Beginners Guide to Programmatic Advertising in 2022

programmatic advertising

The advertising landscape has been changing over time. In the past, businesses would use traditional streams like television, radio, billboards, and print to advertise their brands and widen their market share. As times have changed, we’ve seen more marketing efforts shift from traditional media to going digital. Programmatic advertising has opened a new opportunity for businesses to scale faster then ever with the help of this new platform tool!

Programmatic Advertising

With technological advancement, advertising techniques have changed rapidly as consumer habits also continue to change. This is pushing businesses and marketers to adopt new ways to target consumers easily. These trends have also increased the number of digital advertising agencies to help market brands and fuel their growth. One of the most growing models of advertising is programmatic advertising.

What is programmatic advertising?

Programmatic advertising is the process of buying and selling ad space within an automated environment.

Most businesses have turned into programmatic advertising due to the numerous benefits it provides. Even if your business has brilliant ads, they should be in the right place to target the right audience. Failure to do this, you’ll continuously generate campaigns every time to promote your business without reaching the maximum potential. Traditional advertising techniques involved using quotes, proposals, tenders, and negotiations. However, programmatic advertising utilizes algorithms and data insights to direct ads to the intended audience at the right time and price. These data insights assist in driving various impressions, thus leading to better returns on investment for marketers.

The best thing about programmatic advertising is that it doesn’t work for the large brands alone but rather even in SMEs and other medium-sized organizations. Before the invention of programmatic ad buying, businesses would buy and sell digital ads manually, which was highly unreliable and expensive. Many people have embraced this method because of its lower threats from ad blockers. Additionally, marketers get more time to improve and optimize their ads, thus improving the overall success rate of marketing campaigns. Apart from targeted ads, programmatic advertising makes it easier for business entities to monitor ROI and measure performance from time to time.

Programmatic advertising platforms

These are platforms that assist with programmatic advertising. These platforms play a significant role in serving both advertisers and publishers. Publishers, in particular, can easily get the right services and advertisers who are in line with their needs. There are multiple programmatic advertising platforms that work together to help both advertisers and publishers, as explained below:

Demand side platforms

These platforms help the advertiser make bids from various publishers through ad exchanges. The platforms keep third-party data and user profiles which are essential in the advertising process. One can easily use the data to target an audience using demographics like online behavior, physical location, age, website category, etc. On demand-side platforms, the advertiser will gain from exact ad placement, whereas the publisher will gain from winnings from the high bidder.

Supply side platforms

These platforms hold the ad space inventory of various publishers. The platforms are usually connected to many ad exchanges to increase the exposure of publishers to many potential buyers. On the supply side platforms, publishers can also submit advertisement sources in the form of webpages and put pixel codes for the purpose of tracking visitor behavior. These codes don’t give specific data about visitors and their actions. The publishers can filter ads using different criteria and set ad space rates that define the actual cost.

Data management platform

It’s essential to have accurate data for a successful programmatic marketing campaign. This platform helps to match both the advertiser’s and publisher’s needs, i.e., ad space and ad inventory, respectively. The primary role of this platform is to collect, analyze, manage and activate data from different sources. Whether you’re an advertiser or a publisher, you can utilize the data management platform for accurate targeting, creating similar audiences, and developing reports.

Ad exchange

This sits at the core of the demand side platform and supply side platform. It basically forms the basis of buying and selling between advertisers and publishers. It’s essential to note that multiple platforms may not offer the best solution than single platforms. This is because you might be limited to basic settings and control.

How programmatic advertising works

Generally, programmatic advertising connects publishers with ad inventory to advertisers who need ad spaces to market their businesses. If an advertiser has decided to promote his business brand through digital campaigns, the first step is to engage a programmatic ad company. This company will then come up with an automated solution through the demand side platform to assist you in meeting your set business goals. The advertiser will use the demand-side platform to buy ad inventory from various publishers.

The data management platform that holds audience data comes into play here by ensuring accurate ad targeting to the audience by incorporating demographics like online activity, behavior, location, etc. When someone from the advertiser’s target audience visits a publisher’s website, ad requests are sent instantly to supply side platforms.

The publisher can then sell ads based on the impression he gets. The demand side platform then evaluates the ad before matching it with the available target parameters and data. It also helps determine the first impression bidding price. The entire bidding process takes only 100 milliseconds. After selling the impression, it can now be displayed on the publisher’s site.

