broad audience. It occurs within a website’s loading time; approximately 100 milliseconds. RTB is a form of programmatic advertising, but not all programmatic uses real-time bidding. While about 90% of programmatic buying occurs through real-time bidding, there are other ways of programmatic advertising.
2. Private Marketplace (PMP): These are similar to auctions, but PMPs have restrictions on who can participate. Only selected advertisers can access PMPs by invitation only. However, in some cases, publishers may have a selection process that allows advertisers to apply for an invitation. An auction typically takes place, but the terms of the deal are negotiated in advance and create a more manual environment than standard RTB.
3. Programmatic Direct: This is when a publisher skips auctions and sells media inventory at a fixed CPM (cost per thousand impressions) to an advertiser (or multiple advertisers). It usually involves a fixed-price deal rather than an auction.
4. Mobile DSP: A mobile DSP is a software platform used to purchase mobile ad space. Nowadays, most DSPs can handle both mobile and desktop inventory. There are ad formats that perform well on both mobile and traditional screens. The most important of these is the 300×250 medium rectangle ad. This size makes up a significant portion of all display ad impressions and works well on both mobile and desktop.
5. Ad Exchange (Ad Exchanges): This is a platform where publishers and advertisers come together for ad buying and selling. RTB, which is open to all advertisers, is called an “open exchange” because it is the most comprehensive method. The method of receiving direct reservations with premium deals is called a “Private Exchange.” Ad exchanges can be compared to a trading floor of a stock exchange, but they work for digital display advertising. In short, the ad exchange sits in the middle of the programmatic ecosystem and connects to a DSP on the advertiser side and an SSP on the publisher side. There are numerous ad exchanges that publishers and advertisers can connect to. The largest ad exchanges can be listed as follows: AppNexus, AOL’s Marketplace, Microsoft Ad Exchange, OpenX.
6. Mobile Ad Exchange (Mobile Ad Exchanges): Nowadays, most ad exchanges also manage mobile inventory because mobile has become a significant part of digital advertising. 

Additionally, we should be aware of the following terms: 

1. Trading Desk (Trading Desks): This system manages DSPs on behalf of advertisers, and digital investments are managed here.  
2. Data-Driven Advertising: The fact that programmatic advertising works with a data-driven ad model is one of the reasons why it is so important today. In programmatic advertising, ad campaigns are created for specific audiences determined by the analysis of data, thus significantly increasing efficiency. 
3. Data Management Platform (DMP): All data in programmatic advertising processes are managed on this platform. In the DMP, we can combine, measure, and optimize the data of all campaigns published on ad platforms. To fully benefit from the many advantages of programmatic advertising, the DSP needs to be connected to the DMP. A standalone DMP is essentially a data center containing information about users and needs to be connected to a DSP.  
4. Publisher: These are companies that distribute digital publications. Social networks like Facebook and premium news and content sites can be given as examples of publishers.  
5. Ad Tag: Advertisers use ad tags to direct the browser to a specific ad. They determine the size, type, and URL of each ad. Moreover, ad tags also collect campaign data and verify specific metrics such as impressions and clicks.  
6. Viewability: This refers to the viewing of ads by the target audience. Programmatic ensures that we are confident that the user has fully viewed the ad on the platform where the ads are published. According to IAB’s Display Advertising Standards, for an ad impression to be considered “visible,” at least 50% of the image must be on the user’s screen for at least 1 second. Programmatic reports to the advertiser what proportion of the impressions they purchased were actually viewed by real users. An advertiser who wants to make sure their ads are viewed can buy not only impressions but also viewable impressions.  
7. Ad Server: This collects all campaign information across publishers, ad networks, search, social, etc. It also verifies whether impressions are properly served and helps with the optimization of ad elements.  
8. Affiliate Network: This is a program that connects advertisers and affiliate marketers. Affiliates are paid when they successfully convert a viewer on their site.  
9. Ad Network: This serves as an intermediary between a group of publishers and advertisers. It collects unsold inventory from publishers and sells impressions at a lower price (usually of lower quality). 
10. Header Bidding (Header Bidding): This is a technique where publishers offer their inventory to multiple ad exchanges simultaneously before going to ad servers. By using this technique, publishers can increase competition and, in turn, increase their revenue. 
11. First Price Auction (First Price Auction): Advertisers bid for an impression that pays the highest bid to the publisher. The highest bidder determines the price of the impression. 
12. Second Price Auction (Second Price Auction): Advertisers bid for an impression that pays the highest bid to the publisher. The highest bidder determines the price of the impression. 
13. Preferred Deal (Preferred Deal): Advertisers skip auctions to provide special access to inventory. 

