{"id":73938,"date":"2023-03-17T13:30:13","date_gmt":"2023-03-17T10:30:13","guid":{"rendered":"https:\/\/www.creatopy.com\/blog\/?p=73938"},"modified":"2023-07-24T14:15:22","modified_gmt":"2023-07-24T11:15:22","slug":"programmatic-advertising","status":"publish","type":"post","link":"https:\/\/creatopydevelopmentblog.kinsta.cloud\/blog\/programmatic-advertising\/","title":{"rendered":"Programmatic Advertising 101: How to Navigate Automated Media Buying in 2023"},"content":{"rendered":"

The <\/span>average American is estimated to see up to an overwhelming 10,000 ads daily<\/span><\/a>. Moreover, all of these ads are tailored to each individual. Pretty incredible, right?<\/span><\/p>\n

Ever wondered how advertisers manage to deliver such a large amount of curated ads on millions of websites and apps?<\/span><\/p>\n

I have two words for you: <\/span>programmatic advertising<\/b>.<\/span><\/p>\n

I. What is programmatic advertising?<\/a><\/strong>
\nII. How does programmatic advertising work?<\/a><\/strong>
\nIII. Brief history of programmatic advertising<\/a><\/strong>
\nIV. Display advertising vs. programmatic advertising<\/a><\/strong>
\nV. Types of programmatic advertising<\/a><\/strong>
\nVI. What are the benefits of programmatic advertising?<\/a><\/strong>
\nVII. What are the challenges of programmatic advertising?<\/a><\/strong>
\nVIII. The future of programmatic advertising<\/a><\/strong><\/p>\n

<\/a>I. What Is Programmatic Advertising?<\/h2>\n

Programmatic advertising refers to the use of software to automate the process of selling and buying digital ad space.<\/span><\/p>\n

The concept can be a bit difficult to grasp at first, so let\u2019s expand on this programmatic advertising definition.<\/span><\/p>\n

There are two big players in the game.\u00a0<\/span><\/p>\n

On one side, we have <\/span>the publishers<\/b>. They are basically website and app owners with ad inventory they wish to monetize. On the other side stand <\/span>the advertisers<\/b>. These are brands or advertising agencies that want to rent digital advertising space from publishers to show relevant ads to their audience.<\/span><\/p>\n

Both publishers and advertisers combine different technologies to run advertising campaigns automatically. Here are the main platforms in the programmatic ecosystem:<\/span><\/p>\n

1. Supply-side platforms (SSPs)<\/h3>\n

Also known as sell-side platforms, they help publishers list, manage and sell their ad inventory on multiple ad exchanges at a time. Google Ad Manager, Amazon Publisher Services, Xandr, and OpenX are the SSPs advertisers use more commonly.<\/span><\/p>\n

2. Demand-side platforms (DSPs)<\/h3>\n

They are used by advertisers to set up and manage programmatic campaigns on multiple ad exchanges. A few examples of well-known DSPs are Google Display & Video 360, Amazon Advertising, Roku, and Adform.<\/span><\/p>\n

Some DPSs can be linked directly to SSPs, but more often than not, the two are linked through an ad exchange.<\/span><\/p>\n

3. Ad exchanges<\/h3>\n

These are digital marketplaces that enable publishers and advertisers to buy and sell ad inventory. Google Ad Exchange, OpenX, Rubicon Project, and Xandr are names of popular ad exchanges available right now.<\/span><\/p>\n

<\/a>II. How Does Programmatic Advertising Work?<\/h2>\n

When someone visits a webpage, an ad request containing details about the user, available ad space, and website in case is sent by the publisher\u2019s SSP to an ad exchange or directly to DSPs. You can think of this as an ad for the ad placement (I know, it\u2019s quite meta).<\/span><\/p>\n

Advertisers\u2019 DSPs analyze the offer using algorithms that determine the value of the ad space based on factors such as campaign allocated budget and audience targeting. If they find it\u2019s a good fit, a bid will be sent to the publisher\u2019s SSP directly or through the ad exchange.<\/span><\/p>\n

The publisher\u2019s SSP receives multiple offers from various advertisers and ad exchanges simultaneously and picks a winner whose ad is displayed on the website when the page loads.\u00a0<\/span><\/p>\n

\"how<\/p>\n

To be fair, this is how real-time bidding works, which programmatic advertising is most often associated with. So much so that there is a common misconception that all ad spaces are traded in real-time.\u00a0<\/span><\/p>\n

