Across the past five years, programmatic advertising has made waves both in the way it’s reshaped the marketing and advertising worlds and for the not so clearly defined buzz that’s cropped up around it.
For some of you, it’s probably a term that’s floated around your office space at some point and for others, you may have no idea what we’re even talking about. But for a global market that’s expected to spend $49 billion on programmatic advertising in 2019, it’s probably time to clear up any confusion on what programmatic advertising actually is, and why it’s important.
To put it simply, Programmatic Advertising is the use of technology and software to run advertising campaigns in an automated fashion.
Instead of the traditional methods used to create and subsequently buy ads to show people (If your mind went to Don Draper pitching to a boardroom in Mad Men then that’s probably a stretch, but we get why you’re thinking about Don Draper), Programmatic Advertising uses software to buy ads.
If you’ve ever ventured onto a website or opened a mobile app, then you’ve come across a programmatically served ad. They look like any other digital display ad, often appearing as banners at the top or bottom of a site, or perhaps as a pop-up on an app you frequent.
Reaching consumers on all the possible places they could be — across thousands if not millions of websites and apps — is impossible to do via direct, manual transactions between buyers and sellers. Marketers needed a way to automate this process so they could place ads all over the Internet, wherever their target consumer might be, quickly and efficiently. Programmatic ad buying answered that need.
What did we do before programmatic advertising, then?
In the earlier stages of the internet, before programmatic advertising was introduced, buying ads was a much more human-to-human exchange that began with a relationship between publishers (sellers) and advertisers (buyers). If advertisers wanted to target a specific online audience, publishers provided a web property made up of intriguing and useful content to attract an audience the advertiser might want to reach with their campaigns.
Agencies helped advertisers achieve their marketing goals and connect with their target audiences. It was up to media buyers to create media plans that targeted the right people and to communicate with publishers that had access to those audiences.
As the internet grew, however, so did the amount of ads being left unsold to advertisers. The excess ad supply created a massive amount of unmonetized inventory, and ultimately made the buying process between publishers and advertisers a murky and overextended one.
The industry answered with ad networks, systems which categorized a publisher’s unsold ad inventory and made it easier for buyers to access and include it in media campaigns. Ad networks split ad inventories into two categories: premium and remnant.
Premium ads were sold via direct relationships between buyers and sellers, while remnant ads were those left unsold or leftover, which publishers sold to advertisers via ad networks.
Though ad networks solved the unused ad supply issue, it turned the overall ad buying process into a complex web of difficulty for publishers.
The next solution came in the form of Supply Side Platforms, or SSP’s as they’re commonly known. SSP’s created a gateway for publishers to manage who gained access to ad inventory for resale to agencies and advertisers. SSP’s essentially act as the middleman between the seller and advertising networks by dictating how it is sold and when it will be delivered to the ad network. Out of the success of SSP’s came Demand Side Platforms, or DSPs, for short. DSP’s allow advertisers to pick up ad inventories, enabling them to manage media buying via a single platform.
The implementation of SSP’s and DSP’s finally created an environment that benefited both buyers and sellers, and ultimately provided a platform to conduct programmatic advertising through Real-Time Bidding.
Real-Time Bidding
We can’t talk about programmatic advertising without discussing real-time bidding.
Programmatic Advertising, as it currently stands, is made possible and most efficient through Real-Time bidding. This is how it works:
Let’s say a user visits a website. This typically triggers a bid request from the publisher (the owner of the website) to an ad exchange (an online marketplace for ad purchasing). Every bid request contains information about the user that would suggest if she or he is an ideal target audience that may be interested in the ad.
If the user is a match, then the brand bids for the space. The highest bidder wins and the personalized ad is served to the user, ready to be seen.
Real-time bidding is revolutionary in that it allows advertisers to programmatically display ads to the precise target audience the ad was created for without the risk of losing impressions on uninterested audiences.
RTB isn’t the only type of programmatic ad buying that exists, however. “Programmatic Direct” is another method of programmatic advertising common to the digital advertising world. Programmatic Direct allows advertisers to buy guaranteed ad impressions in advance from specific publisher sites.
So, why is all of this a big deal?
In 2017, US programmatic ad spending topped out at $32.56 billion, which was 78% of all digital display ad spending. As mentioned previously, programmatic is expected to reach nearly $49 billion in 2019, meaning more than four in five US digital display dollars will flow via automated means.
On top of that, nearly eight in 10 mobile display ads in the U.S. are purchased programmatically, which will increase to around 85 percent by 2019, according to advertising estimates conducted at the end of last year by eMarketer.
Advertisers have looked to programmatic advertising as it allows for better audience targeting, more efficient ad deployment, and a consistently higher ad ROI. Programmatic architecture allows advertisers to deliver a personalized ad with the help of DMPs, or, Data Management Platforms, that store a user’s information such as age, demographics, and location.
What’s more, these targeted ads are disseminated within milliseconds, beating the speeds of traditional, human-to-human ad buying negotiations by a long shot.
According to StopAd, the average modern person is exposed to 5,000 ads per day, and that’s not including ads viewed on a mobile device.
In this fast-paced, media-driven world we live in that is only bound to continue accelerating, ads and how they are served are a daily part of our lives, whether we realize it or not. The digital advertising climate will continue to grow and change as we continue to grow and change, and it’s partly our own understanding of the digital ad world that informs how ads are disseminated and consumed.
So that’s why when I’m planning a trip to the beach Ray Ban ads will pop up on the sidebar of my computer screen?
Yep, you got it.
While it may seem odd that your computer can “read” you in this way, it’s really just programmatic advertising doing its thing.
And if you find yourself skimming through Ray Ban’s website while your janky pair of drugstore sunglasses already sits next to you, then programmatic advertising has done its job.
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Originally published at lucidity.tech on August 9, 2018.