Types of programmatic buying methods

Traditionally, advertising products and services would involve the advertisers and publishers coming together on one on one basis to complete the process. However, with programmatic advertising, this isn’t the case. The delivery of your ad will depend on the programmatic buying option you choose. Below are the types of programmatic buying options.

Real-time bidding

Real-time bidding is also called open marketplace or auction. This option is open to everyone(public), meaning ads can appear on all websites. It’s the commonly used option since the auction is instant. Ad slots are publicly available for everyone to buy. Here, the only person who gets the spot is the highest bidder alone. The advertisers are given a chance to select their favorite slots before the process begins. Most people like real-time bidding since paying the required bid amount is not mandatory to secure a slot in the auction. In the real-time bidding system, the advertiser and publisher have the capacity to set parameters depending on their required target audience, ad format, and bid range, among others. The only downside of real-time bidding is that it’s less transparent. Advertisers have access to publishers’ categories but aren’t certain about the exact webpages where ads will appear.

Programmatic guaranteed

It’s also called automated guaranteed or programmatic direct. The negotiations are done by both parties on a one-on-one basis. Unlike other programmatic advertising options, the advertiser isn’t required to bid. Once the negotiations are over, the publisher sells the ad inventory to the advertiser right away. Additionally, the advertiser has the power to select favorable parameters such as type of audience targeting, type of ad inventories, frequency capping, and prices. Programmatic guaranteed is mainly suitable for advertisers with substantial advertising budgets. The best thing about the option is that the advertiser knows precisely where the advert will appear.

Private marketplace

It’s also called a closed auction or private exchange. Advertisers who can participate in private marketplace functions are only the invited ones. Here, publishers are given the mandate to control their premium inventory to the few chosen advertisers. There’s also a set minimum price for the auction, unlike in an open auction. Publishers also have access to user data through the demand side platform. One primary rule of the private marketplace is that publishers are required to have mass reach. Unlike real-time bidding, this option allows advertisers to determine sites where their ads will appear. This makes it easier to estimate and measure ads’ return on investment.

 Preferred deals

This is also called private access or spot buying. The advertiser has the option to select an ad inventory before any auction. Both parties can agree on the terms and conditions of advertising upfront, i.e., mode of targeting, pricing, etc. With the use of demand side platforms, the advertisers are able to determine their target audience and also make sound purchase decisions.

Programmatic advertising formats

If you decide to launch a programmatic advertising campaign for your brand, you can use the following formats:

Programmatic Video Ads

The use of videos is gaining popularity among marketers due to the huge impact it brings compared to other mediums of delivering content. According to research, people prefer viewing videos to learn about brands rather than reading text. Video content is also engaging and precise. All these have contributed to the use of video ads. Video ads are categorized into three, i.e., Out-stream ads, in-stream ads, and in-display ads. Out-stream ads generally appear on different online articles as pop-up windows or inside the content. On the other hand, in-stream ads are found in video players or platforms. An excellent example of these ads is those that run just before a video starts playing on platforms like YouTube. Lastly, in-display ads are found in video recommendations and search results of video players.

Programmatic Audio Ads

The use of audio ads has been growing recently due and is among the best performing programmatic ad formats that have proved to generate more revenues for businesses. First, the platforms that incorporate audio ads usually rely on real-time data from the target audience to place ads. Secondly, these platforms have the ability to use engaging video and display ads which play a crucial role when it comes to optimizing user experience. Audio ads are more similar to video ads.

 Social Ads

The use of social media platforms to market products and services has also helped businesses grow through lead generation and increased conversions. Most social media networks play a significant role in collecting valuable data from different users that helps in accurate audience targeting. Programmatic social ads use such user data to determine the appropriate audience to view the ads, the best ad formats, frequency caps, and ideal timing. When the advertisers get this relevant information, it becomes easier to optimize their ads. The best thing about social ads is that they’re not restricted to certain social media platforms.

Programmatic Display Ads

Display ads are generally considered to be online visual ads. However, in terms of programmatic advertising, they’re ads that you’ll find in sidebars, headers, and footers. Both parties work closely with ad display networks like Microsoft, Google, and Snapchat to help them easily buy and sell advertising slots. The publishers earn money depending on the visitors’ clicks and impressions the ad display network collects.

