Algorithmic ad buying technology, or programmatic advertising, is generally considered to have a bright future. Admittedly, there is a good reason for that, as programmatic benefits both advertisers and publishers and even the audience. That is if we think of programmatic conceptually. At the same time, from a technological point of view, programmatic advertising is close to online cinema while traditional manual media buying resembles good old VHS.
1 Programmatic Marketing: Uncertain Enterprise for Many
However, as it has often happened in the history of the mankind, progressive nature of the technology is its biggest problem. After all, the reluctance to spend some time and resources to understand the technology and learn to use it cuts opportunities for many players. And even those who start using it do not always fully understand what they are doing and how to get the most out of the novelty.
Thus, according to the research by the US Association of National Advertisers and Forrester company, over a quarter of marketers do understand the general concept programmatic, but want to learn more about the technology before applying it to their campaigns. Another 29% have heard the term, but don't have a clear idea what it means. And only about 23% of marketers know what is programmatic media buying and use it regularly.
At the same time, the International Data Corporation study shows that - despite all the difficulties - programmatic budgets are growing by leaps and bounds. In 2014, US advertisers invested in programmatic advertising companies about $12 billion. eMarketer.com predicts that by 2017, this figure could reach $20 billion.
These figures convince that programmatic buying is here to stay. Today, therefore, those, who develop and implement programmatic technologies, have significant competitive advantage.
2 What is Programmatic?
So what is programmatic? To say simply, it is automated RTB (Real-Time Bidding), that is purchasing advertising in real time in an auction. But actually programmatic is somewhat broader than this, and, in addition to RTB, also includes limited auctions and direct sales. Thus, a more comprehensive and precise programmatic definition would be:
A set of methods to purchase advertising on the Internet using automated systems (robots) and algorithms for decision-making on the transaction without human intervention based on socio-demographic and behavioral data about users, available from a publisher and an advertiser. This approach improves targeting and, in fact, allows buying audience instead of space and displays.
There are several generally accepted types of programmatic advertising:
- Actual Programmatic buying, meaning, in this case, the automation of ads purchase;
- Programmatic RTB;
- Programmatic Direct - the automated purchase of guaranteed advertising space without an auction. This type is also sometimes called 'automated guaranteed', 'programmatic guaranteed', or 'programmatic premium'.
3 How Programmatic Technology Works
Here's how programmatic works and what it does essentially:
When a user visits a web page, he sees ads. While the site is loading, it takes fractions of a second for the system to analyze website's audience, align this data to the target audience and select the appropriate ad format. Then an auction takes place among advertisers whose target audience corresponds to the particular visitor. During the auction, the highest bid is chosen; it is then discounted to the minimum rate necessary for the victory. This way the cost of advertising tends to be lower than the bid itself. Then the winning ad is uploaded to the site and shown to the user.
The whole process of handling Big Data and the auction takes 100 to 200 milliseconds. Robots on programmatic buying platforms do all the work, humans only monitor and adjust the parameters.
Before we move to analyzing the technical aspect of programmatic, we should first clarify the terminology.
From a technical point of view, the process involves two parties - sell-side (the publisher) and the buy-side (the advertiser). On the side of a seller, there are SSP (Supply / Sell Side Platform, a platform to sell advertising space on websites), Ad Exchanges and Ad Networks. On the buyer's side, there is DSP (Demand Side Platform, a platform to purchase advertising space).
When you know the terminology it's no longer a rocket science:
- The user gets to the site from a search engine or by the link.
- While the page is loading, programmatic makes a request to the Ad Exchange, where DSP-bids are placed, Ad Networks or other advertising exchange systems.
- The data about site visitor is sent to the SSP for instant analysis: where does he come from? what query did he make? what browser does he have? etc.
- Then SSP holds an auction.
- SSP selects the highest rate among advertisers, increases the cost of the second bet by a defined figure (usually it's a penny) and displays advertisements at this price.
- Voila: the ad is loaded by the user's browser.
4 Not So Hard as Painted
Now you know everything you need to know about the basics of programmatic media buying. We hope we managed to show that programmatic is not so complex as it is painted. Thanks to the convenience and speed, this tool is capturing an increasing share of the advertising market. So you really should consider adding programmatic in yours ad inventory. We also suggest you take a closer look at such promising areas as programmatic video advertising and mobile programmatic RTB.
Vox Peritus (Expert's Opinion)
Taras Talimonchuk, CEO DIGITAL BEE:
Recently, programmatic technology has been called quite differently. At first, everyone called it RTB, marking out the aspect of real-time bidding. Then some mister Know-all wondered why is that considered to be something new?.. AdWords, Yahoo, and many other ad delivery systems have already been trading ad impressions for some time. We clarified the protocol IAB RTB 2.0 (back then), and the magic of the auction has gone. Instead, an issue emerged on the quality of the ads, purchased at the lowest price. But it soon became clear that the price is not the point as well because everyone is ready to keep buying at a fixed price. The main focus moved to the quality and the ability to scale. At this point, terms "audience buying", DMP, "algorithmic buying" exploded. A few years later, everybody was talking about Big Data, and it became clear that the most valuable thing in programmatic is not about the actual user data itself but about the methods to analyze it and algorithms to make the right conclusions. Then people started talking about multiscreen, and it finally has paid off - accumulating data and the ability to handle it was enough to predicatively uniquelize a person regardless of whether is he watching smart-TV or scrolling through Twitter. Accordingly, today, when we speak of programmatic buying, we mean:
- properly collected data;
- integration of CRM, tracking system, advertising services in a single box;
- robot-made consumer portraits;
- purchasing the right audience;
- optimizing rates at all stages of the funnel, and in a long distance - LTV.
Actually, now we have lots of offers on the market, designed to automate the process.
DIGITAL BEE is now testing gaming- and gambling-related issues, namely modeling player's behavior and the identification of new potential players. We can provide customers in gambling and gaming business with look-a-like algorithm buying, that is buying the audience, similar to the existing one. There is an understanding that, with the right data processing, efficiency can grow by 2-3 times.
We invite marketers and agencies to participate in our tests (we're talking about DSP for gaming and gambling business). We also can help with programmatic setup both in-house and by our team.
Creative Copywriter at DIGITAL BEE
LinkedIn - https://www.linkedin.com/in/alexsakhno