Your Complete Guide to Programmatic Ad Buying

programmatic ad buying

Imagine being able to reach the right person with your ad at precisely the time they are ready to buy. Sounds like heaven, right? Well, that day is dawning. Consumers are human, after all. They will always be fickle, but programmatic ads offer marketers a data-driven alternative to target ads to specific people effectively. Programmatic can be a critical element of a brand’s display marketing strategy. The word is getting out as more companies implement a programmatic ad strategy. Spending on programmatic ads is forecast to increase to nearly $95 million by 2022. Agency media planners and buyers are spending 54% of their media budgets in 2021 on programmatic ad buying. 

What Is Programmatic Ad Buying?

Programmatic advertising uses the power of data, algorithms, software and automation to improve ad targeting and place digital ads more efficiently. 

Let’s start with the basics. Brands and media companies create digital ads, right? As advertisers, they create a demand for someplace to put that ad online. 

On the supply side are the websites, social media platforms and other online spaces that people visit. Because they attract visitors or traffic, they supply places to put ads. In the digital ad world, they are called publishers because they publish content online. 

In traditional digital ad placement,  ads placement is manual. This is slow and prone to errors. The cost of the ads depends upon each publisher. There are limitations that make the pricing less transparent. It can be difficult to measure where costs arise. 

In programmatic ad buying, software replaces manual buying and selling. The media purchase is faster and more accurate. 

The media buying transaction happens via bidding that factors in real-time demand. The ad can be placed on a variety of publisher sites, not just one. 

This allows advertisers to focus on the individual type of customer they are looking for, no matter where they are online. 

What’s more, the entire process is automated. Real-time data allows for better optimization than traditional ads. 

Programmatic ad targeting offers a simple solution for brands in their quest to show the right content to the right people. Advertisers can target and engage their ideal consumers based on locations, behavior, online history, and more. 

Of course, the programmatic ad process is not 100% hand free. Depending upon the campaign goals and channels, humans are still an essential part of the end result. 

Think of programmatic ad buying like putting your ads on cruise control. You still need to set the direction and watch for bumps in the road. 

Let’s look at the different pieces that make up programmatic ad buying.

Programmatic Ad Channels

The ad channel refers to the place the viewer sees the ad. Ad channels include video, like YouTube ads, webpages (display), social media ads, audio ads, digital ads on billboards and signs, connected TV ads (CTV ads) and over-the-top ads (OTT ads).

Native ads don’t look like ads – they are made to blend in with the context of the webpage or app. Product placement in movies is a non-digital example of a native ad.

It All Starts With Data

Programmatic advertising uses algorithms to automate the buying and placement of digital advertising. What does the algorithm use to deliver ads? Data. Using data about consumer behavior and characteristics, the algorithms match the ad to the data from people who are a good fit for that ad.

Different Types of Data 

First-party data is Information where are user has provided their name or other Personal Information. It’s collected by observing search queries website behave And shopping activity. first-party data is the most valuable source of data for a company.

When a company makes their first party data  available to another company this is called second party data. 

Third-party data Is anonymized data purchased from different data brokers. The main advantage is that there is so much of it. but a big disadvantage is the quality of the data varies widely. 

The Rise of the Algorithm 

An algorithm is a set of rules or calculations that defines how a platform should allocate advertising space. Some algorithms are very complicated and require a lot of human input, while others are much simpler. 

Programmatic advertising gathers and analyzes Internet user data such as  Internet browsing activity, purchases, interests, sites visited, and media consumed. 

This data is used to create a digital profile of the user. That profile is then grouped into larger sample sizes of 10,000 or more. Marketers can then create algorithms that automate ad purchases online based on the characteristics in the profiles. 

Key Roles in Programmatic Ad Buying

How does programmatic ad buying work?

Let’s say on one side is the advertiser or brand that wants to reach an audience. Their ads create a demand. 

On the other side is the publisher with content that attracts traffic and wants to host ads. They have the “supply” of space for ads.

In the center, between them, is the Ad Exchange, where ad space is auctioned off to the highest bidder using Real-Time Bidding (RTB). 

Both the publisher and the brand or advertiser need a way to access the Ad Exchange. 

The publisher uses a Supply Side Platform (SSP)  to access the exchange. 

The advertiser or brand uses a Demand Side Platform (DSP) to access the exchange. A Data Management Platform also serves the DSP.

Read on to learn more details about this ecosystem. 

The Advertiser or Brand Side

On the advertiser’s side, programmatic initially was used by media agencies and clients with large budgets.  Now we are seeing new self-service tools level the playing field for smaller brand. These new tools eliminate the middleman and give smaller brands ability to compete with larger ones.  

An advertiser signs up with a DSP, which is how it access the Ad Exchange. 

When a person visits a website that is connected to the ad exchange, the exchange receives an auction signal. The exchange checks with the DSP to see if the advertiser has any ads for the placement. 

If yes, the DSP sends a signal to join a Real-Time Bidding auction to compete with other advertisers for the placement.

The winner’s ad is then shown to the visitor on the website. 

Here is some more detail about the Demand Side Platform (DSP) and Data Management Platform (DMP)

Demand Side Platform (DSP) and Data Management Platform (DMP)

The advertiser accesses Demand Side Platform (DSP), software that lets advertisers automate ad placements, instead of using salespeople. The DSP is connected to a Data Management Platform (DMP). 

The DSP and DMP have a synergistic relationship. 

To optimize the results of programmatic advertising, a Demand-Side Platform is connected to a Data Management Platform.  The Data Management Platform provides the capability to access programmatic targeting options.

The DMP is used to sort data that inform ad-buying decisions. A DMP hosts data about users and needs the connection to the DSP to put that data to use.

