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Advertising March 18, 2015

What is Programmatic Advertising and Why Should You Care?

Programmatic Advertising is redefining the digital advertising industry...

But only the tip of this new industry development has been explored. While some experts argue simply over what "programmatic" actually means, others aim to explore and develop the area.

This article will give you a introduction to what programmatic advertising is at its core. I'll also hopefully convince you -- as advertisers  -- why you should consider using it and what to expect from the future of this digital advertising revolution.

What is programmatic advertising?

Most commonly, programmatic advertising is an umbrella term referring to the  use of software to purchase digital advertising inventory instead of traditional methods like direct sales. 

However, in recent times "programmatic" has begun to transform from simply "programmatic buying and selling media" to include programmatic  creative ad production. There is even an extension of the definition's scope that covers programmatic analytics and other types of automated, dynamic media buying.

What are the Key Features of Programmatic Advertising?

At this point in the evolving definition, programmatic advertising boils down to two well-established features: real-time bidding and programmatic direct.

Real-Time Bidding (RTB)

Real-time bidding (RTB) refers to the purchase of digital advertising inventory through real-time auctions. 

This type of programmatic advertising allows advertisers to buy individual impressions through a bidding process. An advertiser can decide how much to bid on an impression based on the information associated with the person who has entered the website. 

This typically includes targeting based on information such as: 

  • Websites previously visited
  • Geographical location
  • Gender 
  • Browser Type
  • Any other available data 

This whole process is automated and happens within a few milliseconds using ad exchanges and demand-side platforms (DSP). Real-time bidding is beneficial for both advertisers and publishers, as it means that advertisers can buy only those impressions that are of value to them while publishers can ensure that their advertising inventory is always sold.

Programmatic Direct

Programmatic direct has taken direct sales of digital advertising inventory and automated it using software. 

Programmatic direct works in such a way that advertisers are able to buy  packages of inventory directly from the publisher. In this way, there is no need for advertisers to place bids or negotiate prices. One can simply buy and run advertising campaigns.

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Why should you care? What are the benefits?

Well, if the two features above didn't make you want to dedicate at least some of your ad spend on targeted, automated advertising, consider the time you'll save.

Programmatic advertising automates much of the online advertising process, significantly reducing your time and resources spent advertising. For example: where before it may have taken an entire team to effectively buy digital advertising inventory, one person can now control the entire process using software. This means that larger advertising campaigns are becoming scalable for small business and larger businesses can save money and manpower; which can be invested into other projects. The entire advertising process really just becomes that much more effective.

Plus, programmatic advertising is more reliable that traditional, high-touch methods of buying media. Directly buying media is slow and mistakes can be made when it comes to targeting the right audience. By removing most of the human element, programmatic offers a more reliable process, thereby offering more predictable and repeatable campaign results.

What are some challenges with programmatic advertising?

As it's a fairly recent field, programmatic advertising is yet fully developed. 

One of the most significant challenges is having the ability to produce the large amounts of display advertising creatives that are required to fuel the software to its potential. As such, you'll likely want the possibility to produce flexible campaigns that can be updated on the fly, demonstrating the need for  programmatic creative.

Another challenge is that the field of programmatic ads remains inaccessible to most people. This is due to its novelty and because it's not yet the norm -- with only about  50% of inventory being bought programmatically. However, this problem will partially solve itself as more advertisers and publishers start to understand and adopt programmatic advertising. 

As it stands, the brunt of the task falls on industry professionals as well programmatic software vendors to educate advertisers in this rapidly developing field.

The Future: More Programmatic

Programmatic advertising is definitely here to stay. 

In the near future, programmatic advertising is set to continue developing as advertisers begin to recognize programmatic as an ecosystem spanning from ad creation to analysis, rather than exclusively media buying. Expect to see even more types of programmatic, such as the programmatic creative production and analytics mentioned above. 

Such advancements are in line with the development of online marketing as a whole. As online marketers move ever towards closed-loop marketing and predictable ROI, such internal development and reporting will not be exclusive to the realm of content and other inbound marketing methods, but will also become an integral part of display advertising. Display advertising will start to see developments in this area as marketers start to understand multi-channel marketing as a whole cohesive process.

With this in mind, advertisers who have not yet adapted to programmatic advertising should begin educating themselves in the area. It is predicated that over the next 2 years,  spending on programmatic advertising will explode, so now is the time to come to terms with a shift in software and mentality. 

One thing is clear, programmatic advertising is already changing the way that many advertisers work. The question becomes: are you ready to reap the benefits that it can offer to your business?

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