What Is Programmatic Advertising? How Does It Work?

Programmatic advertising has been a buzzword in the marketing industry for quite some time. But what does programmatic actually do? And how does it differ from traditional display marketing?

Read on to learn everything you need to know to be successful at programmatic advertising.

What Is Programmatic Advertising?

Programmatic advertising uses automated technology and algorithmic tools for media buying. The term programmatic relates to the process of how ads are bought and sold in the advertising space.

Programmatic advertising differs from more traditional media buying methods in its use of automation.

It analyzes many user signals to ensure that ads serve the right person, in the right place, at the right time.

Think of programmatic as the umbrella in this category, where different types of programmatic buying are categorized beneath it.

What’s The Difference Between Programmatic And Display Ads?

It’s easy to confuse display and programmatic ads, especially with the strides that Google has made in its automated and real-time bidding capabilities.

The largest difference between programmatic and display is:

• Programmatic refers to how ads are bought.
• Display refers to the format of how ads appear.

The second biggest difference between display and programmatic is the ability to buy ads across platforms.

Display ads are more commonly referred to when placing ads within one specific ad network, such as the Google Display Network.

Programmatic advertising, on the other hand, takes display media to the next level.

Multiple platforms exist for programmatic, such as sell-side platforms (SSPs) and demand-side platforms (DSPs), allowing advertisers to buy ad inventory across an open network of platforms.

With both programmatic and display, advertisers typically have control over the following:

• Audience.
• Bidding strategy.
• Budget.
• Creative and assets.
• Placements.

Programmatic Advertising Platforms

Automated technology has made significant strides throughout the years.

There are many types of programmatic platforms.

The three main types of platforms are:

• Sell-side platform. Also known as a “supply-side platform,” this platform allows publishers to sell their ad impressions to advertisers in real time. This platform encompasses both DSPs and ad exchanges.
• Demand-side platform. This platform allows advertisers to purchase ad inventory across multiple platforms at once.
• Ad exchangers. This is how SSPs flow their ad inventory to DSPs. DSPs connect to an ad exchanger, where ad prices fluctuate based on the competitiveness of that inventory.

To familiarize yourself with the different platform types, let’s take a look at some of the major players in each category.

Sell-Side Platforms

A comprehensive list of SSPs for publishers includes:

• Google Ad Manager.
• Amazon Publisher Services.
• OpenX.
• Google AdMob.
• Yahoo Ad Tech.
• TripleLift.
• PubMatic.
• Verizon Media.
• Xandr (Microsoft).
• Index Exchange.
• Sovrn.
• Magnite.
• Media.net.
• Criteo.

If you’re looking for a video SSP, some of the leading companies include:

• SpotX.
• Teads.
• AdColony (now DigitalTurbine).

While there are many more available to publishers, these are companies you may have heard of but might not have associated with programmatic technology.

Demand-Side Platforms

Similar to SSPs, these company names may ring a bell and offer DSPs.

Some of the top DSPs include:

• Display & Video 360 (Google).
• The Trade Desk.
• Amazon DSP.
• LiveRamp.
• Adobe Advertising Cloud DSP.
• StackAdapt.
• Amobee.
• Yahoo Ad Tech.
• AdRoll.
• Basis (formerly Centro).
• RhythmOne.
• Choozle.
• BrightRoll.

Some of the larger DSPs for Connected TV and video include:

• TubeMogul.
• OneView (Roku).
• MediaMath.

Again, there are many more DSPs available to advertisers. It’s important to choose a DSP with the features and inventory you are looking for.

Some DSPs offer self-serve advertising, while others offer both self-serve and full-managed service (likely to larger advertisers or agencies).

Ad Exchangers

Some of the more well-known ad exchangers available to publishers include:

• Xandr (Microsoft).
• Verizon Media.
• OpenX.
• PubMatic.
• Google Ad Exchange.
• Index Exchange.
• Magnite.
• Smaato.

Not all ad exchanges are equal.

It’s important for publishers to research options carefully and choose platforms that align with their goals.

How Much Does Programmatic Advertising Cost?

Simply put, programmatic advertising can cost as little or as much as your budget allows.

It’s a common misconception that small businesses can’t benefit from programmatic technologies – but we’re here to correct that.

Programmatic ads are typically bought on a cost-per-thousand-impressions (CPM) basis.

CPMs typically range anywhere between $0.50-$2.00.

However, CPMs can be much higher based on factors such as:

• Which DSP you choose.
• Your target audience.
• The level of competitiveness.

