“The art of simplicity is a puzzle of complexity.”
Seeming rather complex at first, the concept behind the details of programmatic advertising could turn out to be quite simple. While largely perceived as a puzzle of complexity, its core idea is far less abstract than it sounds.
Falling within the spectrum of digital marketing, programmatic advertising has been building its reputation as the future of digital advertising for the past few years. Yet, there is ongoing reluctance on the issue of “programmatic”. While the concept of advertising is well established, how does it blend with “programmatic”?
The term “programmatic” basically means “machine-driven” or “automated”. Within the context of advertising, it is the use of machines to purchase ads.
Leaving bureaucracy behind, programmatic advertising aims at bringing specificity and efficiency to the process of customer targeting by using various types of software that interact with each other. Digital trade is happening through software “pipes”, making advertising more specific and target-oriented, excluding human touch wherever possible, which ultimately makes the entire process cost-effective.
The tools of programmatic advertising
Think of programmatic advertising as a coin; one side is real-time bidding while the other is programmatic direct.
Real-Time Bidding represents the automated means by which ad inventory is bought on per-impression basis and sold using a bidding system at an auction, all this in real time, just milliseconds before a web page is loaded.
The concept of Real-Time Bidding entails the following crucial components:
- Publishers (website owners, sellers). They provide inventory. They might use SSPs (supply side platforms, similar to demand side platforms) to manage their inventory sale.
- Supply Side Platforms (SSPs). Software tools for publishers that help them sell their inventory. Supply Side Platforms work to maximize selling prices of impressions.
- Ad exchange platforms. Tools that use their technology-driven approach to facilitate the process of buying and selling of ad inventory in real-time through auctions. They connect advertisers (buyers) and publishers (sellers).
- Demand side platforms (DSPs). Tools that bid on behalf of advertisers. These platforms have the interface through which advertisers can access a huge specter of inventory coming from different sources.
A user’s visit to a website triggers a bid request. The request goes from the publisher to an ad exchange platform or an SSP, which submits that bid request, along with the generated data to a Demand Side Platform. Then, the DSP checks if an advertiser needs that bid request. If that’s the case, the DSP sends that bid response back with the bid on behalf of the advertiser, and if the bid is the highest, the ad is displayed.
Benefits of Real-Time Bidding
- RTB is a more efficient concept of narrowing target audience, because it leaves the practice of purchasing in bulk and ending up with wasted impressions;
- Bidding on per-impression basis allows advertisers to be very selective and precise in deciding what is relevant for their business;
- RTB goes to great lengths to make transparency its key advantage. Advertisers can now know the exact context in which their ads will appear, which means they precisely know what they pay for, where it is presented, and who sees it.
- Safety. Advertisers can now be sure their ads will not end up in a portion of a website the user won’t notice or get lost among other ads. They know the exact end context of their ads.
- They can expect higher revenues since buyers constantly increase the value of impressions with the bidding;
- Thanks to the Supply Side Platforms, publishers can control minimum prices at which their inventory is sold, often referred to as “price floors”;
- The biggest benefit for the publishers is the opportunity to sell impressions which in the past would have been wasted of left unused;
- Ad impressions are presented to huge number of advertisers since the biggest DSPs directly work with hundreds of them. DSP clients are all potential buyers of the available ad impressions, thus it’s much easier and more likely to sell the ad impressions. Publishers that do not sell using programmatic technology have much smaller reach of potential advertisers.
In essence, both RTB and programmatic direct represent automated, software driven means of ad buying and selling; however, when we discuss the latter, it does not include an auction. The word “direct” describes the notion of direct pre-negotiation between buyers and sellers while making use of automated ad delivery for targeting specific audiences.
Basically, advertisers purchase publisher’s inventory without bidding on it at auctions. Once it is purchased, it is directly on the publisher’s ad server.
Benefits of Programmatic Direct
For advertisers, the benefits of programmatic direct revolve around the increase in efficiency provided with the introduction of automation. This basically means a severe reduction in bureaucracy, thus making the entire process more efficient and target-oriented. Moreover, programmatic direct is better at targeting a specific audience, which leaves buyers time to develop more optimized strategies. Lastly, there is the possibility to reserve or guarantee inventory in advance.
Efficiency was already mentioned as one of the key points of both Real-Time Bidding and programmatic direct – but what does it mean in practice and how does it apply?
Primarily, programmatic advertising skips the human factor wherever this is possible. This ultimately redirects the focus on creating tactics and achieving goals more quickly. By providing this, it saves both time and money for companies.
Moreover, since most transactions are happening in real time, marketers are constantly alert and updated on the changes in the market dynamics. That awareness will lead to taking up a proactive approach in analyzing constantly incoming data and will develop a problem-solving attitude.
It seems that programmatic was the missing puzzle in the display landscape, the one that brought a shift in it by transforming its complexities into simple and effective solutions for marketers. Thus, programmatic advertising should be received by marketers not so much as a product, but more as a feature within the spectrum of digital advertising, and as such, its enormous potential should be the prime focus of any serious business endeavors.