What is programmatic advertising? And is it here to stay?
Programmatic advertising sounds scary, people like to use the term but don’t really know how to explain it. I will try and simplify the term, explain how it works and show you why it is here to stay. Programmatic advertising has changed during the past few years and has evolved into a smart tool advertisers and publishers use to maximize their profit. In the past, it was used just to sell more ads and increase fill rate. However, today, it is possible to use programmatic advertising to target a specific audience in a more focused manner.
What is programmatic?
Just a few years ago, to simply put it, programmatic was the buying and selling of ads through machines. An automated system using RTB (Real-Time Bidding), purchasing and selling ads in real-time in an auction. Real-time Bidding is a live auction that happens through an advertising exchange. Demand side partners (DSP) bid on impressions.
In time, programmatic had evolved into much more. Today it also includes limited auctions and direct sales. A precise definition would be: “A set of methods to purchase advertising on the Internet using automated systems (robots) and algorithms for decision-making on the transaction without human intervention based on socio-demographic and behavioral data about users, available from a publisher and an advertiser.” Here you can find some videos explain it furthermore.
How does it work?
Let’s take a close look at the image below, keep in mind this process happens in a fraction of a second (100-200 MLS)
Once anyone goes into a website, while the page loads the publisher reaches out to its ad server requesting ads (it can also reach out directly to a SSP). The ad server reaches out to an ad exchange or ad network (depending on the set up). At this point the publisher is “talking” to a SSP – sell-side platform, trying to sell ad space to the highest bidder. On the other side, you have the DSP’s – demand site platform. The DSP’s bid on the offer using set parameters which are set into its system. The DSP’s represent the advertiser, he can use an ad server or an ad network to buy impressions.
Until here it is very simple, this is the basis of programmatic advertising. As I mentioned before, now you also have limited auctions and programmatic direct, but I don’t want to focus on them right now.
Is it here to stay?
With programmatic advertising, online advertising has changed! It is faster, more efficient, less cost (for advertisers) and has higher payout (for publishers). One big advantage you have today in online advertising is the option to target specific audiences. Targeting has advanced so much in the past years due to the use of DMP’s – Data Management Platforms. Big data has led to the creation of ad tech analytics and technologies that help advertisers target their audience of choice. Improving targeting, in fact, allows buying audience instead of space and displays.
To sum it up here are some numbers from eMarketer showing predictions for the next couple of years: “eMarketer estimates nearly four of every five US digital display dollars will transact programmatically in 2017, totaling $32.56 billion”
In conclusion, Programmatic advertising can sound a bit scary but once you understand the basics – it is very simple. It doesn’t look like it’s going anywhere in the near future so if this didn’t help you understand a bit better how programmatic works then I don’t know what will.
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