Ad inventory is generally purchased through real-time auctions. Advertisers can buy on a per-impression basis using programmatic channels, allowing them to target the right audience. Since the process is automated, programmatic advertising guarantees speed and efficiency in purchasing that traditional media does not offer. 

How Does the Process Work?

Stage 1: 

When a viewer visits a website using programmatic advertising, automatic bidding begins to serve an ad to this viewer. 

Stage 2: 

The publisher lists the ad space of this viewer on the SSP. The SSP acts as a seller for the publisher, allowing advertisers to know the characteristics of the ad space that enables site, user, and DSPs to bid. Essentially, they advertise the product (ad space) for sale. 

Stage 3: 

After receiving information about the ad space, the SSP analyzes the user’s cookies to determine factors such as geography, demographics, interests, etc. 

Stage 4: 

Then, the corresponding DSP reviews the information about the user provided by the SSP. DSPs act to help advertisers select ad space that is compatible with the advertiser’s budget and targeting parameters. They assign a value to the ad placement based on the website and the user’s characteristics. 

Stage 5: 

On behalf of the advertiser, the DSP submits a bid for the ad placement. All this happens in real-time, which is why programmatic advertising is often referred to as real-time bidding (RTB). 

Stage 6: 

After receiving bids from various DSPs, the SSP selects the winner. Different SSPs have different bidding strategies. Waterfall bidding, client-side header bidding, and server-side header bidding are considered the most efficient and fair. 

Stage 7: 

After the winning bid is selected, the SSP displays this ad to the user on the publisher’s site. This entire process takes place within milliseconds as the page loads for the user. 

What Are the Forms of Programmatic Advertising? 

Programmatic advertising now encompasses different ad formats. A decade ago, it was only display advertising, but now there are various and growing options. 

Display: The oldest form of programmatic advertising is display advertising. However, ads have evolved from being static to dynamic. 

Video: Programmatic buying and serving of digital video across channels is now an important strategy for marketers. There are two different types of programmatic video: In-stream and out-stream (in-banner video is sometimes classified as a type of out-stream ad). 

In-Stream Ads: Appear within the video player itself. For example, ads shown before a YouTube video are called in-stream ads. There are three types of in-stream ads: 

• Ads shown before the video 
• Ads shown in the middle of the video 
• Ads shown after the video 

Out-Stream Ads: Out-stream ads appear between online articles. They are embedded within the content or displayed as pop-up windows. Additionally, some types of display ads are included in video ads, displayed not in the video player but in search results or video suggestions on video content sites. 

Websites and Social Media: These are programmatic ads that match the content on a website, social network, or another application. For example, it could be sponsored content, so adjusting content-based targeting and customizing your ads is crucial. 

Audio: The development of Amazon Alexa and the rise of applications like Spotify have witnessed the emergence of another format: Audio. This format offers a rich source for both content-based and user-centric targeting. With Google offering advertisers the chance to buy programmatic audio ads through its DSP, it is rapidly maturing. 

Out of Home (OOH) Advertising: Programmatic is entering the world of outdoor advertising with the use of digital signage. The laborious production process involving the advertiser, agency, media vendor, and printer is on the verge of disappearing. Instead, integration between existing programmatic platforms offers real-time outdoor ad optimization and reactivity. 

Television: Currently, programmatic television ad spending is not significant (only 2.5% of total ad spending in the US). However, many major industry players like Google, SKY, and Netflix are building the infrastructure needed to support the transition to programmatic TV. Despite the mentioned programmatic formats, the format needs further development. 

Native Ads: While browsing publisher websites or social media platforms, you may have encountered posts with headlines like Sponsored Posts, Featured Stories, or Recommended for You. When you click on these posts, you are redirected to a third-party website. This is an example of native advertising. 

Native ads camouflage themselves in the media format of the platform they are placed on and allow brands to present content in a non-salesy manner. Therefore, unlike banner ads, native ads appear as part of the interface and do not disrupt the UX. Unlike programmatic display ads that appear in the header, footer, or sidebar, programmatic native ads can appear elsewhere on a web page or application. Some native ad formats include: 

• In-Feed Units 
• In-Article Ads 
• Paid Search Units 
• Recommendation Widget Units 
• Featured Lists 
• Sponsored Content 
• Rewarded Video Ads 
• In-Ad Native Units with Content (IAB Standard) 

How Is Targeting Done in Programmatic?  

Contextual Targeting: Contextual targeting aims to display ads based on the content of a website. For example, you can choose a website that only provides sports news. Keyword Targeting: A type of content-based targeting focused on serving ads based on specific keywords. For example, if you are a shoe-selling brand, you can target accordingly. Your keyword list is matched with the keywords used in the article to ensure the best match for your ads.  

