What is programmatic advertising?

What is programmatic advertising?

Programmatic is the automated process of buying advertising space in real-time with an automated platform. Programmatic uses audience data and Artificial Intelligence algorithms to show ads to the right user, at the right time, and at the right price. 

A sophisticated way to display advertising, it uses data and machine learning algorithms to drive ad impressions at scale, which results in a better ROI for brands and achievement of results that matters for business. 

Ecosystem of Programmatic

To understand how programmatic media buying works, you should know the terminology related to this process. Firstly, there are some participants who play a specific role in the buying and selling of ads: platforms that sell their inventory,  advertisers who are interested in them, and website visitors for whom advertisers are bidding for: 

Publisher — any platforms that run ads in their apps or on sites. They have their own ad inventory —a place to display ad messages. Advertisers need to buy ad inventory to run their ads. As programmatic is an automated process of buying ads, publishers and advertisers cooperate with specialized platforms.  

Demand Side Platform (DSP) is a technology platform that represents the interests of the advertisers, makes a bid, and buys impressions. DSP aims to buy requests that meet the advertisers’ requirements at the lowest cost.

Ad exchange is an online marketplace where advertisers, agencies, demand-side platforms, publishers, and supply-side platforms can bid on advertising inventory from various publishers using RTB.

Sell-side Platform (SSP) is a technology platform that represents the interests of publishers and helps them monetize traffic. SSPs let publishers sell their inventories to a pool of potential buyers through auction, and maximize their revenue.

Data-Management Platform (DMP) is the platform that extracts, collects, manages, and analyzes data. DMP is the depository for users’ data gathered from different channels: geo, ID devices, and web browsing history. Platforms can buy some missing data from DMP. For example, DSP can buy specific audience segments for more accurate targeting. 

These platforms connect to the single system that allows brands to manage advertising efficiently, faster and profitable.

How does it work?

The process of buying and placing advertisements takes place in real time at the auction – Real-Time Bidding, or RTB. 

When a user visits a site with a free ad space, a Publisher sends a request with information of an ad inventory to an SSP while a website page is loading. The SSP identifies a user by cookies and generates a lot — Bid Request. It includes information about offered ad inventory (which ad formats may be shown, on which page and place, min CPM) and depersonalized user data (IP address, geo, operating system and so on). In order to complete information about users, the supply-side platform can buy necessary data from data-management platforms. A Bid Request is sent to an Ad Exchange where bids are accepted. 

DSP determines the value of an ad impression to a given user for an advertiser and decides which impressions to buy and how much to pay for them. Also, if the DSP needs more information about the user, they can  buy additional data from DMP platforms. When all bets have been placed, the DSP transfers them to the SSP system. The bids are analyzed. The winner with the biggest bid will show its advertisement for the user. As RTB is the second-price auction, the winner pays the price offered by the second-highest bidder, plus $0.01. 

Additionally, advertisers can buy ad space directly from publishers. We’ll speak about other ways to place programmatic ads in the following articles.

How does programmatic work, we explane it on scheme.

Where does the information about the target user come from?

Users are identified by cookie-files.  Cookies are small text files in the browser that collect information about site visitors: geodata, language, a browsing history, interests, etc. Cookies help create a digital portrait of the user, as well as provide relevant content and advertisements to the audience. 

Will programmatic work without cookies?

Yes, it will. Cookies are one of the most popular user authentication methods for displaying relevant ads, but not the only one. What other options are there?

Machine learning algorithms of programmatic technology use data to identify target audiences of advertisers and choose relevant advertisements for them. So brands can use their first-party data from CRM systems to interact with users. One more solution is DMP. NT DMP has rich and valuable data to provide excellent services for advertisers. 

Also, brands can use contextual targeting to deliver relevant messages to users based on the content of the web page, not on the personal information. For instance, a make-up brand can advertise on a site about skin care, tutorials of make-up and so on. In this case, relevance and efficiency of ads will be saved due to the correct choosing content of a site. 

Ad Formats for Programmatic Advertising

Programmatic doesn’t limit brands in the use of ad formats as well as channels. They can use different ad formats for different goals and stages of ad campaigns, and channels. Users will see advertisements wherever they are — smart algorithms analyze and choose the right moment and place to display ads in order to get more profit for brands. 

Generally, advertisers can use the following ad formats: banners (static, dynamic, interactive, etc.), videos, search ads, promo posts and carousel ads and stories on social networks, native advertisements, audio and so on. Also, NT DSP allows brands to use custom advertisements designed by NT team especially to solve your unique business challenges. They help grab more users’ attention, drive engagement and conversion. If you want to get strong results faster, contact us

It’s better to choose ad formats and media-mix of channels based on the goal brands are looking to achieve. We’ll talk about that more in the following articles.   

Which goals do programmatic help achieve?

Programmatic advertising is designed to do away a mess of different types of ads for each goal. With programmatic technology, brands can advertise through the sales funnel with different ad formats and channels to reach brand goals as well as performance.  

Shortly, programmatic helps:

  • increase brand awareness, loyalty and trust of audience;
  • drive engagement of the audience and attract quality traffic to a site;
  • increase conversions such as app installs, sales and leads and so on;
  • tell about a new brand’s product or services to a wide audience and boost users interest and demand;
  • increase LTV, ROI and repeat purchases;
  • re-engage users and increase retention rate and so on. 

How much does programmatic advertising cost?

The cost of programmatic depends on type of industry, targeted devices, ad format and ad placement on the page as well as value of ad impression. In general, it tends to be cheaper than social media ads, for example. This means that even small businesses with limited marketing budgets can also use programmatic advertising as a part of marketing strategy.

As programmatic technology uses data and AI-algorithms to target users at the right time, place and cost — it optimizes media buying process to enable advertisers to pay only for the best users, it brings great opportunity for brands to succeed and boost their profit in the digital adtech world.  
If you are ready to see how programmatic technology can improve marketing strategy, contact us. We’d like to help you reach your goal and show you how strong you can be.