Some Demand Side Platforms now offer DMP solutions integrated with their tool to offer a complete solution for advertisers. This avoids the need for 3rd party data management software.

The DSP’s job is to buy ad space at the lowest possible prices. 

Programmatic Targeting

Programmatic ad targeting’s ultimate goal is to help advertisers reach the right people at the right time with the right message.

Programmatic targeting taps into consumers’ locations, behaviors, and characteristics to help advertisers find the people looking for their products and services.

Audience Targeting – Data Targeting

Audience targeting uses characteristics of viewers to determine what ads to show. 

Audience lists are created from a combination of first-party and third-party data. This is helpful for businesses that know their ideal customer profile but don’t know exactly where to look for them.

Contextual Targeting

Contextual targeting considers the context of the visitor’s location and behavior. By using data to determine the website content where the visitor has landed, contextual targeting places relevant ads next to related articles.

For example, if you are reading about cruise vacations,  ads for beach resorts and bikinis may start to pop up alongside the article. 

Keyword Targeting

This kind of targeting seeks to match key words or phrases in the web copy with those found in the ad copy. 

Intent Targeting

Intent targeting involves targeting visitors based on what their intent is online. It looks at past actions, search topics, and social media activity. 

Behavioral Targeting 

Similar to intent targeting, behavioral targeting also targets people based on their actions.  Behavioral targeting uses data like website visits, products viewed, what links were followed. Behavioral profiles may also include Information about offline visits to stores and in-store purchases.

Re-targeting

Re-targeting is showing ads to people who have visited a website or shown interest in a brand previously. It helps brands re-engage with people who already know something about the brand. 

Cross-Device Targeting

Cross-device targeting is like the omni-channel experience for ads. It’s the ability to serve targeted ads across a variety of digital devices based on activity and usage. 

For example, a person on their mobile phone might see an ad while riding the subway, and see another ad for the same product at home on her laptop. 

Geo-Targeting

Geo-targeting allows brands to reach customers based on where they are. This is important for brick and mortar locations. For companies doing business in multiple countries, language-specific ads can also be served based on locations.

Advertiser Metrics

An advertiser should use the following metrics to determine the performance of their programmatic ads:

  • Unique visitors
  • Bounce Rate
  • Pageviews
  • Average time on page
  • Engagement: number of shares, likes and comments per post.

Monitoring metrics gives advertisers performance data and helps them prioritize the most effective ads.

The Publisher Side 

Publishers provide the location, or placement, for the ads to run. To do this, they need a Supply Side Platform (SSP) to distribute their ad slot inventory across one or more ad exchanges. 

The way it used to work was salespeople would reach out to advertisers to sell ad space. The Supply Side Platform automates this by using the ad exchange. Its not hard to see how much faster and more efficient this is for everyone. 

The SSP tells the ad exchange what available placement inventory is available. Through Real-Time Bidding, the inventory is auctioned off to the highest bidder. 

The SSP’s job is to sell ad space for the highest possible price. SSP’s connect to multiple ad exchanges to maximize the publisher’s exposure to available buyers.

SSPs also allow publishers to control their inventory, such as specifying minimum prices, buyers or channels.  

SSP Costs

The cost of an SSP varies. They charge commissions and some have optional extra services. An average fee is 10-20%.  Data Management Platform and some programmatic features may be extra. 

Major SSPs in 2021

  1. ADYOULIKE
  2. AerServ
  3. BrightRoll Ad Exchange
  4. DoubleClick for Publishers
  5. MoPub
  6. OpenX
  7. ONE by AOL
  8. PubMatic
  9. Rubicon Project, For Sellers
  10. SmartyAds SSP
  11. Xandr

The Ad Exchange

The Ad Exchange is like the auction house for ads. It is the heart of the programmatic ad process.

The ad exchange sits between the advertiser’s Demand-Side Platform (DSP) and the publisher’s Supply-Side Platform (SSP).

Real-Time Bidding (RTB) 

Most, but not all, programmatic advertising uses Real-Time Bidding.  RTB automates the data-driven buying and selling of digital advertising. RTB is included in the programmatic universe because it leverages advances in technology. 

Advertisers can easily buy online ads in a real-time bidding process. Publishers can get higher rates for their inventory while advertisers get improved targeting and coverage.

Ad exchanges leverage technology to work incredibly fast. The ad is auctioned and purchased at the same time as a visitor loads a website. 

When a visitor enters a website, the exchange matches available bids to ad space via a real-time auction. The winning ad is then displayed or “served” to the viewer of the web page.

A Private Marketplace (PMP) is an auction with restrictions on who can join. Selected advertisers are allowed access on an invitation only basis. Some publishers allow advertisers to submit an application.

A programmatic direct sale is when the publisher doesn’t participate in an auction at all. They directly sell inventory at a fixed cost per mille (CPM) to one or more advertisers. 

What Is an Ad Network? 

An ad network is different from an ad exchange. An ad network only offers inventory to advertisers from specific websites. And ad exchange is more like an auction house where advertisers can buy ad space from many ad networks. 

There are many ad exchanges, here are some of the biggest players:

  • AOL’s Marketplace
  • DoubleClick
  • Microsoft Ad Exchange
  • OpenX
  • Rubicon Project Exchange.
  • Smaato
  • Xandr 

Several factors go into the quality of an ad exchange. Advertisers should review several to see which ones fit their specific needs best.

Programmatic Advertising Is Here to Stay

Advertisers are always looking for the most efficient way to reach the right people at the right time. Programmatic ad strategies are the next wave in meeting that need. 

If you’d like to learn more about how the services of an expert digital marketer can help you with your programmatic ad buying, contact us today.  

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