Not true.<\/span><\/p>\n

Advertisers can buy ad spaces in real-time auctions as well as directly from publishers. But we\u2019ll explore the different programmatic advertising types later on.<\/span><\/p>\n

<\/a>III. Brief History of Programmatic Advertising<\/h2>\n

The <\/span>first online ad was published on the internet in 1994<\/span><\/a>. From that moment on, more and more publishers started selling ad space to advertisers.<\/span><\/p>\n

Of course, at the time, manual direct media buying was the norm, which meant advertisers and publishers had to go through a lengthy process to seal the deal.<\/span><\/p>\n

The back-and-forth included advertisers preparing and sending offers to publishers, who, in turn, provided information on campaign run dates, available ad placements, and other details. The advertisers would then review these and start potential negotiations.\u00a0<\/span><\/p>\n

The ad designers would step in only after the two parties reached an agreement. When the banner ads were ready, the advertiser would send them to the publishers, who\u2014you guessed it\u2014would publish them manually on their websites.<\/span><\/p>\n

Besides the time-consuming aspect, manual direct media buying generally came with higher costs and a factored-in risk of human error.<\/span><\/p>\n

As time went by, publishers increased their ad inventory, and this traditional method of transaction just wasn’t cutting it anymore.<\/span><\/p>\n

In the late 2000s, programmatic advertising started to gain traction, and we saw the first DSPs, SSPs, and ad exchanges. These adtech platforms reduced the need for manual media buying.<\/span><\/p>\n

Then, in the early 2010s, the growing use of mobile devices urged the widespread adoption of programmatic. Real-time bidding came into play, giving advertisers more control over their ad buying and helping them improve ROI.\u00a0<\/span><\/p>\n

Today, most of the ad space is traded programmatically. According to eMarketer, <\/span>programmatic digital display ad spending in the US surpassed a hundred billion dollars<\/span><\/a> in 2021, growing year-on-year after that.<\/span><\/p>\n

\"Programmatic<\/p>\n

<\/a>IV. Display Advertising vs. Programmatic Advertising<\/h2>\n

Advertising beginners can have trouble telling the difference between display ads and programmatic ads, so let\u2019s get that out of the way first:<\/span><\/p>\n

Programmatic<\/b> is a way of buying and selling ads.<\/span><\/p>\n

Display <\/b>indicates the creatives that are <\/span>displayed<\/span><\/i> on websites or apps.<\/span><\/p>\n

Display ads can be delivered programmatically, but also non-programmatically, through advertising platforms like Google Ads. The second method is what is commonly referred to as <\/span>display advertising<\/span><\/a>.<\/span><\/p>\n

The two ways of running display ads require different strategies. Let\u2019s take a quick look at what differentiates programmatic advertising from typical display advertising.<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n
Programmatic advertising<\/b><\/td>\nRegular display advertising<\/b><\/td>\n<\/tr>\n
Cross-platform inventory, wider reach<\/span><\/td>\nOne ad network\u2019s inventory, limited reach<\/span><\/td>\n<\/tr>\n
Real-time bidding available<\/span><\/td>\nNo real-time bidding<\/span><\/td>\n<\/tr>\n
CPM preferred\u00a0<\/span><\/td>\nCPC, CPM, and CPV<\/span><\/td>\n<\/tr>\n
Frequency cap by hour & minute<\/span><\/td>\nFrequency cap by day<\/span><\/td>\n<\/tr>\n
Image, video, HTML5, native, rich-media, and audio ads<\/span><\/td>\nImage, video, HTML5, and rich-media ads<\/span><\/td>\n<\/tr>\n
Over 20 targeting methods<\/span><\/td>\nLimited targeting methods<\/span><\/td>\n<\/tr>\n
Dynamic creatives available<\/span><\/td>\nNo dynamic creatives<\/span><\/td>\n<\/tr>\n
Open auctions, private auctions, preferred deals, guaranteed deals<\/span><\/td>\nNo auctions and deals<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/a>V. Types of Programmatic Advertising<\/h2>\n

There are a few different types of programmatic advertising available to advertisers and publishers. They basically refer to the ways in which programmatic buying can take place. Let\u2019s break them down.<\/span><\/p>\n

A. Real-time bidding (RTB)<\/h3>\n

As you can probably tell by the name, real-time bidding allows advertisers to purchase ad space in real time.<\/span><\/p>\n

We\u2019ve already covered how it works\u2014a virtual auction occurs when a user tries to access a website with available ad space.\u00a0<\/span><\/p>\n

