What Is Programmatic Advertising and How Does It Work?
Written by Kyle McCarthy
Programmatic advertising is a term most marketers are familiar with but know very little about. Google AdWords (soon to be Google Ads) has dominated the paid digital advertising landscape for so long that most companies have been reluctant to allocate even a small portion of their marketing budget to new (and sometimes confusing) platforms.
As programmatic advertising becomes more sophisticated and lucrative, however, even small businesses should consider gradually and responsibly shifting some of their marketing dollars to this emerging tactic. Keep reading to learn more about what programmatic advertising is, how it works, and some of the benefits of this innovative paid digital marketing tool.
What Is Programmatic Advertising?
Programmatic advertising can be a little difficult to describe in concise terms. In fact, research conducted by eMarketer found that 60% of marketing agencies can’t seem to agree on a consensus definition. Consequently, “only 12% of agencies trust programmatic systems to execute their ad order accurately.” Another study conducted by the Association of National Advertisers and Forrester found that:
- 23% of marketers know what programmatic advertising is and use it.
- 29% of marketers have heard of programmatic advertising but don’t have a grasp of what it is.
- 12% of marketers haven’t even heard of programmatic advertising.
Since so many professionals are unable to define, much less effectively utilize, programmatic advertising, the strategy is still in its infancy. Therefore, agencies and in-house marketing teams who do understand programmatic are at a distinct advantage operating in an unsaturated and often ignored market. In other words, now is the time to strike.
At LaFleur, we loosely define programmatic advertising as follows: selling and purchasing impressions for content marketing assets on search engine exchanges for specific digital publications, often in real time. That might seem a little heady, so here’s how it works.
How Programmatic Advertising Works
With programmatic advertising, online ad space is purchased, and then computer programs use data and proprietary algorithms to select which ads to buy and for what price. These computer programs target specific demographics, user behaviors, dates, and times to reach the ideal audience for the purchaser’s content. Essentially, the publisher’s programmatic advertising algorithm identifies the user on the page and uses the available data to determine if your ad content is relevant to the user. If it is, the content is displayed as an impression, which will hopefully entice the user to click on it.
Programmatic is especially effective for companies who are looking to increase brand awareness because impressions are guaranteed based on the price point negotiated between the buyer and the vendor before launching the campaign. Rather than investing your media spend in a single publisher, that budget is spread across numerous publishers based on optimal delivery for the advertiser and the user. If the purchaser would like to augment their efforts or reach new audiences, they can bid for additional impressions in real time.
Of course, to achieve success with programmatic advertising, the data used to optimize the advertising algorithms must be accurate and expansive. This means the purchaser must combine their in-house customer data with a vendor’s data to narrow down their ideal user profiles and placements. Many companies take it a step further by purchasing third-party data that can inform the campaign. Whereas retargeting campaigns on Google AdWords or Facebook can often be too narrow and rely on the unpredictable behavior of low-quality leads, programmatic gives advertisers the flexibility to chart their course based on the data at their disposal.
Important Programmatic Advertising Terms and Initialisms
A major source of frustration around programmatic advertising relates to jargon and acronyms. Let’s define a few important terms to clear up some of the confusion.
Multiple parties sell and purchase advertising space within these automated digital auctions. Price is based on ad relevancy and demand.
Data Management Platform (DMP)
This central nexus shares data between vendors, publishers, and marketers to optimize targeting.
Demand-Side Platform (DSP)
The DSP automates purchasing based the unique attributes of each impression and then analyzes that data in real time to make more informed and effective bidding decisions.
Real-Time Bidding (RTB)
This functionality allows purchasing and selling programmatic advertising via digital auctions on ad exchanges. Bidding occurs within milliseconds: the length of time to load a webpage.
Supply-Side Platform (SSP)
Publishers use supply-side platforms as an automated means of selling programmatic advertising impressions. They set a minimum price (called the “price floor”), and then they maximize ad cost by opening up ad buys on ad exchanges and DSPs in real time.
These definitions may help eliminate some of the confusion related to programmatic advertising, but they don’t tell us much about the benefits it has to offer. Keep reading to learn why your business should be incorporating programmatic advertising into your digital marketing budget.
What Are the Benefits of Programmatic Advertising?
The biggest benefit of programmatic advertising is the increased level of control you have over where, when, and why your creative content is being placed. Unfortunately, most businesses fail to analyze and update their user data on a consistent basis, or they fail to provide accurate information before the launch of the campaign. When advertisers leverage quality data to target ideal consumers, however, programmatic advertising can be a cost-effective way to increase brand awareness and generate leads who are closer to the end of the buyer’s journey. Remember, programmatic advertising aggregates data continuously and the auctions occur in real time, so your success or failure is based heavily on your involvement.
Another advantage of programmatic advertising is that it allows advertisers to get their content in front of millions of interested users based on their wants, needs, and behaviors. This is important for younger companies that don’t receive much web traffic, but it’s also a great opportunity for businesses of all sizes to promote their content. On average, 3.5 billion people are online at any given time, and programmatic advertising allows you to reach as few or as many as you’d like without having to make placement decisions on behalf of your target audience. Billboards can’t offer that. AdWords can’t offer that. Even television can’t offer that, and their advertising costs are much higher than programmatic advertising.
As always, the quality of your content is paramount. We suggest developing content that relates back to your services and/or products when spending marketing budget on programmatic advertising. Collateral resources should have a high perceived value; for example, whitepapers, infographics, ebooks, or even video could be effective assets for promotion. But be sure to link back to your high-value webpages and blog articles within these assets to get the most from every piece of content.
The last benefit we’ll mention here is that, when structured properly, programmatic frees up you and your team to focus on other tasks. Again, you should continually monitor your ad performance and user data, but this information should be available in a simple, customizable dashboard that can be analyzed and updated within minutes. Make sure your staff has someone who is skilled with data and trained on the platform, and ask them to provide daily status reports and make regular optimizations. This will allow your marketing staff to focus on developing truly outstanding content that will attract users when placed in a programmatic advertising campaign.
LaFleur Uses Programmatic Advertising to Help Clients Solidify and Expand Their Brand
We first started recommending programmatic advertising to clients at the beginning of 2016. We have learned a lot since then and now recommend it in tandem with search, display, and remarketing campaigns — especially for clients who are looking to increase their exposure, share their content, and generate more traffic to their website. And we’re getting fantastic results.
If you would like to learn more about programmatic advertising and whether it might be a good fit for your organization, please contact us by calling (888) 222-1512 or by completing a brief form. We also specialize in traditional PPC, content marketing, social media marketing, email automation, and other digital marketing services. Whether you’re just starting to market your business online or you are looking to make an upgrade, we would love to hear from you.
Hof, R. (2014, June 11). Still can’t figure out how programmatic advertising works? Watch this video. Forbes. Retrieved from https://www.forbes.com/sites/roberthof/2014/06/11/still-cant-figure-out-how-programmatic-advertising-works-watch-this-video/
Penson, S. (2017, January 16). Programmatic delivery: The future of content marketing and promotion. Moz. Retrieved from https://moz.com/blog/programmatic-content-marketing
Rogers, C. (2017, March 27). What is programmatic advertising? A beginner’s guide. Marketing Week. Retrieved from https://www.marketingweek.com/2017/03/27/programmatic-advertising/