How Does Programmatic Advertising Work?

Bryce Hamlin
By Bryce Hamlin

Programmatic advertising is an intelligent, data-driven automated process that serves display ads across the web, with targeting sourced from ‘Big Data’ companies like Oracle and DataLogix.

Programmatic, as we call it, uses artificial intelligence (AI) and real-time bidding (RTB) for ad display across multi-device and multi-network platforms, such as mobile, video, social media, display, and even television.

The growing interest of marketers is catapulting programmatic advertising to new heights. According to Statista, the spending on this sizzling feature rose from 4.9 billion US dollars in 2011 to more than 33 billion US dollars in 2017.

Moreover, programmatic accounts for about 75% of the total digital ad spending, while the programmatic display ad expenditure in the US is estimated to reach beyond 45 million US dollars by 2019.  

With such increase in the popularity of programmatic advertising across multiple platforms, it’s better to learn what programmatic advertising is and how it works with other digital marketing platforms.

If you’re a marketer, you can’t hope for programmatic to make its move in the future; it’s a present thing and you need to learn about the importance of using it or risk being left behind. Billions are already spent on programmatic digital ads, so make sure you get up to speed and take advantage of this AI-aided technology.
However, as difficult as it may seem, programmatic boils down to a few simple components, such as:

  • The networks you’re serving ads on
  • The targeting settings you use
  • The creative direction of the ads
  • The goal of the campaign

PPC Forecasting Tool

The Networks

Now that you’re familiar with programmatic, you might know about the Google Display Network (GDN).

GDN is a product developed by Google that allows businesses to place display ads on a vast network of various websites (probably covering about 70% display inventory on the internet). Online marketers can present their brand image and media-rich ads to their targets across various sites. They can target audience by using keywords, domains, or audience’s topic of interest.

However, GDN lacks in providing detailed insights into the audience activity, does not support multiple formats and customization, depends on only Google for audience’s data, bid adjustment lags for about 2-3 hours, and you can buy only GDN inventory when using GDN.

In contrast to the GDN, programmatic advertising offers access to nearly all of the display inventory across the internet, GDN included.

With tools like Google Analytics, you can analyze even more data on converting traffic, actions performed, bid optimizations, behavioral funnels onsite, and so much more. You can also advertise the things you can’t on the GDN – like CBD and medical marijuana products (we are a California agency, after all).

Programmatic advertising is more agile than GDN when it comes to dealing with behavioral data. The AI used in the programmatic chooses the best placement and buy those ad placements based on users’ interests, location, behavior, devices etc. Plus, the bidding is real-time and is done in milliseconds, saving you time by making manual optimizations all but obsolete.

The Targeting

Targeting is the most crucial part of the Programmatic Advertising. The audience base is huge due to which reach numbers escalate (i.e. unique users). Using information from Big Data companies, such as Oracle and DataLogix, you can micro-target and uber-segment your targets based on a wide variety of criteria, such as:

  • Users’ online behavior
  • Purchasing affinity (the likelihood a user will buy X product based on previous purchases or reviews)
  • Data of purchasing history (via credit cards or other e-money sources etc.). Although this sounds a little creepy but it is legal!
  • Net worth/Net household income
  • Inferred lifestyle choices

(If this irks you a bit because of all the recent Facebook news, remember that all of these “free” online services & social media sites are free because YOU are the product and your data is being sold. Money’s gotta come from somewhere. Think hard about the information you choose to share online..)

With the help of real-time bidding, the virtual auction makes it possible for the advertisers to serve particular ads to a particular audience based on the audience characteristics. Via RTB, human error is minimized.

The interesting aspect of using the internet to carry out routine functions is that users provide so much personal information to visited websites and third parties than they realize. The usage pattern is detected by the Big Data and an anonymous profile is created for the target user and ads relevant to his interest will be displayed. The better the data, the more powerful programmatic gets.

Take an example of a user having an interest in luxury travel. Using his data and profile, the sites he visits will display ads about travel tickets, best destinations, cheap hotels etc. All ads displayed will be shown relevant to the interest of the specific user.

Another example is Nestle. Nestle has deployed third-party data to add fuel to its programmatic advertising based on location. This way, the company can reach its customers with display ads when they are inside a certain shop.

There’s no possibility that a human can extract as much data as programmatic can in milliseconds; this top-notch processing is an innovation that digital or generational marketing has never witnessed before as it helps you optimize your ad spend. The RTB in programmatic allows advertisers to reach the right people with the right message at the right time. Thus, the collective effort of programmatic advertising, RTB tools, and user data make sure that ads are delivered to the right audience with maximum accuracy.

The Creative

The programmatic creative is quite similar to any other display effort. The programmatic supplies a huge inventory of rich media units. It also allows for more sizes, video ads, gifs native ads and a lot more.

For instance, if you’re looking at a recipe and you simultaneously view an ad that blends into the page about another recipe featuring X ingredient.

Programmatic creative also allows the combination of Multimedia forms (graphically and textually) to create new-dimensional ads that excel the boundaries of design possibilities. However, creative practices are still in place as they offer high-quality imagery, clear call to action (CTA), and make the users understand what your unique selling propositions (USPs) are.

Creative is a key success-determining factor of advertising. The more goal-oriented the ad is, the higher the chances of getting noticed. It’s important to make sure your ad creative has a specific goal, whether it’s brand building or direct response. Certain messages speak to different audiences.
It’s always best to experiment with and rotate new creative as always, as you can possibly increase your key performance indicators (KPIs), attract a new audience, and increase your sales.

The Goals

Although programmatic isn’t a direct response platform, it can still prompt an action from the viewers.

However, you must first indicate your business and campaign goals when determining what KPI to measure. For example, if you believe that brand awareness is the main objective, then your campaigns need to be designed accordingly to achieve the brand awareness goal.

Once you have your goal established and KPI in place, you can go ahead and choose your preferred marketing tactic. However, you also want to drive your goal throughout your campaign by moving from one objective to another to get full-funnel results.

Regardless of your goal, be aware of the fact that it’s difficult to measure the success of programmatic by looking directly at its metrics. Programmatic has a “rising tide lifts all boats” effect on digital campaigns. In fact, this has been proven by studies showing that display advertising (and programmatic, by extension) drives an increase in searches in as little 2 weeks after launch.

Conclusion

Programmatic advertising is a very effective and is becoming a crucial addition to nearly every marketing campaign. Programmatic will drive top-notch top-of-funnel traffic to your site and has huge potential to improve your digital ROI.

Since targeting is the most important and strongest aspect of any paid advertising effort, programmatic allows comprehensive reach to your audience across multiple locations in a single purchase. Every user has a unique profile and is targeted according to the characteristics relevant to him.

Moreover, it saves time and lot of money. The biggest advantages that programmatic advertising can offer are customized user-profile campaigns, calculated cost-per-1000-impressions (CMPs) being around $1-8, and avoidance of ad dispersion on non-target and random sites, and analysis of real and specific data.

If you’re having difficulty driving high-quality top-of-funnel traffic or running successful brand awareness campaigns, Programmatic should be the first solution you turn to. It’s a solid addition to nearly any digital campaign and will be all-but-required moving forward.

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Bryce is a Paid Media Account Manager at Power Digital with experience with both Google and Facebook advertising. He attended SDSU (not too far from our office!) and has been apart of the PDM team since 2015. He's been passionate about technology and entrepreneurship his entire life and this passion translates through to his work in Digital. Out of the office, you can find Bryce at the beach, on a hike, or anywhere that has live music!