 Programmatic Native Ads

This format incorporates the demand-side platform. The advertiser uses this platform to select the best impressions to purchase depending on their prices. Statistics show that 53% of consumers prefer using native ads compared to display ads. These ads usually appear on applications and web pages. The most common native ad formats include sponsored content, in-article ads, promoted listings, paid search units, rewarded video ads, and in-feed units.

Ways advertisers use in ad targeting

Using programmatic advertising, the marketer can utilize several ways to target the right audience and achieve better results as follows:

1. Keyword targeting

As the name suggests, the advertiser targets the right audience using specific keywords. For example, if you’re a car spare parts dealer, it’s wise to create keywords surrounding the subject. To make your ads relevant in this case, you need to ensure they appear in articles with car-related topics. When your ad keywords match those in the article, you’ll be sure to get more clicks and quality leads.

2. Contextual targeting

This involves showing different ads with respect to the website’s context. For instance, if your company deals with financial services, it’ll be better to ensure your ads appear on websites like Forbes. On the other hand, if you’re in the fashion and beauty industry, you’ll get better results if your ads appear on vogue magazine’s website.

3. Geo-targeting

It’s also called geo-fencing or location-based targeting. In this method, the advertiser is only interested in reaching the relevant audience in a particular region or locality. If you’re in the fashion industry and have a physical store in Los Angeles, it won’t be beneficial for your ads to appear to people located in England. However, this method will work well for international brands to target people with tailored needs.

4. Data targeting

This is also called audience targeting. In this method, ads will appear on users’ cookies regardless of website context. For instance, visitors to financial services websites will get ads even when visiting other sites in different industries. Basically, the basis of this is that the visitor seems to be interested in the company’s products or services.

5. Retargeting

Statistics show that only 2% of visitors to a particular website end up purchasing products or services from that specific brand. Therefore, the primary role of retargeting is to get the remaining portion of visitors back and close more deals. When you re-engage your audience, there are high chances of getting some people back since they know a little about your brand.

Advantages of programmatic advertising

Programmatic advertising has proved to be effective and efficient since there’s minimal human intervention, and it uses artificial intelligence-driven algorithms. Below are some top advantages of programmatic advertising:

  • a. Greater audience targeting capabilities

This is probably the primary benefit of programmatic advertising. Without the right audience, it’ll be challenging for businesses to get clients and conversions that lead to more conversions and revenues. Using programmatic advertising, it becomes easier for advertisers to use data to make great audience profiles and improve the accuracy of reaching out to these people. Advertisers can also incorporate other techniques such as location-based targeting, app or site targeting, IP address targeting, and remarketing. Generally, advertisers have the option to make more personalized ads.

  • b. Provides real-time insights

Advertisers have been struggling to get the best out of their advertising campaigns for a long time due to inefficiencies in getting accurate data and ad performance. However, it’s easier to get these real-time insights with programmatic advertising. This makes it easy to determine the actual performance of their campaigns. The data gathered using this technique also plays a crucial role in helping advertisers make meaningful campaigns that target the right audience for better results.

  • c. Highly efficient

Programmatic advertising is highly efficient compared to other forms of advertising. In the past, advertising spots would be purchased manually by advertisers through negotiation and bargaining. This was time-consuming and unreliable. Today, people use AI-driven algorithms to quickly and efficiently perform the same task.

  • d. Increased audience reach

It’s easier to make your brand recognized worldwide through programmatic advertising. Statistics show that 3.5 billion users are always on the internet doing different things, including searching for products and services, interacting with other people, reading online stories, or watching videos. Therefore, if you use programmatic advertising, you’ll be targeting a vast audience. It’s also essential to narrow down to specific consumers who have particular demographics of interest. Advertisers can also easily determine the number of impressions made by the audience, their location, etc.

  • e. Increased transparency

Programmatic advertising provides transparency to advertisers better than traditional forms of advertising. Marketers will easily determine ad inventory before purchasing and the right audience to target for better results. This is essential because the advertiser will determine the required budget upfront and also make optimized campaigns. Since programmatic advertising doesn’t involve a lot of human interactions and dependency, there are lower risks of errors that can be quite costly.

