The Easy Guide to Programmatic Advertising and What Makes It Work

As per Statista, programmatic ad spend is expected to be around $725 billion by 2026, up from $418 billion reported in 2021. As is known by most in the branding world now, a programmatic marketing campaign mixes machine learning, data science, and automation. To run such a campaign, one must have adequate skills and technical acumen. 

A well-managed marketing campaign will eventually deliver profitable and long-lasting outcomes. To that end, this article serves as the fundamental guide to programmatic advertising to those still new to it power and nuances.

What Is Programmatic Advertising?

Imagine that you want to advertise your business in a local newspaper. Typically, newspapers have specific spaces for advertisements. The advertisers contact the publisher and rent advertising space for a particular day. A similar phenomenon is observed when purchasing advertising space in an online magazine. Digital marketers often contact the owners of online magazines and blogs to ask them to put ads on their sites.

The traditional marketing or advertising strategy discussed above has multiple drawbacks. For the brand marketers, there are so many options to choose from and they change from moment to moment. The digital consumer is also much more fluid and dynamic, traversing channels quickly and seamlessly. Also, publishers and advertisers need help managing advertising spaces in the traditional system as it gets extended into the complex digital realm. In these circumstances, most publishers cannot furnish data such as ROI, click rate, ad performance, etc. So, advertisers need to know how well a platform can bring the right visitors to their websites.

A programmatic advertising strategy can been put in place to get rid of the problems with traditional advertising. In programmatic advertising, the software and algorithm deal with digital ad placement. The algorithm calibrates the requirements of the advertisers while also tracking vital data such as impressions, clicks, etc. It applies advanced technologies like AI and ML to help advertisers enable smarter budget utilization by automating key portions of the process of channel selections for ads. Therefore, advertisers can easily measure the productivity of paid advertisements and get better ROI. On the other hand, publisher websites can ask for a higher fee on ad placement if the ads get more impressions.

How Does Programmatic Advertising Work?

Let’s expand on this by exploring the components of a programmatic advertising campaign.

1. Demand Side Platforms (DSP)

DSP, an acronym for Demand Side Platforms, allows advertisers to purchase ad spaces on various digital platforms through ad exchanges. You can use different filters such as age, location, online behavior, etc. The software handles the ads and ensures they work as well as possible, so advertisers don’t have to worry about much. However, 

the advertisers should create an ad inventory for the ads’ visibility.

2. Supply Side Platforms (SSP)

Publishers make use of SSPs to deal with ad inventory. Typically, an SSP can connect to multiple ad exchanges and optimize profitability. Publishers can use the SSP to determine the effectiveness of specific ad spaces. So, they can develop a pricing module based on how well the ad spaces work.

3. Data Management Platforms (DMP)

The DMPs are separate platforms that work as centralized data warehouses to collect, analyze, and manage data. The DMPs create unique profiles for each user, which the programmatic advertising algorithm then uses to find the most relevant ads. The aim is to show the most relevant ads to web visitors so that the advertisements can generate a high return on investment. 

Besides these three components, an ad exchange also plays a crucial role. It acts as a trading platform that connects advertisers and publishers. These two entities can negotiate inventory prices according to their convenience. Another noteworthy thing is that ad exchanges can connect to multiple ad networks.

The Benefits of Programmatic Advertising

The rising importance of programmatic advertising is beyond doubt. Here are some benefits:

  • Better Ad Efficiency: Artificial intelligence (AI) helps publishers and advertisers find the most profitable advertising spaces on digital platforms. This enhances the efficiency of the ads to fetch potential buyers.
  • A Higher ROI: Return on Investment (ROI) is a big concern when people decide to invest in business advertising. Programmatic advertising brings a high ROI thanks to the involvement of AI.
  • Optimized Target Audience: The ML-powered algorithm collects and analyzes data to understand the scope for optimizing the ad conversion rate, visibility, etc. AI also helps optimize the ads for the target audiences.
  • Sustainable Brand Value: Programmatic advertising helps develop a sustainable brand identity and realize desired outcomes at speed.

Programmatic Purchase Methods and Strategies

Advertisers use different negotiation strategies to purchase advertisement spaces from publishers. As mentioned above, programmatic advertising differs from conventional marketing, and advertisers must embrace different strategies to negotiate purchasing ad spaces from the publishers. Typically, advertisers use the following three methods and strategies to do that:

1. Reduced Purchase Costs with Real-time Bidding

The publishers can sell leftover inventories using the real-time bidding strategy. Many advertisers look for cheap advertisement spaces. For example, small businesses and budding entrepreneurs require low-budget spaces to reduce expenses. The publisher can hold an auction for their leftover ad spaces, and advertisers can bid for those spaces through a real-time auction. A real-time bidding method helps purchase advertisement spaces at a low price. However, it also creates hassles for advertisers due to high competition and the need for more transparency.

2. Concrete Results with Programmatic Direct

Programmatic direct is a deal between a publisher and an advertiser. Typically, such deals come with a guaranteed minimum number of ad impressions. The advertisers can choose packages depending on the guaranteed impressions. For example, ad spaces with high impressions will come at a high price. In the same way, you can buy ad space for less money if the number of guaranteed impressions is low.

3. Greater Transparency with Private Marketplace

Through a private market, publishers can sell premium ad space to advertisers. The advertisers purchase the ad spaces through online auctions. The private marketplace auctions bring more transparency to the table compared to real-time bidding.

The Ingredients for Executing a Programmatic Advertising Plan

1. Connecting and Analyzing Data

Data becomes even more critical when machine learning and automation are employed. Programmatic advertising depends on collecting and analyzing data across different ad spaces. Advertisers and publishers need data to determine how profitable ads are, how visible they are, etc.

2. Adapting to Innovative Technologies

A programmatic advertising process involves multiple technologies. For example, it involves demand-side platforms, supply-side platforms, and many more. Technology is an integral part of programmatic advertising. The technology provides an online platform where publishers and advertisers negotiate the ad inventory rental prices.

3. Getting Accustomed to a Standard Approach

A systematic approach to programmatic advertising is essential for both advertisers and publishers. The advertisers should know their goals and plan the advertising campaign accordingly. On the other hand, the publishers should track performance systematically and set prices for the ad spaces accordingly.

4. A Mix of Human and Machine Intelligence 

As a publisher in the programmatic advertising market, you need more than an algorithm to do well. Even with a gamut of advantages that technologies like AI and MI accrue, you may still require human intelligence to improve your profits and ads. This is precisely where an expert partner can help in determining the importance of ML, AI, analytics, consumer insights, etc., and making the most of the knowledge gathered. 


So, there you have it. These are the fundamental aspects that you must know about programmatic advertising. No doubt, programmatic advertising makes it convenient for both publishers and advertisers; publisher-advertiser agreements become more transparent. 

For more information, contact us.