By 2020, marketers will spend $69 billion in programmatic ad buys, which will account for almost 90% of total online digital display advertising in the US. As so much money is invested in this type of advertising, it’s imperative that marketers making ad buying decisions understand the options, as well as the technical details of how programmatic advertising works. Through this, they can make informed decisions that drive sales.
The Technical Details of How Programmatic Advertising Works
Programmatic advertising is a form of data-driven marketing which allows users to leverage platforms to automatically buy ad space based on pre-set criteria. Primarily, it involves three separate components:
Demand Side Platforms:
DSPs are where marketers buy ad inventory. They facilitate the process by allowing marketers to purchase ads in a variety of spaces. An example of this includes the Google Ad Manager, which enables brands to display advertisements when specific, targeted keywords are searched, as well as show their ads on certain websites, among other options.
Supply Side Platforms:
The SSP is the publisher side of the platform, where sites can offer unsold ad space to the general public or a select group of brands. The publisher can connect with multiple DSPs to sell their free space and monetize websites.
Data Management Platforms:
DMPs allow brands to target their advertising by using data to better understand their audience. Such platforms collect details from website cookies to understand user buying behavior, and create groups marketers can target to ensure their best chance of sales conversion.
Targeting Options in Programmatic Advertising
Often, programmatic advertising is mistaken for “real-time bidding,” a common type of programmatic advertising where brands can target users based on the keywords they search. However, this is not the only option for targeting users. Brands can get much more detailed, as DMPs give them access to a wide range of information, including:
Individual online behavior:
The pages individuals check and sites they frequent can provide indications on their future purchase behaviors. The followers of a famous makeup artist on YouTube, for example, would also be strong targets for a makeup brand selling their wares on Facebook.
Purchase affinity goes a bit deeper than simple browsing preference as it creates context. An individual who leaves a positive review of a brand’s product on a popular site will be more likely to make future purchases, as they have an existing positive brand affinity.
Many individuals are surprised to learn that their actual purchases are trackable when using credit cards or other digital funding methods. While details like credit card information aren’t available, information like what consumers purchased and when is often visible to brands that wish to pay for the privilege of seeing it.
Information individuals post on an online resume site or through their credit report can often be used to estimate their annual household income, net worth, and other financial factors.
Inferred lifestyle choices:
This is a general category that isn’t always accurate but can become so with more data. For example, an individual with a high net worth, who purchases high-end makeup regularly, could also be assumed to have an interest in luxury fashion, making them an ideal candidate for targeted marketing. The more data the brand has available, the more likely their predictions are to be accurate.
The Benefits of Programmatic Advertising
Brands can enjoy increased efficiency, better tracking, and a stronger ROI through programmatic ad buys. Here are just a few of the ways programmatic advertising offers brands improved marketing.
The most apparent benefit of programmatic marketing is the ability to reach millions of buyers at once through the click of a few buttons. Google alone gets an estimated 40,000 searches per second, meaning that brands will always have a broad audience to reach when advertising on or through the search engine.
Ease of use:
Programmatic advertising is relatively easy to learn, and providers focus on the user experience to ensure ease of use. It’s far more straightforward than the old process of requests for proposals, negotiations, and manual insertion orders that took time, effort, and a lot more know-how.
Simplified ROI tracking:
Understanding the ROI on a programmatic ad buy is relatively simple, as the tracking from ad display to conversion is typically automatic. This process simplifies budgeting and helps companies determine precisely how much they should spend on this venue for the best results.
Enhanced data and insights:
Brands can learn a lot about their target market by looking at the results and conversion of their programs. They can discover niche communities with loyal followers and further enhance their marketing to improve their ROI.
The final benefit for programmatic advertising comes on the consumer’s end. When a consumer sees an ad which is more relevant to them, it creates a personalized connection which can spur positive brand affinity.
The Challenges of Programmatic Advertising
Programmatic advertising isn’t a magic bullet for marketers, especially for those new to online optimization. While the platforms themselves are easy to use, a lot is going on behind the scenes which creates limited effectiveness. Here are just a few of the challenges marketers face with programmatic marketing.
While marketers can certainly use location as a basis in their search, there are some limitations to this—especially when consumers are in the shopping aisle. When advertising at a brand level, the ability to reach consumers as they make a purchase is crucial. However, tracking real-time GPS data is not a possibility in these types of ad buys as it would be considered an invasion of the consumer’s privacy. Brands can only connect with consumers who permit GPS tracking through a retail, shopping, or branded app.
Ad fraud risk:
Not all providers of advertising space are equal. Brands must contend with malicious traffic created by bots, which could inflate effectiveness and limit the overall ROI. Carefully vetting ad providers can ensure brands reach an audience that will provide genuine sales.
Programmatic advertising can be expensive, especially when dealing with competitive keywords or high-value platforms. It’s impossible to target every platform, so it can be challenging to pinpoint the most profitable avenues without investing in less effective ones.
The programmatic market is valuable, which is why so many brands are already on board. The more individuals participate, the more expensive it will get. Consumers may go “ad blind” by seeing too many sidebars and headline ads, choose to skip them, or install ad blocking software to eliminate them, making programmatic less effective.
Alternatives to Programmatic Advertising
Brands can seek out new methods to reach consumers on an automatic basis without the need for programmatic advertising. This is an opportunity found through third-party apps. Third-party apps work based on user permission, so it’s possible to reach consumers based on their location and as they travel. They also provide a less competitive space, as brands can pick and choose the companies they work with for the best results.
Third-party apps can help bridge the gaps in programmatic advertising by allowing brands to reach traveling consumers, especially as they’re about to make a purchase. They can drive consumers to products in the shopping aisle, which enhances any overall digital marketing program and increases sales.
The Future of Programmatic Advertising
Programmatic advertising is expected to reach platforms outside of regular websites and even mobile apps in the years to come. Smart speakers serve as a prime example. While voice ordering is still a relatively new option, programmatic advertising could enter this realm and allow brands to gain audio air space when consumers interact with their smart devices.