Programmatic media buying, also called programmatic advertising, is an automated method and process of purchasing digital advertising space in real-time auctions. This technology of media buying uses data and algorithms to deliver targeted ads to the right audience at the right time and on the right device. In this post, we’ll explore what programmatic media buying is, how it works, and its benefits.
What is Programmatic Media Buying?
Programmatic media buying is the process of using technology to automate the buying, placement, and optimization of digital ads. Programmatic media buying is differentiated from traditional media buying, which involves less automation and slower manual processes.
Programmatic media buying eliminates the need for manual processes such as negotiation, phone calls, and paperwork. Instead, the technology uses algorithms and data to place ads in front of the right audience at the right time. This saves advertisers time and resources, allowing them to focus on strategy and creativity.
Programmatic media buying processes are divided into four groups: real-time bidding (RTB), private marketplaces (PMP), preferred deals, and programmatic direct.
- Real-time bidding (RTB) is open to any advertiser and publisher, allowing them to buy and sell ads through instant, automated auctions. This type of programmatic media buying process is also known as open auctions.
- A private marketplace (PMP) functions on the same technical principles as an RTB open auction but imposes limitations on who is allowed to join. Typically, a PMP is reserved for selected advertisers on an invite-only basis, although some platforms may allow advertisers to apply to join.
- Preferred deals, also known as spot buying, are a compromise between RTB and private marketplaces. Under the preferred deal model, publishers and selling entities may offer inventory for a preferred, fixed price. In turn, buyers have “first-look” privileges, allowing them to see the ad spaces before negotiating a deal. Unsold preferred-deal inventory generally goes to an open auction.
- Programmatic direct refers to the direct sale of media inventory from a publisher to an advertiser without using an auction system or competing with other publishers. Although it allows publishers and advertisers to enter into agreements directly, programmatic direct platforms automate the placement of the ads and allow both parties to negotiate the costs.
How Influential is Programmatic Media Buying?
Although programmatic media buying technologies have existed in some capacity since the early 2000s, an eMarketer study revealed they became the dominant form of digital display advertising in the United States in 2015.
Programmatic media and programmatic ad buying technologies have entirely changed how businesses operate and use online advertising. Compared to more traditional methods in the past, programmatic ads and technologies have expanded the reach of digital advertising, optimized the use of ad space, and enhanced ad-serving effectiveness.
Programmatic media buying is faster and more cost effective than traditional equivalents, resulting in reduced operating costs and higher returns on investment.
What is Programmatic Advertising, Then?
Programmatic advertising is a synonymous term for programmatic media buying. Both terms refer to the same concepts that let advertisers and publishers buy and sell:
- online display spaces (e.g., ad spaces) using automated processes,
- traffic data,
- and online display targeting.
Their main aim is to generate impressions.
How Does Programmatic Media Buying Work?
Programmatic media buying platforms form a unique environment called the programmatic advertising environment or programmatic ecosystem. This environment comprises multiple technologies and entities crucial to the programmatic ad serving process. Each plays a unique and critical role in managing programmatic ads, programmatic advertising costs, automated ad-serving, and display selling processes.
Although numerous technologies power the underlying processes, the programmatic media buying process is relatively simple. Here are the essential steps explaining how programmatic media buying works::
- Advertisers start new ad campaigns, design ad creatives, and use a demand-side platform (DSP) to purchase suitable ad space automatically.
- DSPs connect to ad exchanges and check for available ad spaces listed on supply-side platforms (SSPs).
- Users visit websites with suitable ad spaces. When a new visitor is detected, DSPs and data management platforms determine whether the visitor matches the targeting criteria of available advertisements.
- If a visitor matches audience targeting criteria, a DSP issues an ad request to an SSP through an ad exchange, launching an auction to obtain the visitor’s impression. Ads requested can be of any type as long as it matches the ad space. Typical examples include display ads and native programmatic advertising.
- The DSP processes the ad creative’s data and audience targeting parameters, then instantaneously places a bid for the impression via real-time bidding (RTB).
- The SSP compares bids placed by all participating DSPs and selects an auction winner. Typically, the impression goes to the highest bidder, although SSPs may sometimes impose a price floor to ensure the winning ad is of higher quality.
This entire process occurs every time a user visits a website with functional, suitable ad spaces. It generally takes no more than a few milliseconds, well within the average web page load times.
What are the Main Components of Programmatic Advertising?
The main components of the programmatic advertising environment are 3. They include sell-side platforms (SSP), demand side platforms, and ad exchanges.
