How Does Programmatic Advertising Work? Learn and Grow Online Marketing

It’s a fact that digital advertising is taking over traditional advertising methods. In 2022, over 90% of all digital ads are expected to be done programmatically — and that’s double the $115 billion that was recorded in 2019. Speaking of programmatic advertising, you may be wondering how does programmatic advertising work? 

In simple terms, programmatic advertising allows advertisers to broadcast various messages across various platforms. These messages will be broadcasted to the right persons, at the right times, and to the exact device that they use at any stage of their customer’s journey. Furthermore, the programmatic technology helps brands to build robust awareness, nurture prospects, and pretty much convert them in no time.

Still don’t understand what programmatic advertising is? Well, here’s a robust explanation of what programmatic advertising is all about.

What is programmatic advertising?

Programmatic advertising is an automated process — and it uses the following technologies to automate the purchase of ad space.

• Demand-Side Platforms (DSPs): DSPs allow the purchase of ad space via ad exchange like Google Ad Manager. The Google Ad Manager is a platform that offers advertising inventory from publishers.
• Supply-Side Platforms (SSPs): SSPs offer ad spaces to marketers, advertisers, and other third parties who are interested in buying ad space.
• Data Management Platforms (DMP): DMP helps organizations in the collection and management of user data. Typically, the data collected is used for digital marketing processes like programmatic advertising.

These platforms work in sync with one another. And if you incorporate them properly with a mix of artificial intelligence (AI), then you’re in for some good time. Programmatic advertising uses these three technologies to automate the buying and bidding of ad spaces. What’s more, the process is made faster, smarter, and the user data is used to deliver top-notch ads in milliseconds.

Now you’ve got a good grasp of “what is programmatic advertising?” The next big step is to answer the question — how does programmatic advertising work?

How does programmatic advertising work?

If you’re a newbie in the digital marketing space, you’re probably wondering how programmatic advertising is done. Well, here’s what you need to know.

• Arrive: When a user starts the programmatic advertising process, it triggers an automated advertising process. Since programmatic advertising happens within milliseconds, the user will not notice it.
• Send: When there’s the presence of a new user, the website publisher sends the dimensions of the ad space to the supply-side platform (SSP). The process is automatic, and if you’ve not gotten a good grasp of it, you can think of it this way — the publisher offers a list of the product offering for the advertiser to buy.
• Read: After information about the ad space is received, there is an analysis of the user’s cookies by the SSP. One of the primary goals is to learn about the user to deliver relevant ads to them.
• Evaluate: At this stage, the coordinating demand-side platform becomes involved, and the information generated by the SSP is reviewed. Next, the DSP evaluates the user’s worth, and a value is assigned to the user’s impression.
• Bid: Since a value is assigned to the user, a bid is submitted by the DSP to the SSP. These processes take place in real-time. And that counts as why programmatic advertising is termed real-time bidding (RTB).
• Choose: When the DSP’s bid comes in, the SSP reviews it in comparison with other bids — and the winner is chosen from the poll. Most times, the winner is often the highest bidder. You’ll most likely pay a fee plus the price of the highest (or second-highest) bid. All these largely depend on the auction.
• Deliver: At this point, the SSP delivers the ad of the bid winner to the users. Since programmatic advertising happens at a break-neck pace, the page will load with the ad displayed. If the ad doesn’t display, the page will reload so the ad will be displayed.

As a protective measure, publishers implement fraud protection. This way, your company only pays for the ad that reaches your target audience. Ads that reach spammers and less valuable members of your audience will not be added to your pay.

Now you’ve figured out the answer to “how does programmatic advertising work?” you’ve got to consider the next big thing — what is the value of programmatic advertising?

What is the value of programmatic advertising?

Here are four main reasons why programmatic advertising is valuable.

i. Scale:

In the days of direct buy, there are limitations to how many people you can reach. Scalability is almost zero — but everything changes with programmatic advertising. Programmatic advertising gives room for unlimited scalability. You’d reach a vast number of people using retargeting techniques. Provided an ad inventory is available, and you’ve got the budget for it, programmatic advertising helps you buy it.

ii. Real-Time Flexibility:

When it comes to direct buy, there are no rooms to make adjustments once the purchase is made. It’s set in stone — and all you can do is wait it out until the timeline of the campaign elapses. However, programmatic advertising helps you make changes and tweaks even when the campaign is running. This way, you get to make changes to adjust the impressions you’re generating.

iii. Targeting:

Programmatic advertising offers layers of targeting options. This way, you get to reach your ideal target audience on a large scale. For instance, there are ways of narrowing your target audience so you could reach the right people. This way, you get to have a more efficient campaign, record more impressions, and also save some money. Speaking of targeting layers, you’d see in-market audiences, demographics, big data, interests, and lots of other options.

iv. Efficiency:

If you’re a marketer who manages the Google Ads campaigns of others, you’ve got to consider using programmatic advertising for your big clients. It’s a reliable way of recording more efficient advertising. For instance, if there is extra cash in the client’s budget, you get to plug it right back into programmatic advertising. You’d be surprised at how far a small budget would go into converting lots of potential customers. In the long run, the client will likely make more returns on ad spend (ROAS).

Now you’ve got an answer to the “what is the value of programmatic advertising” question, you’ve got to figure out the ways programmatic advertising will work for your business.

How many ways programmatic advertising works for your business?

Now you’ve got answers to the question “how is programmatic advertising done?”, and also have a good grasp of the value of programmatic advertising. You’ve got to consider how programmatic advertising will work for your business.

Regardless of what your business is, here is how programmatic advertising will work for you.

