Programmatic Advertising 101: What is it?

Programmatic Advertising Title Graphic

There was a time when getting an ad on a website — say, Yahoo! —required you to call and work out a deal. If it weren’t for the ascent of programmatic advertising, that process would still exist.

Thankfully, it doesn’t.

Today, the overwhelming majority of digital ad buys are done programmatically, and that’s not going to change. Here’s what programmatic advertising is, why it’s important, and what its future looks like. 

Contents

What is Programmatic Advertising?

Programmatic advertising is the process of using technology to automatically buy and sell digital ads. 

A level deeper, programmatic advertising starts when an ad impression loads in a user’s browser. The information about that page and the user is passed to an ad exchange, which proceeds to auction it off to advertisers. The advertiser who is willing to pay (bid) the most for that impression wins. 

Step-by-step, programmatic advertising looks like this: 

  1. Someone clicks on a website
  2. The website’s owner puts that impression up for auction via a Supply-Side Platform (SSP)
  3. Advertisers bid on that impression via a Demand-Side Platform (DSP).
  4. The highest bidder wins
  5. The ad is served on the website

Here’s a visual:  

A visualization of the programmatic advertising process

Top 3 Benefits of Programmatic Advertising

It’s hard to imagine an advertising world that doesn’t revolve around technology. In no uncertain terms, it makes life easier, more efficient, and a whole lot more affordable. But, ask any digital advertiser who was in the trenches a decade ago, and they’ll tell you how exhausting and challenging it was—how tedious and mundane it became. 

Even the most straightforward campaign with one ad set and creative combination meant reaching out to publishers directly, communicating back and forth, and, hopefully, agreeing. Only then would the publisher place their ad. 

If they wanted their ad on more than one website, you had to repeat this process. If you had more than one campaign, the increase could be exponential. It was time-consuming, taxing, and ate tons of resources that advertisers could spend on more critical tasks. It kept human error in the equation, too. 

For better or worse, programmatic ad buying ushered in a more straightforward way of working. While pundits will continue to say it’s taking jobs away from media buyers, others see its benefits. In reality, it’s hard to argue that programmatic technology hasn’t had the most significant impact on the digital advertising ecosystem — ever. 

Benefit #1: Programmatic Means Smarter (and Cheaper) Campaigns

Let’s be real: The online world is way too big and complicated for anyone to run a campaign with any semblance of efficacy. Imagine running a Facebook campaign and a search campaign at the same time. 

Each campaign has a handful of ad sets with different copy and creative combinations. On top of that, you’ve segmented your audiences. Once these campaigns are live, you have to optimize them. Is one ad performing better? If so, it should get more resources. Is one lagging? Well, pull back.

Is a subset of your target audience not responding? If that’s happening, maybe you want to change it up. All of these changes and tweaks are optimizations essential for a successful campaign. 

Without programmatic technology, you (or a team of media buyers), would have to go step by step and make these changes manually. It would take forever. Actually, it’s probably not even possible.

However, with programmatic ad buys, technology takes over and removes much of the guesswork—it makes the ad-buying system more efficient and, therefore, cheaper. In a world ripe with media waste, this should be music to your ears. 

Benefit #2: With Programmatic Ads, You Get Laser-Focused Targeting

Over 4 billion people have access to the internet. That means 4 billion people around the world could, theoretically, see your ad. Sounds good, right? Well, sort of. The problem is that only some of those people are in your target audience. 

Thankfully, with programmatic technology, you can segment your target audiences in meaningful ways. 

Log into Facebook Ad Manager and start building out a campaign.

Facebook's audience targeting for ads

During the build, Facebook will ask you to select your audience. Depending on your goals, you’ll pick some traits and characteristics that are important to you.

Maybe you want to reach people who are between 30-45 years old and interested in baseball, or perhaps you want to engage with recent college graduates in your area who are looking for their first post-grad job.

Facebook’s programmatic ad-buying tools allow you to do this easily. The same technology is available across other programmatic ecosystems, including Google.

Programmatic also means you can target across tactics and devices, which will continue to be critical in a cross-channel world.

Benefit #3: Finally, More Transparency

Before the advent of programmatic, advertisers had little to no transparency into their ad buys. For all intents and purposes, when they signed the insertion order (IO), they entered a world of complete uncertainty. 

How did the campaign perform? How much did it cost? Did we achieve our goals?

They could ask the publisher, but there was no way of knowing for sure if they were honest. It was like receiving a bill and seeing many numbers but no reference to what they mean or where they came from. You were trusting that the publisher was operating in good faith.

Understandably, this wasn’t healthy for either side of the aisle. 

Programmatic advertising strips much of that uncertainty. Now, when you run a campaign on Facebook or a search campaign on Google, you know exactly where your ads are landing, who’s seeing them, and how they’re performing. This information is invaluable, both in determining the impact of the current campaign and planning for future ones. 

What is the Future of Programmatic Advertising?

Predicting the future of anything in the digital advertising world is tough. There are too many moving pieces, and consumers are always evolving, which means that what worked yesterday might not work today.

When something becomes ineffective, things change to help advertisers be successful. That’s why we have programmatic advertising today. It was the only way to be effective and efficient in the expanding online world. 

Suppose the digital world continues to advance as it has been for the past several years. In that case, we can surmise that the future of programmatic advertising will include more inventory than ever before.

At the moment, programmatic ad buys are synonymous with online ads, i.e., display and banners. Moving forward, however, it’s not hard to imagine it expanding to encompass all types of digital ads, including CTV and OTT, out-of-home ads, and mobile.

You can also expect the programmatic technology to advance in sync with the demand from advertisers.

Think about the targeting options you had on Google five years ago. There weren’t nearly as many. What about the placement options on Facebook? Fast forward to today, and it’s easy to see how far programmatic has come.

Moving forward, expect the technology to evolve to meet the demands of the modern consumer world — moving cross-channel to effectively and efficiently deliver ads to individual users across devices. 

Cool, right? 

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