1. Sell-Side Platforms (SSPs)
A sell-side platform, also known as a supply-side platform (SSP), is an adtech software platform and a component of the programmatic ecosystem designed to assist publishers, digital media owners, and others in display selling. The primary purpose of an SSP is to automate the management, optimization, and sale of ad space from an ad exchange.
SSPs are also designed to connect to demand-side platforms (DSPs) and ad exchanges, ensuring that the available ad space for sale will be given to the highest possible number of potential buyers and maximizing the potential revenue.
2. Demand-Side Platforms (DSPs)
A demand-side platform (DSP) is the buyer’s equivalent of an SSP. This adtech software platform is designed to assist advertisers, media buying agencies, and other buying entities. The primary purpose of a DSP is to automate bidding on ads and associated decision-making processes, such as bid amounts or target audiences..
DSPs allow advertisers to upload their ad creatives and connect to multiple ad exchanges and sell-side platforms (SSPs) to look for suitable ad spaces to display them. Automation then handles the bidding and ad-buying processes according to the advertiser’s parameters (e.g., target audiences, budget limits, integrations, etc.), automatically assigning ads to the best and most suited spaces.
3. Ad Exchanges
An ad exchange is an online digital marketplace accessible to advertisers, publishers, SSPs, and DSPs. The ad exchange is at the center of the programmatic advertising ecosystem, functioning as an intermediary.
The primary purpose of the ad exchange is to serve as the platform through which buying and selling entities can trade ad inventory and purchase ad inventory together. Ad exchanges host the real-time bidding (RTB) processes allowing for the buying and selling of ad inventory. They can accept nearly any type of ad creative, from native ads to display ads, mobile interstitials, and video ads.
Although many automated processes exist to ensure a sale takes place within a few milliseconds, the operating principle of an ad exchange is that of simple supply and demand.
Publishers supply ad spaces and look for the highest bidder to buy ad space (ad inventory), whereas advertisers look for ad spaces with the best features and visibility to obtain a good return on investment.
Why is it Worth Choosing Programmatic Advertising?
Programmatic advertising offers numerous advantages to buyers and sellers, the most significant of which is the automation and streamlining of many manual, time-consuming tasks.
In the traditional media buying methods of the past, securing a deal to sell ad space involved many elements, such as negotiations, requests for proposals (RFPs), audience targeting, manual implementation of ads, and more.
Programmatic advertising lets machines handle all these aspects, saving publishers and advertisers considerable time, increasing the publishers’ reach, boosting the effectiveness and ROI for advertisers through better audience targeting, and decreasing advertising costs.
Programmatic advertising optimizes the processes to ensure that the right audiences see the best ads at the right time for the right price.
Good Programmatic Advertising Ad Campaign Examples
Numerous advertisers and companies have used programmatic advertising to their advantage, creating compelling ad campaigns. Below are three prominent examples of good programmatic ad campaigns.
1. Google Search App
In 2014, the search engine giant adopted programmatic advertising for the first time to improve the performance of their digital advertising campaigns. In doing so, Google became one of the earliest adopters of the technology. At the time, Google’s programmatic ad tech and marketing strategy focused on promoting the Google Search App, using first-party and third-party data to create a custom audience targeting solution.
Google’s adoption of programmatic advertising has resulted in a 50% increase in brand awareness, 30% lower cost per mille (CPM), and increased reach equivalent to 30% more users reached three times more frequently.
The search engine giant had set a target for 2014: to buy 60% of the company’s brand display marketing using programmatic media buying. The program was so successful that Google not only met but exceeded that goal, reaching 73% at the end of that year.
Google Media Lab representative Brendan Starr cited real-time ad campaign optimization as one of the most powerful advantages of this technology. This advantage allowed Google staff to refine their ability to target and reach audiences much more effectively than then-standard post-campaign reports.
Kellogg’s is another early adopter of programmatic advertising technology, first using it to boost sales in 2014, the same year as Google.
As a multinational food manufacturing company, Kellogg’s business depends on offline sales. This particularity meant the company had to overcome the challenge of using a technology primarily designed to drive views and sell products online. They determined the most critical key performance indicators (KPI) of a digital ad campaign for offline products were viewability (how likely a user is to see an ad) and frequency (how often a user views the same ad).
The cereal company used programmatic advertising technologies to maximize their ads’ viewability and frequency as much as possible, even partnering with ad management company DoubleClick to improve their audience targeting performance.
Programmatic advertising helped Kellogg’s achieve 70% to 80% more viewability and 2x to 3x more accurate targeting.
3. The Economist
The Economist, a well-known U.S.-based print and digital news publication, adopted programmatic advertising in 2016 to increase readership. To do so, the company analyzed its extensive audience data to gain more insights into how its existing subscribers interact with the site and its content.