1. Lowers advertising costs:

As a business owner, you’ll probably save more with programmatic advertising. By merely automating your bidding process, and tweaking your cost-per-thousand-impressions (CPMs) in real-time, your ads will be properly optimized. Tech giants like Google use programmatic advertising to promote the Google Search App. This way, the CPMs decreased by 30 percent. At the same time, the programmatic advertising of the company reached an additional 30 percent of its target audience.

2. Maximize productivity:

Since programmatic advertising is an automatic process, you get to spend less time on it and focus more on other vital aspects of your business. This way, you’d increase your productivity in the long run. That’s not to say that you will leave your campaigns unchecked.

No!

You’ve got to check your campaigns from time to time. By checking your campaigns, you’d get real-time feedback on how the PPC campaign is performing.

When it comes to programmatic advertising, there has to be routine maintenance in place — and it’s quite different from other modes of advertising that require daily maintenance practices. Route maintenance provides an avenue where your team gets to focus on other high-priority tasks. This way, you’d have much better productivity.

3. Streamline ad buying:

Handling marketing and advertising efforts could be tedious. However, you get to streamline the process using programmatic advertising. Programmatic advertising eliminates the time that goes into buying ad spaces. It helps you focus on your overall marketing strategy and the results that come from it.

If you’re more strategic in your approach, you’d optimize your bid and campaigns to generate better results.

4. Expand audience insight:

One of the benefits of programmatic advertising lies in its audience insight. The data gathered using cookies can help you make informed decisions. It’s a reliable way of improving your existing campaign and modifying future campaigns.

5. Achieve KPI goals:

Gathering useful data and narrowing your target audience comes with some perks — and one of such is achieving your key performance indicators (KPIs). Simply put, programmatic advertising helps you generate a better return on investment (ROI).

That’s not all…

You have a reliable system for measuring your KPIs.

But how much does it cost to run programmatic advertising? Well, here’s what you need to know.

How much does programmatic advertising cost?

There is no fixed price when it comes to programmatic advertising. The prices vary — and it’s measured using a  model.

As a publisher (or advertiser), if you desire more specific targeting, then you’ve got to be willing to pay more. Factors that influence prices include.

• Ad format
• Targeted audience
• Ad placement on the page
• Type of industry

In comparison to social media advertising, programmatic CPMs are much cheaper. It’s also more valuable than other offline approaches.

Regardless of the size of your business and your marketing budget, there is a place for you with programmatic advertising.

How many types of programmatic advertising?

There are four types of programmatic advertising namely;

1. Real-time bidding:

It’s an advertising option that’s open to the public, and any company can make their bids. But why is it called real-time bidding? Well, because the auction process happens in real-time. And the ad spots are sold using open auction bidding.

The highest bidder gets the spot!

Anyone who wins the highest bid doesn’t get charged the highest bid amount. On the flip side, you’re not certain where your ad appears. There are possibilities for your ads to show up in places you don’t like.

2. Private Auction:

The private marketplace works on an invite-only basis. Here, publishers reserve premium ad spots for some selected advertisers. Typically, publications and websites with massive reach are invited to private marketplaces. Furthermore, lots of companies are competing for ad spots on these platforms.

Since there is a level of competition on these platforms, spaces are reserved for only top advertisers. On a positive note, you’re always sure of where your ads appear — there’s no guesswork with private marketplaces.

3. Preferred deals:

With preferred deals, both advertisers and publishers get to agree on terms before an ad spot becomes available for real-time bidding auction, or on private marketplaces. Yes, preferred deals enable advertisers to choose an ad spot before it’s made public.

There is a fixed price in this programmatic advertising type. Before advertisers claim their preferred ad space, they get to agree with the publisher on things like targeting, pricing, and other details. If you want a preview of the various ad spaces, then the preferred deals ad type is your best shot.

4. Programmatic guaranteed:

This approach is synonymous with media buying. Both advertisers and publishers get to negotiate the terms of the ad space, and there is no bidding. Advertisers get to choose their preferred price, their target audience, and the frequency of their ad appearance.

Advertisers get lots of control with this method at a high price. If you’ve got the budget for it, then programmatic guaranteed is a reliable option. After all, you get good control of your Google Ads cost and placement.

FAQs:

What are programmatic advertising platforms?

Programmatic advertising platforms connect advertisers to marketers with the primary objective of automating the buying and management of digital ad campaigns. It involves media buying, ad placement, campaign optimization, and performance tracking. As a publisher, you get to manage your ad inventory using programmatic advertising platforms.

Is programmatic advertising effective?

Yes, programmatic advertising is effective. You get to benefit from real-time ad bidding. Also, programmatic advertising provides a way of answering your customer’s questions even before they ask such questions.

Why do we need programmatic advertising?

Programmatic advertising offers transparency to marketers. This way, they gain visibility over their campaigns. As a marketer, you get to easily pinpoint the sites your ads have been used on, the target audience, and the return on investment.

Is programmatic advertising the future of marketing?

Programmatic advertising uses a mix of artificial intelligence and machine learning for the purchase and optimization of digital campaigns in real-time. By the end of 2021, 88% of all digital display advertising in the United States was done using programmatic advertising.

Wrap Up:

How does programmatic advertising work? By now, you’ve probably figured out how it works.

Programmatic advertising helps both buyers and sellers to make informed decisions. Making data-driven decisions eliminates guesswork. To build a thriving business, you need to drive qualified leads — and that’s where programmatic advertising comes into play.

It’s an effective technique that helps you launch hyper-targeted campaigns that yield a sizable return on investment.

Regardless of the type of business you’re running, programmatic advertising will help you get the most out of every dollar spent.

Now you know the answer to “how does programmatic advertising work”, what kind of customers do you want to attract using the marketing strategy?