Programmatic Advertising (PA) describes the use of technologies to buy and sell advertising inventory with the help of automated and data-driven processes. PA is a software-based method to automatically book, serve, and optimize online advertising. This includes video, mobile, native and display ads.
HOW DOES PROGRAMMATIC ADVERTISING WORK?
In an online market place for automated advertising (Ad Exchange), publishers and advertisers place supply and demand, which are interlinked when there’s a match, to generate advertising.
In this market place there are two different platforms:
Sell Side Plattform (SSP): Here, publishers offer their advertising space as profitably as possible. The available advertising space and the publisher‘s details are listed via the SSP on the Demand-Side Platform (see below). The SSP is the technological basis for the supply side to make advertising inventory available for automated advertising sales.
Demand Side Plattform (DSP): The DSP provides the technological infrastructure for buying advertising space. It represents the buyer side. The DSP checks all available inventory on their suitability and also evaluates incoming data to generate the best offer. The DSP is the technological basis for a data-driven purchase of individual advertising contacts, which are also evaluated based on the data collected.
DATA AS A MAJOR BASIS FOR PROGRAMMATIV ADVERTISING
For advertising to be presented only to the right users, it requires information about each individual website visitor. The more an advertiser knows about the user, the more valuable they become.
The original sources of implemented user data are split into 1st, 2nd and 3rd party data.
1st Party Data: This comprises all data advertisers collect on customers within their own systems. This can either be data users leave when visiting the website or data collected in the CRM tool. It contains information about customer behavior, actions or interests.
2nd Party Data: This kind of data is created with other companies that are part of the advertising space sale. The publisher can, for example, extract data from their website that contains information on users that showed an interest for a particular product. The marketer can then determine which pages the user visited with the same or similar topics. The agency documents how frequent and in what way a user reacted to an advertising banner for the same or a similar product. This data usually comes directly from a supplier (e.g. ad server).
3rd Party Data: 3rd-party data is often aggregated by various different websites and provided by external suppliers. It includes socio-demographic data such as age, gender or level of education. This type of data is sold via different distribution paths.
REAL TIME BIDDING – HOW DOES IT RELATE TO PROGRAMMATIC?
Often programmatic advertising is used synonymously with real-time bidding. However, real-time bidding only comprises the auction part of programmatic advertising where advertisers place a bid for advertising space on a platform. So, real-time bidding can, but doesn’t necessarily have to be, part of programmatic advertising.
This is how bidding works in real-time:
The user enters the publisher site containing advertising space and initiates a request for playing an ad in this advertising space. The SSP linked to the publisher site then sends a request to the DSP. This includes e.g. details on the publisher’s transaction requests, the price and the target group. Via the DSP, all advertisers relevant for the user can place their bid to the SSP, which checks the campaign budget and the target group. The highest bidder wins the advertising space and the ad is played on the publisher website. The processes between DSP and SSP happen fully automated and in real-time. The platforms have 200 milliseconds to put in their requests, take part in the transaction and play the ad.
BENEFITS OF PROGRAMMATIC ADVERTISING
Budget-saving: PA uses data to generate visual contacts with a selected target group. This heightens the chance for sales, i.e. less budget is wasted on ineffective advertising.
Time-saving: PA is designed to drop the human element as much as possible, which saves time when completing transactions or negotiating prices.
Transparency: PA enables advertisers to see exactly which sites their advertising reaches, which customers see their advertising and what costs are associated with it.
Real-Time: Advertisers can track the performance of their campaigns as soon as they are launched. They don’t need to wait until they are finished.
Exact Targeting: With programmatic advertising, advertisers can reach those customers that will most likely complete a purchase.
Reach: Programmatic advertising allows advertisers to reach potential customers throughout the world by placing ads in multiple advertising networks, via different partners, channels and geographical locations.
According to an IBM study, companies who really know their customers have a 60% better performance than other competitors. More and more advertisers recognize the importance of data-driven marketing, including programmatic advertising.
Advertisers and publishers who don’t make use of PA, run the risk of wasting precious budget or time with ineffective methods. Advertisers should keep up with the times and adapt PA to their marketing. Otherwise companies might stagnate or risk going under completely amid ever-growing competition.