What is Programmatic Advertising Anyway?

Photo Credit: Illustrations Courtesy of iStock
Published September 7, 2022

What is programmatic advertising?

Programmatic advertising is the automated process of connecting brands looking to advertise with digital publishers looking to sell advertising space.

Advertisers use software called demand side platforms (DSPs) and publishers use supply side platforms (SSPs) to instantly "meet up" in massive online ad exchanges. From there, targeting data match ads with placements based on parameters set by both the advertiser and publisher. 

Humans set up the creative, budget and targeting and machines broker the deals - using AI to optimize performance based on set goals.

These transactions happen in real time, meaning in less time than it took to write a single word of this sentence an ad placement is auctioned off and another ad has found a happy home in front of a desired audience.

Instead of targeting publishers one at a time, programmatic advertising allows for targeting audiences across multiple publishers in real time.

What problems does programmatic advertising solve?

It used to be very time consuming to connect advertisers with publishers. Back in the pre-programmatic day, advertisers had to approach publishers individually to reach deals.

If you wanted your Stouffer's lasagna print ad below the Garfield funnies, you called the newspaper. If you wanted to feature your extra-absorbent tissues at the end of a tearjerker you called good people at Lifetime.

Now…for certain programmatic guaranteed deals (PGs) or custom or bespoke media buys, human outreach is still required, but…

Programmatic advertising platforms now instantly and automatically connect advertisers with publisher inventory (ad slots/impressions). In essence, programmatic took much of the manual 1-on-1 process of advertisers and publishers outreach, negotiating and agreeing to deals and automated it.

Target Audiences, Not Publishers

Instead of targeting publishers one at a time, programmatic allows for targeting audiences across multiple publishers in real time.

Win-Win for Publishers and Advertisers

From the publisher's perspective, programmatic helps them sell media placements (impressions) that might otherwise go empty by automatically connecting their inventory via the ad exchange with advertisers. This creates a win-win scenario in which publishers get additional income and advertisers get what is often more economical access to publisher audiences.

Efficiently Reach New, Qualified Audiences

Beyond this, programmatic advertising allows advertisers to scale as far as their budget allows and efficiently reach new and qualified audiences they couldn't have before.

Given its relative agility, programmatic advertising also makes it easier to test new creative ground, follow (and even stay ahead of) your audiences and expand your brand reach.

According to a study by Streamable, 89% of U.S. consumers subscribe to streaming services, while data from AudienceProject shows those still watching linear TV on a weekly basis has hovered around 60% from 2018-2021.

If your audience is cutting the cord, or maybe never had a cord to cut, you may want to test running your video ads on a premium CTV publisher like Fubo, Hulu, Sling, YouTube TV, or one of the many others you can reach via programmatic advertising.

Brand Safety and Machine Learning

Demand side platforms, like Google's Display & Video 360 (DV360), provide layers of brand safety as well - helping ensure ads reach relevant audiences and avoid placements that may be irrelevant or even detrimental to your brand.

Add to this oodles of performance data for optimizing and machine learning to help with the heavy data lifting and you have one very power method of finding, engaging and growing your audience.

Types of programmatic ads

Programmatic display ads can take on many forms. They fill what can seem like an innumerable array of ad placements, including digital audio ads.

Primarily though, when we think of programmatic display advertising, HTML5 banners and video spots placed on desktop and mobile publisher sites are the types of media that come to mind.

More recently, programmatic ad placements have come to include digital out-of-home, streaming audio (including podcasts) and connected TV (CTV).

According to PEW Research, only 56% of Americans watched satellite or cable TV in 2021. So when someone mentions watching "TV" these days they're increasingly less likely to be referring to traditional, linear TV and more likely talking about catching highlights of last night's game, or their favorite show, on their smart TV's YouTube App, especially if they're under the age of 34.

How programmatic advertising works

When a user visits a publisher's digital space (usually a website or an app), a split-second negotiation takes place within an ad exchange between the DSP (advertiser) and the SSP (publisher).

Depending on the type of programmatic advertising deal, this negotiation doesn't always take the form of an auction. This negotiation involves these five main automated parties:

  1. Demand-Side Platforms (DSPs)
  2. Data Management Platform (DMPs)
  3. Ad Exchanges (ADx)
  4. Ad Servers
  5. Supply-Side Platforms (SSPs)

Think of these five parties as the automated liaisons between advertisers and publishers.

1) DSPs: Advertisers & Agency Partners

Advertisers enter an ad exchange via their demand-side platform with their selected brand safety and targeting parameters set.

[DSP Examples: Google Marketing Platform (DV360 & CM360), Trade Desk and Amazon DSP.]

2) DMPs: Audience & Demographic Data

Data Management Platforms provide audience and demographic data that help inform a campaign targeting.

[DMP Examples: Nielsen, Oracle bluekai, Lotame and Snowflake.]

3) SSPs: Publishers/Websites

Publishers enter through software called supply-side platforms, where they've set their various parameters as well. These requirements might be such things as no content pertaining to drugs, alcohol, or politics. Kinda like tea at your Nanna's house.

The good ones will also make it so ads from similar or competing brands don't show alongside each other.