Usually, the advertiser with the highest bid wins the auction and gets to have their ad displayed in that spot. But quality score (how well an ad fits with a publisher\u2019s audience and content) plays a part in it too.<\/span><\/p>\n

What does the highest bid mean? Well, in programmatic campaigns, you pay on a Cost Per Thousand (CPM) impressions basis, so the winner is the advertiser that offers the highest CPM.<\/span><\/p>\n

This entire process is completely automated and incredibly fast. Everything is done in milliseconds before the webpage even loads.<\/span><\/p>\n

B. Private marketplaces<\/h3>\n

Do you want your ads shown in top placements on high-profile websites like The New York Times, CNN, or USA Today? If you gasped and quickly nodded your head, your best bet is to participate in private programmatic marketplaces.<\/span><\/p>\n

Private marketplaces are basically invitation-based RTBs. They\u2019re organized by publishers trying to sell premium ad inventory directly to advertisers, generally at higher costs.\u00a0<\/span><\/p>\n

\"private<\/p>\n

The publisher decides which advertisers participate in their private auction and sets a minimum price floor, meaning advertisers whose bids don\u2019t rise to this amount are not even considered.<\/span><\/p>\n

Other than that, the auction follows the same course an open RTB would. Advertisers bid through their DSPs, and the highest bid wins the auction.\u00a0<\/span><\/p>\n

C. Programmatic direct<\/h3>\n

Unlike real-time bidding, where many advertisers bid for a publisher\u2019s inventory, programmatic direct is a one-to-one media buying process. The sell-side and the demand-side negotiate on a fixed CPM, and the transaction takes place directly, without ad exchanges.\u00a0<\/span><\/p>\n

I know this sounds very similar to the old manual direct media buying methods, but it\u2019s nowhere near as complicated.\u00a0<\/span><\/p>\n

Yes, there is human interaction between sales representatives from both sides. Still, the negotiation and campaign setup takes place on a single platform, making things easier and reducing the risk of human error.\u00a0<\/span><\/p>\n

Plus, setting up the campaign is a lot faster. You can make the deal and have your campaign up and running on the same day.<\/span><\/p>\n

D. Programmatic guaranteed<\/h3>\n

Lastly, we have programmatic guaranteed<\/span>\u2014<\/span>another one-to-one media buying transaction in which the sell-side and the demand-side enter an agreement prior to the campaign run.<\/span><\/p>\n

The advertiser agrees to buy a certain number of impressions, and the publisher agrees to deliver that number of impressions for a guaranteed price. For example, the terms of a guaranteed deal could be to get 50,000 impressions at a CPM of $45.<\/span><\/p>\n

The setup usually looks like this:<\/span><\/p>\n

Advertisers typically find publishers through their DSPs and request an offer. Once they receive it, advertisers can either try to negotiate the terms or accept it as is.<\/span><\/p>\n

When the two find an agreement, the publisher creates a guaranteed deal ID and sends it to the advertisers to target it with the campaign.<\/span><\/p>\n

A huge advantage of programmatic is that you can target or exclude specific audiences. Let\u2019s say your campaign objective is to attract new website visitors. You can exclude your existing customers to avoid budget waste.<\/span><\/p>\n

<\/a>VI. What Are the Benefits of Programmatic Advertising?<\/h2>\n

These are several advantages the automated media buying process comes with. These can help advertisers put their campaign budgets to great use and achieve their marketing goals more easily. Let’s unpack them together.<\/span><\/p>\n

A. Efficiency and speed of the process<\/h3>\n

As you\u2019ve already seen, programmatic media buying moves at the speed of light compared to the old way of buying advertising space. Its efficiency is two-fold. For one, it helps advertisers save time, and two, it takes fewer resources.\u00a0<\/span><\/p>\n

Due to its efficiency and high speed, programmatic advertising is also scalable. Advertisers can easily manage multiple campaigns at the same time and take advantage of the cross-platform inventory at their fingertips.<\/span><\/p>\n

In addition to that, no time is wasted setting up and launching the ad campaigns. This leaves more time for optimization, increasing the chances of better performance and helping campaigns reach their true potential.\u00a0<\/span><\/p>\n

B. Data-driven decision-making<\/h3>\n

Data is critical to the success of programmatic advertising campaigns because it helps advertisers make informed decisions about targeting, measuring, and optimization.<\/span><\/p>\n

There are three types of data segments you can tap into to get your ads in front of the right people: first-party data, second-party data, and third-party data.<\/span><\/p>\n

\"1st<\/p>\n