Data Targeting/Audience Targeting: Ads can also be displayed based on a user’s cookies rather than the context of a website. Geo Targeting/Location-Based Targeting: Brands use geographic targeting to reach customers related to their location. If you provide services in Izmir, it may not make sense to have displays in Ankara.  

Retargeting: On average, 2% of visitors convert on their first visit to your site. Retargeting aims to bring back the other 98%. Every time a potential customer visits your site, a cookie is placed on their computer. This information can then be used to target ads to this specific person, increasing the chances of them returning to purchase from you. Retargeting is a highly efficient way to re-engage people with your brand since they already have a relationship with you. 

How Is Pricing in Programmatic?

Programmatic tools use CPM-based pricing, meaning you pay for the cost per 1,000 ad impressions. CPMs can vary depending on the quality of the list and the level of targeting. The higher the quality of the inventory or the more specific you want to be in your targeting, the higher the price. Prices also vary by industry, device, format, and placement on the page. 

What Is the Difference with Google Ads?

Google Ads is a type of DSP, but it is limited to Google’s inventory. Although Google Display Network has access to a large percentage of websites worldwide, there are places where it does not have access. 

One of the main advantages of using a programmatic DSP is that you can access inventory that is not covered by Google’s ad network. For example, Facebook display ads are not part of Google’s ad inventory. This means that if you run your campaigns through the Google Display Network, they will not appear on Facebook. 

Why Is Programmatic More Beneficial?  

Whenever and How You Want! When setting your bid, you can adjust the frequency and timing. If you know the people you want to reach typically browse the internet throughout the day, you can tailor your campaign to bid only on ad spots that match your criteria. This is a huge advantage for your business as it allows you to focus even more on your target market. You can reach them at the exact time of day they will be online. 

• It also prevents wasting money. You won’t invest in ads that people in your target market won’t see. This allows you to spend your money on reaching your target audience better. 
• Set Your Own Price! Another benefit of this method is the ability to set the amount you want to pay. Just like in pay-per-click (PPC) advertising, you determine the maximum bid you are willing to pay.

This makes programmatic marketing a flexible option for your business. You decide the amount you want to pay when someone clicks your ad. 

This is a great option for your business as you set the budget. You can control how much you spend. This allows you to spend money only on the people you want to reach, reducing your costs and maximizing conversions. 

• Get Relevant Impressions! With programmatic marketing, you only pay for relevant impressions. You can set the minimum number of impressions you want to receive. This helps ensure your campaign reaches its goals, resulting in a better return on investment (ROI) for your business. 
• Benefit from Advanced Targeting. Programmatic marketing allows you to target a specific audience. This is an effective way of marketing because you can understand what type of content resonates with your target audience. You’ll be able to see which content leads people to click your ad and which content leaves a positive impression on your target audience. 

You can also create a better user experience with these ads. Since you’re using customized ads to reach these customers, the likelihood of them clicking the ad is higher. Ads are targeted at people with the highest probability of converting, allowing you to better target your market. 

• Define Your Advertising Purpose. This type of marketing allows you to set goals. You’re not just putting your ads in front of people who you hope will convert. Instead, you can choose a specific goal you want to reach. 

Your goal can be anything from brand awareness to conversions. The ability to set various goals makes this a versatile option. 

• Use with Different Media. Programmatic marketing is versatile. One of the most important points is the ability to use programmatic marketing across different media. 
• More Transparency! As advertisers are aware of the ad inventory they purchase and the audience they target, they can monitor their ads’ performance, see how their budgets are spent, and optimize their campaigns in real-time to achieve the desired results. 

Additionally, the lack of human dependency reduces the risk of human error. 

How to Start with Programmatic Advertising?

Initially; 

• Know Your Marketplace. As a person/company entering a new advertising space, you will encounter a series of new ideas and terms; take the time to familiarize yourself with them.  
• Set Your Goals. As with everything in digital marketing, it’s essential to set your goals upfront. Use existing data to determine what kind of advertising you need and establish an appropriate strategy. Create your short and long-term goals.  
• Determine Your Budget. Make sure you have an adequate budget to start with a new platform like programmatic or allocate additional funds.  
• Work with the Right Person. In programmatic, you’ll need talented people to plan, control, and optimize your purchasing process.  
• Be Cautious and Controlled. One challenge with programmatic is that relying on algorithms can lead to ads appearing in the wrong places.  

Make sure your blacklist is continually updated and that you are not publishing ads on inappropriate sites.  

•  Beware of Fraud. Don’t fall victim to fraud committed by publishers, including bot fraud.  

 Or let Perfist handle all of these for you, and you can sit back and relax with confidence.