[SSP Examples: Google Ad Manager, MoPub, Sharethrough, PubMatic, AppNexus and more.]

4) Ad Exchanges

Ad exchanges then do the work of matching advertisers with publishers based on their collective targeting settings and determine, in less than the blink of an eye, which advertiser wins the placement on a publisher's property.

[Ad Exchange Examples: Google AdX, Magnite, PubMatic and Freewheel…amongst many others.]

5) Ad Servers

Once the negotiation is settled, ad servers then place the ad on the publisher's site. Ad servers also collect and report back performance data to the DSPs and SSPs for reporting and optimization.

[Ad Servers Examples: Google Ad Manager, Smaato and OpenX.]

Programmatic advertising from an advertiser's perspective

As advertisers (or brands), we mostly enter and experience this whole programmatic ecosystem through our demand side platform. It's where we load our ads, sculpt our campaign targeting, apply various layers of brand safety, reach out to various exchanges and networks, review performance data and optimize. The other four programmatic "parties" function largely in the background.

At Edge, we utilize the Google Marketing Platform as our DSP. It provides us and our brand partners access to the world's largest collection of ad exchanges. Not to mention it integrates some incredibly useful products like DV360 and CM360 and a ton of targeting and reporting options under one roof. But this is not to say the other DSP options out there aren't excellent also.

Programmatic advertising pros and cons

The Pros

Programmatic advertising is highly effective at building brand awareness, interest and recall. Plus, it saves time by automating the tedious bits and bobs like publisher outreach and overwrought RFPs.

Granular Targeting, Brand Safety & Reporting

Programmatic display allows for granular audience targeting, overlaid with brand safety measures and scrupulous, ever-improving reporting.

Access to Connected TV

Increased ease of access to CTV publishers helps ensure placement quality, further brand safety and provide a sort of future proofing against a post-cookie world.

Affinity & Brand Boost

Beyond the DSP platforms themselves, well-tuned programmatic campaigns provide increasingly efficient lift to a brand's primary digital channels. These channels are Organic & Paid Search and Direct and typically comprise the lion's share of online conversion activity.

The brand and affinity boost can make for a sort of rising tide effect, floating all the boats in a brand's digital harbor.

The Cons

Programmatic advertising remains a relatively new ad technology. Like all emergent technologies, it certainly has its share of wrinkles to iron out.

Dense Adtech

One wrinkle is programmatic's steep learning curve and potentially high buy in for the advertiser. This can make it hard to access some DSPs without going through an agency. This places a lot of weight on the advertiser/agency relationship. Advertisers would do well to decide on critical KPIs ahead of time with their agency and make sure their agency provide accessible, transparent reporting.

The Middle People

Good agencies will certainly earn their cut and substandard agencies will still take their cut of your media spend dollars. DSPs will take a piece as well. If you use a data management platform (DMPs) you will be charged for access to audience targeting data.

Make sure you talk with your agency and understand how much of your budget is going to getting your ads out there.

Knowing What to Measure

One of the biggest perks of programmatic advertising is the data, so it can be a little weird to hear that measurement is also a perceived drawback. It really isn't a lack of data so much as it is a lack of analysts.

If you're investing in programmatic display and video make sure you're getting more from your agency partner than an invoice and an Excel sheet with an impression total at the end of the campaign.

Ask to meet their data analyst before getting started and even see samples of their reporting. Ask them what their approach is to reporting and campaign optimization.

Impression Monsters of the Open Exchange

The internet consists of a lot of amazing content, but it's also full of garbage. (There, I said it.) Real-time bidding (RTB) on the open exchange offers tremendous value to both advertisers and publishers for the aforementioned reasons. However, without the proper precautions in place your brand could be susceptible to what I affectionately call impression monsters.

These unloveable creatures can take the form of sites, or bots impersonating sites, whose sole job is to rack up impressions and steal advertiser money.

Those are the more egregious kind, but really an impression monster is any poor-quality site you'd rather not have your brand associated with.

For an advertiser to get the most out of open exchange display or video placements, make sure your agency is deploying brand safety measures and regularly reviewing APP/URL reports for any impression monsters.

Low Viewability Rates

One special type of impression monster are sites that tally up tons of impressions, but very few viewable impressions. I've yet to meet a client who's eager to pay for an ad that no one saw or heard.

For this reason viewability is a key metric when evaluating your ad performance. Ask your agency if they are straining out low visibility sites and taking other strategic measures to increase ad visibility without sacrificing scale.

Partnering with an Agency

Yes, I realize I listed out more cons than pros above, but the benefits of programmatic advertising definitely outweigh the drawbacks. There's a reason why over 90% of digital display dollars will move through programmatic advertising in 2022.

Fortunately, most cons can be addressed by partnering with a proficient programmatic agency. The best agencies match expertise with a respect for best practices and transparent reporting.

Finding the right programmatic agency partner will help minimize the potential negatives and maximize the benefits for your brand.

If your brand's boat could use some extra wind in its digital sails, it might just be time to find your Edge.

Edge's Digital Marketing Services include strategy, creative, set up, management and reporting. From conversion-optimized LPs and ad creation to management and results, we move the needle from active…to actively performing.

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