Programmatic advertising, or ‘programmatic,’ is quickly becoming one of the top preferred methods of digital advertising today. According to the International Advertising Bureau (IAB), programmatic advertising is now a key element in most companies’ digital ad budgets because of how effective it is in placing and scaling targeted digital ads.
Globally, programmatic advertising reached $129B in ad spend in 2020 and is projected to reach $150B by the end of 2021. According to the IAB, programmatic ads account for over half of digital media advertising at 68%. To date, the US leads the majority of programmatic media buys at 85% of all digital ad spending, followed by over 80% in Europe.
In terms of ad spend on programmatic video ads, Australia closely follows Germany as the fifth largest market for buying programmatic video ads, with a significant growth rate of 14% in just one year.
If you’re interested in learning more about programmatic advertising and finding out if it’s right for your brand, keep reading!
So, What Exactly Is Programmatic Advertising?
In simple terms, programmatic advertising is a method that optimizes how advertisers purchase ad space, through the use of artificial intelligence (AI) and machine learning. It’s a way to automatically buy and optimize digital campaigns, all without needing to deal with publishers directly.
This kind of automation makes it incredibly efficient for both advertisers and publishers. Previously, both parties had to go through lengthy negotiations and proposal requests or approvals.
Programmatic advertising allows advertisers to buy advertising in real-time through AI and machine learning, allowing for the delivery of the most effective ads to target audiences based on signals such as shopping patterns. In a nutshell:
- Brands and agencies use DSP (demand-side platform), which allows them to determine what to buy
- Publishers use SSP (supply-side platform) to sell ad space to these brands
To be clear though, programmatic advertising does not completely automate the entire ad buying process. It only eliminates a lot of the previously labor-intensive practices (insertion orders, ad tags, negotiation, proposals, etc.) and creates a smoother workflow that allows publishers and advertisers to optimize and improve ads drastically.
How Can I Do Programmatic Advertising?
If you’re not quite sure how to get started with programmatic advertising, we’ve prepared a guide summarizing the steps to help you get things going:
Step 1: Goal setting
This step involves identifying your campaign goals and your target audience. By defining your audience and objectives early on, you’ll be able to make quicker and more informed decisions as you create and run your campaign. From there, you’ll be able to create a more targeted and specific campaign. You’ll also know what KPIs to track once you start your programmatic ads.
Your goals may look like this:
- Increasing website traffic
- Increasing sales of a product
- Boosting brand awareness
- Increasing positive brand association
- Getting more subscriptions or sign-ups
- Increasing app downloads
While it sounds simple, this step ensures that you and your team stay aware and on-track regarding key objectives.
Step 2: Choosing the right ad format
The next step is choosing your ad format for programmatic ad channels. Programmatic advertising allows you to place ads across various digital formats, such as:
- Display ads: These are static and animated ads that are in the form of banner adverts and other similar ad styles placed on websites.
- Native ads: These are ads that blend seamlessly into web content. Programmatic buying platforms use AI and analytics to ensure relevance and accurate targeting of native ads.
- Video ads: These may come in the form of videos that play before a featured video, videos inside article bodies, or videos placed as in-display video ads on streaming platforms such as YouTube.
- Mobile ads: These are ads that appear on mobile websites and apps.
- Interactive ads: These allow the audience to engage with the advertisers by asking them a question or displaying a simple game. These are usually placed on websites and apps.
- Connected TV (CTV) ads: CTV ads combine TV reach with programmatic ads by displaying ads on TV platforms for audiences who watch TV programs through online powered /non-cable TV platforms.
- Audio ads: These ads are inserted into digital radio shows and podcasts to allow marketers to reach engaged listeners.
- Search ads: These ads appear on search engine results pages (SERPs) based on a user’s search history and browsing behavior. They usually appear as search results at the very top of the page above organic results.
- Social media ads: These are heavily personalized and targeted ads based on data collected by social media platforms from their users.