  • f. Wide range of channels

You can run a successful programmatic marketing campaign through various channels, including display, mobile, video, and audio. These channels will help you reach the targeted audience. If you find that one channel isn’t giving the results you want in terms of lead generation and conversions, you can switch to another channel. If you’re operating on a huge budget, you can consider using multiple channels simultaneously to get better results.

Disadvantages of programmatic advertising

Although programmatic advertising provides a lot of benefits to marketers, it also has some downsides, as explained below:

  • a. Risk of online traffic fraud

When you pay for slots to advertise your business online, you’ll expect to get real views that translate to conversions and revenues. However, this sometimes isn’t the case. You might be getting views from bots or other AI tools. These aren’t actual customers, and you’re likely to get low conversions that don’t reflect the number of views. Some agencies make or purchase bots specifically made for viewing videos repeatedly. In this case, you’ll receive many views consistently and pay them, thinking that you’re on the right track. You may end up losing a lot of money buying empty views.

  • b. Lack of human control

Ad automation relies on the system, and there’s minimal human intervention. This has been a key concern among advertisers since there’s a high risk of getting different results from different ad agencies. These differences arise due to the variations in professionals’ skills in executing and managing advertising campaigns. If you come across an ad agency with inexperienced personnel or poor practices, you’re likely to face multiple issues that can affect your campaign’s success. This usually happens when your ads appear on unnecessary inventory or where your audience is targeted well.

  • c. Inaccurate ad matching

The success of any advertising campaign depends on where your ad appears. If you pay for low-quality inventory, there are high chances your ads may appear on webpages, content, and other locations that aren’t relevant to your brand, making it difficult to get better results. In this case, you might fail to get even a single conversion, especially if there’s online fraud. Most ad agencies offer brand safety to avoid such scenarios.

  • d. Lack of transparency of platform fees

This has been a key concern among players in the industry. Programmatic advertising includes multiple players such as ad agencies, data verification vendors, publishers, and ad exchanges, among other providers. They all play a crucial role in the processes involved in programmatic advertising. Each player has a share in the amount spent on the ads. Studies show that although each party gets a cut, it’s actually impossible to determine the exact fees they get. Therefore, it’s also impossible to know whether each party’s fees reflect what they do.

Tips for building a successful programmatic advertising strategy

Programmatic advertising seems complex for people who are new in the industry and want to launch ad campaigns to widen their market share. However, it’s not complex if you draw a plan on the strategies to use to achieve your set goals. Below are top tips for building a successful programmatic advertising strategy:

Before you think of anything else, you must be prepared adequately by determining the vision you want to achieve and the available resources to assist you in the process. During the preparation phase, you need to do the following:

1. Preparation

  •  Set goals

Before creating any strategy, it’s essential to define your goals. These goals can be to increase visitors to your website, increase conversion, retarget previous customers, or increase brand awareness. Ensure these goals are measurable to make it easier to evaluate the strategy’s success rate accurately. When you have clearly outlined goals, you’ll also avoid getting lost in your way, and your focus and concentration will be intact.

  • Make initial assessments

Depending on the available resources, you can implement the strategy and start tracking the initial progress. Ensure you understand your current audience, cost of individual conversions, current traffic, etc. Having an estimate of these will help you work within your budget.

  •  Set a flexible budget

Since technology is dynamic, it’s essential to set a flexible budget to ensure you can tap into new opportunities that come across to achieve quicker results.

2. Create engaging ads

To stay ahead of your competitors, you must develop eye-catching creatives. Programmatic advertising usually utilizes visual channels. Therefore, as an advertiser, you must be ready to create relevant, precise, and compelling ads. The ads can be in the form of video, audio, banners, and rich media.

3. Work with the right audience

To easily reach your goals, you must target the right audience. Programmatic advertising allows advertisers to use data to help them understand their potential customers and the best ways to target them. You can segment your audience based on different demographics such as age groups, customer behavior, location, interests, and gender. You can also map customer journeys to ensure your products or services are available to potential customers at the right place and time.

4. Make the right choices

You must pay special attention to every aspect involved in programmatic advertising. Take your time to select the best metrics, information, and targeting campaigns.

In conclusion, you can easily measure the performance of programmatic advertising through metrics like return on investment(ROI), click-thru conversion (CTC), and return on ad spend (ROAS). Programmatic advertising is generally priced through the cost per mille (CPM) model. The cost varies depending on ad format, type of industry, targeted device, etc.

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