After determining reader categories among The Economist subscribers (e.g., Politics, finance, economics, etc.), the publication treated each category as a separate target audience and designed ad creatives tailored to each. For instance, a reader in the Finance category would primarily see ads promoting its latest or most viewed finance stories. They then used programmatic advertising to distribute the ads, creating 60 different creatives.
At the end of their first programmatic ad campaign, the results came in, and The Economist benefitted in numerous ways: 1 million unique viewers, 650,000 new prospects, $650,000 earnings in ad revenue, 9,500 new subscribers with a lifetime value of over $15 million, and a 64% increase in the publication’s awareness.
The ad campaign resulted in a 10-to-1 return on investment, meaning The Economist earned about ten times the amount they spent on the campaign. The Economist’s efforts resulted in a nomination at the 8th Shorty Awards in the Multi-Platform Campaign category, citing how the ad campaign had changed viewers’ perception of the publication.
Why is Programmatic Advertising a Success?
According to eMarketer, the total spending on programmatic advertising in the United States alone was $75.09 billion in 2020 and is projected to rise to $141.96 billion by the end of 2023. There is no denying it: programmatic advertising is a success, making up an overwhelming majority of total digital ad spend. Understanding the top reasons why programmatic advertising is successful will help you see why it has become dominant in the ad tech sector.
More Accurate Targeting with AI software
Programmatic advertising platforms employ the latest advances in automation and algorithmic technology, such as artificial intelligence (AI), to facilitate most of the processes in media buying.
For example, programmatic advertising platforms can use AI to power their audience targeting tools. They can track down the most relevant and highest-intent viewers, resulting in high-quality ads displayed to audiences most likely to show interest in the product.
Programmatic advertising technologies are ideally suited for leveraging all possible advertising avenues and maximizing your reach.
They can serve ads of all ad types and ad formats, including native ads, video ads, interstitials, display ads, connected TV (CTV), and more, on desktop and mobile platforms.
Improved Ad Campaign Cost-Effectiveness
The most significant factor behind the success of programmatic advertising is the time and money saved by leveraging automation technologies. Programmatic platforms can secure deals and help place ads on available spaces to the right audiences within milliseconds.
Technologies such as real-time bidding also ensure that the ad inventory is bought and sold at the best possible prices, helping reduce the costs of an ad campaign.
Benefits of Programmatic Advertising to Advertisers
From the advertiser’s point of view, programmatic advertising has made it easier to reach their intended audiences, boosting sales and impressions more efficiently than any other digital advertising method. The top three benefits of programmatic advertising for advertisers are scalability, a real-time, data-driven approach, and high transparency.
1. Scalability and Flexibility
Regardless of the size of their business, advertisers of all kinds can take full advantage of programmatic advertising. Whether the advertiser belongs to a small or medium business or a major multinational company, programmatic advertising is designed to scale to the advertiser’s needs.
There are various tools and options if you have a limited marketing budget, such as daily budget ceilings and overall spending control systems. They all allow advertisers to precisely control how much they want to invest in their ad spend. Advertisers may simply scale their spending up or down as needed as their business grows or declines, making it flexible and adaptable.
2. Access to Real-Time Data
Programmatic advertising comprises data analysis and application technologies. Programmatic would not function if it didn’t have access to large amounts of data in real time. Consequently, advertisers and marketers can see and use the information to their advantage to make any changes or modifications they need to their ad campaigns.
For instance, if the data reveals a particular trend in the middle of a campaign, an advertiser can adjust their programmatic advertising campaign’s settings on the fly to try and capitalize on this new trend.
Programmatic media buying provides advertisers with real-time data and insights, allowing them to optimize their campaigns.
Advertisers concerned about associating their products and services with suitable ad spaces can access numerous tools and options to ensure their brand’s safety.
For example, a programmatic advertising platform can display information regarding where their (banner) ads are being displayed, what types of audiences they attract, and how efficient the campaign is. These metrics are critical for advertisers looking to fine-tune the effectiveness of their ad campaigns while ensuring they communicate the right messages to the right audiences.
4. Efficiency and Cost-effectiveness
Programmatic media buying eliminates the need for manual processes, saving advertisers time and resources.
It allows advertisers to bid on ad inventory in real-time, resulting in more efficient use of advertising budgets. The use of an AI software that regulates bidding caps allows advertisers to also be more cost-efficient.
Benefits of Programmatic Advertising to Publishers
Publishers have also significantly benefited from the introduction of programmatic advertising technologies. Like advertisers, publishers of all sizes can use programmatic advertisers to grow their business more efficiently than previous-generation digital advertising methods.
