Programmatic Advertising 101: How It Works

Programmatic advertising is growing increasingly in popularity amongst marketers as this disciple is estimated to account for 63% of the CPG display advertising spend in 2015. In 2014, $10.06 billion dollars were spent programmatically and it is projected by eMarketer to double by 2016. According to CMO,  60% of brands’ online video spend is spent programmatically. Additionally, Adweek projects that mobile programmatic advertising spend will hit $20 billion by 2016. With the increase in programmatic advertising popularity across multiple channels, it’s important to have an understanding behind what programmatic advertising is and how it all works with other marketing channels before kicking off your first campaign.

In this post, I’ll explain the basics of programmatic advertising from an industry perspective and the benefits of integrating programmatic advertising into marketing efforts. If you already understand the basics and want to jump right to learning how to select a programmatic partner based on your marketing goals, check out “Programmatic Buying: Simple Guide To Get You Started.

What is programmatic advertising?

Simply stated, programmatic advertising is the automated process of buying and selling ad inventory through an exchange, connecting advertisers to publishers. This process uses artificial intelligence technologies (more about that later) and real-time bidding for inventory across mobile, display, video and social channels – even making its way into television.

In the Google Trends chart below, you will see that programmatic advertising interest has steadily increased from the latter part of 2013 to 2015 while traditional display advertising interest has started to see a decline. This trend graph shows how increasingly popular programmatic is in the marketing space and hints at the reasoning behind current projections on the continual growth of programmatic in the next few years.


Screenshot: Google Trends

How does programmatic advertising work?

Artificial intelligence technologies have algorithms that analyze a visitor’s behavior allowing for real time campaign optimizations towards an audience more likely to convert. Programmatic companies have the ability to gather this audience data to then target more precisely, whether it’s from 1st party (their own) or from a 3rd party data provider.

Programmatic media buying includes the use of DSPs, SSPs and DMPs. DSPs, (demand side platforms) which facilitate the process of buying ad inventory on the open market, provide the ability to reach your target audience due to the integration of DMPs (data management platforms). DMPs collect and analyze a substantial amount of cookie data to then allow the marketer to make more informed decisions of whom their target audience may be.

On the publisher side of things, publishers manage their unsold ad inventory through an SSP (supply side platform). An SSP reports attention data such as how long a visitor was on a specific site or how many pages were viewed per visit. SSPs will ultimately be in charge of picking the winning bid and will serve the winning banner ad on the publisher’s site.

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Graphic: Seer Interactive

Marketers Hesitations

Programmatic advertising was essentially designed to be scalable, efficient, and precise. So why are some marketers and brands hesitant to give it a try? There may be multiple reasons why brands are unsure about this type of advertising, but I will address the top three industry concerns when it comes to launching a programmatic campaign and explain how technology is currently improving to solve this issues.

  1.    Ad Fraud

Ad fraud is a huge concern when executing a programmatic campaign, or a display campaign in general, as more than 1/3 of online traffic is fraudulent. With advancements in programmatic technology, we can identify fraudulent traffic based on the behavior of the user. Over a short amount of time, the technology continues to learn which leads are lower quality, allowing marketers to pivot campaigns towards the types of leads that are more likely to convert, ultimately increasing overall ROI.

  1.    Viewability

With programmatic advertising, you can adjust your campaign based on if the inventory is above the fold (ATF) or below the fold (BTF), allowing for a more strategic campaign based on your end goal. If a campaign is more of a branding initiative, ad placement may not be a huge focus for the overall campaign. However, if a campaign is focused on generating leads and conversions, ad placement that is ATF would be the priority to gain max visibility.

  1.    Brand Safety

Companies that specialize in ensuring brand safety are now integrated with many programmatic advertisers. These companies, such as Integral Ad Science, strive to ensure that ads only appear on brand safe pages. With programmatic, marketers have the insights they need to garner the best results for their campaign.

Programmatic Advertising Advantages

Although there may be some concerns, I do believe that programmatic advertising benefits outweigh the concerns as programmatic technology is continually working towards identifying and solving these issues in an effort to further fine-tune marketers’ campaigns. The following are five top benefits of programmatic advertising that can help improve any marketing campaign:

  1. Target your KPIs more closely– Programmatic technology is continually working to improve performance towards your campaigns KPIs and increasing overall ROI.
  2. Cost Effective – With programmatic, advertisers have the ability to adjust CPMs in real time dependent upon how heavily that impression is valued.
  3. Gain more customer insights – Learn more about your audience! Programmatic technology is continually gathering “smart” data based upon the type of individual that engages with your brand. Take these learnings and apply it across all marketing efforts to increase overall campaign performance, creating a more holistic marketing approach.
  4. Easier Media Buying – Forget the complication of RFIs, RFQs & RFPs and spend more time focusing on the overall strategy for your campaign through programmatic technology.
  5. Scalability – Programmatic allows you to to reach a larger audience across multiple websites and touch points in a timely and efficient manner.

Big Brands Go Programmatic

Kellogg® launched a campaign with Google to help facilitate an increase in their offline sales. Their main KPIs were viewability, targeting index and frequency. Viewability was measured with DoubleClicks Active View which showed that with the launch of their campaign, the viewability rate increased more than 70% due to programmatic’s ability to optimize towards the specific goal. Kellogg® was also able to leverage audience insights and contextual data to then understand more about who their customers are, which led to a 2-3X increase in better targeting across channels. Programmatic buying allowed Kellogg® to move consumers through the path of purchase by displaying their brand 24/7.

Google is even embracing programmatic marketing strategies, hoping to expand more into mobile and video in the future. The company says that in order to make brand advertising work, they have turned to programmatic due to the many advantages it offers, stating numerous times that the biggest advantage is the ability to adjust the campaign in real time. They ran a campaign for their Google Search App and saw that they were able to reach 30% more people 3X more frequently with 30% lower CPMs. Google also saw a 50% lift in awareness when they leveraged the 3rd party data provided by programmatic companies versus using only first-party data for their campaign.

Utilize Programmatic Audience Insights Across Marketing Channels

Instead of planning your media buy on where you think your customers are, start focusing on the overall strategy and goal to reach the audience you want. With the ability to adjust the campaign in real time based on the insights gathered, you start to better understand who your target audience is, allowing for further refinement across all marketing channels.

For example, Google recently released the ability to target by specific demographic on the display network (age, gender, or parental status). When you run a programmatic campaign, you are constantly gathering consumer data points to learn more about your converting audience. With the ability to gather these audience insights, you can then take these learnings to your Adwords campaign to create a more holistic marketing strategy.Additionally, you use other channels to improve your next programmatic campaign. For example, take your audience insights from a Adwords display campaign to then build your target audience for programmatic.

Instead of compartmentalizing your marketing strategies, start focusing on incorporating all efforts as one large overarching marketing plan to improve ROI across all customer touch points. 

Now that you understand the basics of programmatic advertising, check out this post to learn how to begin the programmatic buying process.

And with that, I’ll leave you with one of my favorite quotes by Jef I. Richards, “Creative without strategy is called ‘art’. Creative with strategy is called ‘advertising’”.