Step 3: Choosing your platform
The next step is deciding which AdTech or DSP (demand-side platform) you prefer to use to run your programmatic buys. Some of the top DSPs are:
- Amazon (AAP)
- Facebook Ads Manager
- Rocket Fuel
Step 4. Identifying Your Budget
How much do you want to spend on ad space? This is a huge determining factor for the type of programmatic buying you will use. You’ll get to set a budget for each day. Once that amount is spent, your ad will stop running and will resume the next day.
Here are the different methods to calculate the value of your ad spend:
Through CPM (Cost per thousand Impressions)
This roughly translates to ‘cost per thousand impressions,’ which means you need to pay a certain price for every 1,000 users who see your advertisement. For example, if the CPM for an ad space is $3 and 10,000 people see your ad, you’ll pay $30.
This is an ideal model for:
- Reaching a broader audience
- Campaigns focused on brand awareness
- Other campaigns that don’t require specific action such as buying, subscribing, etc.
Through CPCs (cost per click)
With the CPC approach, you pay every time a user clicks on your ad. For example, if the CPC is 25 cents and you get 2,000 clicks, you would pay $500. Advertisers use CPC when they want to target a more specific, niche audience.
Does Programmatic Advertising Work?
You might already know the answer to this. But indulge us: Yes, it works.
Like we discussed earlier, programmatic advertising is now a significant part of most advertisers’ ad budgets, especially large businesses. That’s because it works.
More and more brands and agencies are relying on programmatic advertising to maximize campaign efforts, as well as save time and money. This is strongly evidenced by the exponential growth that programmatic ad spending has seen in the last five years.
Back in 2017, ad spend was only at $68.2B. In 2021, it’s projected to reach over $150B:
A large part of its success is because it’s an efficient use of both advertisers’ and publishers’ time, money, and resources. Programmatic does away with the hit-or-miss element of traditional campaigns and allows for much more effective delivery of marketing campaigns.
Programmatic advertising gives you a reliable algorithm that will determine where your ad budget is best spent. All you have to do is provide information about your campaign and what your KPIs (key performance indicators) are. The system will then essentially launch your campaign and allow you to monitor your ad spend as well as pinpoint areas for improvement.
Benefits of Programmatic Advertising
While traditional ad buying will still allow you to reach your target audience, programmatic has some benefits that will allow you to reach your audiences better and improve your campaigns:
Programmatic advertising does away with time-consuming and labor-intensive tasks such as developing RFPs (request for proposals), creating insertion orders, and the back-and-forth of negotiation. Programmatic advertising creates a much more streamlined and efficient process that allows advertisers to buy and place ads in real-time.
This means that as the advertiser, you can reach your target audience exactly when and where they are most likely to buy. This also means that you won’t be wasting ad impressions on people outside your target audience profile, making it more cost-effective as well.
With programmatic, you can reach your target audiences based on a variety of signals such as shopping behavior and browsing activity, across multiple devices. It can also help you determine what type of audience you want to reach using data gathered surrounding your KPIs and campaign efforts.
Instead of trying to reach your audience from a specific website or page (E.g. placing a fashion-related banner ad on a fashion blog for a month), you can build an audience and reach them through hundreds of platforms, whenever they happen to be online. It allows you to expand your reach exponentially without needing to be extra-specific in hunting down individual blogs or websites to place your ads.
Programmatic allows you to measure your campaigns and make adjustments in real-time. This immediacy allows you to optimize your efforts and get maximum results.
You have the option of ‘testing’ whether your campaign will be effective on specific audiences, and then adjust your targeted ads later on to more specific audiences according to the data you’ve gathered surrounding your campaign success.
Traditional media buying allows advertisers to purchase in bulk, with little to no control over inventory and ad placement. With programmatic advertising, you’ll know exactly where your ads will appear, providing you the assurance that your ads are running smoothly.
You’ll be able to access the ad’s purchase price, number of impressions, clicks, interactions, and the platform it’s running on. You can also view data regarding your audience, including brand loyalty, browsing behavior, and buying habits.