The top three benefits of programmatic advertising to publishers are:
- advanced technology support,
- efficient inventory and data management platform, and
- detailed reporting.
1. Support from Advanced Technologies
Modern programmatic advertising platforms are powered by artificial intelligence (AI) and machine learning (ML) algorithms. These can analyze and predict trends regarding ad viewership and assist publishers by automating many tedious tasks, such as audience targeting, efficient ad placement, or bidding strategies.
2. Efficient Inventory Management
Programmatic advertising services are ideally suited to manage a publisher’s ad space inventory. Most platforms today can help publishers manage ad types, locations, and segmentation, ensuring that a publisher’s available supply of ad spaces is filled and efficiently utilized.
3. Detailed Reporting
Just as they can provide numerous data types in real time to advertisers, programmatic advertising platforms today can create highly detailed and personalized data reports for publishers. They contain crucial information and insights to understand a publisher’s ad operation performance, allowing them to find the best opportunities to grow and improve their ad yield.
Programmatic Advertising Platforms & Tools to Use
Learn about the top five programmatic advertising platforms and why their features and options are among the best in the ad tech marketing industry.
- Google Ad Manager (GAM): Ad Manager is the search engine giant’s programmatic advertising platform. This platform is an SSP, meaning it is aimed primarily at publishers. Over 75% of ad impressions in the United States are served through GAM.
- PubMatic: PubMatic is a full-stack programmatic advertising platform suitable for advertisers and publishers. The platform’s top features include comprehensive real-time analytics, a powerful anti-fraud system, a sizable private marketplace (PMP), and a massive selection of ad types and formats.
- Adobe Advertising Cloud: Publishers and advertisers looking to advertise through all media types often choose Adobe Advertising Cloud. This platform is compatible with a huge range of ad creatives: standard options like native, display, and video ads, and more specialized formats, such as connected TV (CTV), audio-only ads, and even search engine ads.
- AdRoll: This programmatic advertising platform is owned by one of the oldest players in digital advertising, with over 15 years of experience working with over 120,000 of the world’s top brands. Top features include an easy-to-use interface, quick-start templates, world-class analytics systems, and high returns on investment.
- SmartyAds: As another full-stack programmatic ad platform, SmartyAds offers a full suite of services for publishers and advertisers. One of the best uses for this platform is campaigns aiming to boost click-through rates, conversion rates, and overall engagement.
Common Misconceptions About Programmatic Media Buying
There are several common misconceptions that bring misunderstanding about programmatic media buying, including:
1. It’s too complex
While programmatic media buying involves a complex ecosystem of players, it is still accessible to advertisers of all sizes and budgets.
2. It’s only for large advertisers
Programmatic media buying is accessible to advertisers of all sizes and budgets, allowing smaller businesses to compete with larger ones.
3. It’s only for digital advertising
While programmatic media buying is primarily used for digital advertising, it can also be used for traditional media such as TV and radio.
Boost your Digital Properties’ Profitability with CodeFuel
Programmatic advertising is one of the most efficient ways to advertise and serve ads in today’s world. If you need help getting started with your programmatic media buying journey, CodeFuel’s team of digital marketing experts can help you. Whether you are a publisher or an advertiser, we can help you leverage your digital marketing properties and extend their profitability. Contact us today to start.
How much does programmatic advertising cost?
An average programmatic ad campaign costs between $0.50 and $2 CPM (Cost Per Mille), meaning advertisers pay publishers between $0.50 and $2 for every 1,000 ad impressions generated.
Is programmatic media buying more expensive than traditional media buying?
Programmatic media buying can be more cost-effective than traditional media buying because it allows advertisers to bid on ad inventory in real time, resulting in more efficient use of advertising budgets.
Can programmatic media buying target specific audiences?
Yes, programmatic media buying uses data to target specific audience segments, increasing the relevance and effectiveness of ads.
How to integrate programmatic advertising into your marketing mix?
If you aren’t using programmatic advertising, the best way to integrate it into your marketing strategy and marketing mix is to join a programmatic advertising platform, such as a DSP or an SSP, and start using their tools and offerings today.
Is programmatic advertising “the future of ad buying”?
According to the latest recorded statistics on digital advertising, programmatic ads made up 84% of all digital ad spending worldwide in 2022 and are projected to rise to 87% by 2026. Ads purchased programmatically are not only the future of ad buying but have already become the norm.
Are programmatic buying and real-time bidding the same?
No. Real-time bidding (RTB) is a technology used in programmatic buying and is the most common way to buy and sell ad inventory; the two terms are not always interchangeable.
Programmatic direct is one of the four programmatic media buying processes and does not always use any auction or bidding system and would not be the same as with real-time bidding.