A good rule of thumb for programmatic ad cost is: The more niche your audience, the higher CPM you will pay.

So, whether you’re a multi-million dollar advertiser or a small business just getting started, you can likely fit programmatic into your advertising budget.

What Are The Benefits Of Programmatic Advertising?

There are many benefits to incorporating programmatic advertising into your marketing strategy.

Some of the top benefits include:

• Large-scale audience reach.
• Efficient and low-cost awareness.
• Real-time data and analysis.
• Ability to utilize first and third-party data.
• Opportunities for cross-device campaign strategies.

Large-Scale Audience Reach

Arguably the biggest benefit of programmatic advertising is the ability to grow and scale.

Programmatic is the best way to buy ad inventory to reach the masses due to the abundance of cross-platform inventory.

Efficient And Low-Cost Awareness

Related to the above benefit of scaling reach, programmatic is one of the most cost-effective types of advertising out there today.

Earlier, we discussed average CPMs for programmatic averaging between $0.50-$2.00.

Even with a small budget, your marketing dollars can go pretty far to reach your target audience and increase awareness of your product or service.

Real-Time Data And Analysis

Because programmatic platforms rely on real-time bidding, advertisers reap the benefit of receiving near real-time data.

Why does this matter?

Real-time data means you can make faster decisions and pivots. It also puts you in a proactive – instead of reactive – mode.

Utilizing First And Third-Party Data

Another benefit of programmatic advertising is the type of data segments available to advertisers.

For example, advertisers can upload owned first-party data in a secure way and target those people directly, using real-time bidding signals.

Taking that a step further, DSPs have many third-party segments that advertisers can choose to target if they don’t have first-party data.

Another type of third-party data advertisers can leverage is turning their first-party data into third-party data by creating lookalike audiences of their own customers.

This avenue opens the door to finding new customers similar to current ones.

Cross-Device Campaign Strategy

It’s important to note that programmatic advertising is typically seen as an awareness tactic.

Because of this, companies that look solely at last-click success often overlook the true potential of programmatic advertising.

So, how does programmatic fit into a cross-device campaign?

The key is to capture that initial awareness to users through programmatic ads.

Likely, a user won’t purchase a product or service after the first interaction with a brand.

Once a user’s interest is peaked, you have the ability to remarket to them on other platforms based on their interaction or engagement with that initial ad.

Marrying that data together from the first interaction to eventual purchase is key to determining the success of your programmatic strategy.

Types Of Programmatic Advertising

There are different types of programmatic advertising.

These should not be confused with the programmatic platforms themselves.

The types of programmatic advertising are simply how an advertiser purchases ad inventory.

The four most common types are:

• Real-time bidding. This type of bidding is open to all advertisers, where ad auctions happen in real-time. This is also known as the “open marketplace.”
• Private marketplace. This bidding happens when publishers have agreements with a limited number of advertisers. These websites typically offer premium pricing because of the coveted ad space.
• Preferred deals. A lesser-known type of programmatic advertising. Advertisers choose ad spots before they go on the private or open market. This is also known as “spot buying.”
• Programmatic guaranteed. Similar to a preferred deal, but there is no auction bidding. The publisher and advertiser agree on a fixed price for ad inventory.

Programmatic Advertising Examples

Programmatic ads come in all shapes and sizes.

The beauty of using programmatic ads is tailoring the content to your chosen target audience.

A few well-executed programmatic campaigns include:

Amanda Foundation

The Amanda Foundation is a non-profit animal hospital and shelter rescue in the Los Angeles area.

It created a campaign to help at-risk shelter animals find a home during their final days.

Specifically, it leveraged programmatic signals like location, demographics, and browsing behavior to tailor specific animal images to its audience.

If a user was interested in large dogs, they would be served a banner ad with large dogs instead of smaller dogs.

As you can see, messages and images were tailored to the individual’s behavior and interests.

Image from Amanda Foundation, August 2022

Geico Insurance

You’ve most likely seen or heard some version of a Geico ad.

Have you ever thought about the different ads Geico targets for you, though?

Geico uses such ad formats as TV commercials, website banner ads, social media ads, and more, to create a true cross-platform awareness campaign.

The brand carefully chooses its content based on the platform it serves on, the target audience and demographics, and more.

Its commercials are so popular, in fact, that Geico has dedicated a resource page on its website where users can view their favorite commercials.

Conclusion

The basics and benefits of programmatic advertising can help guide your existing programmatic strategy, or if you’re just getting started, create a new strategy that incorporates programmatic.

Understanding the functionality and features of each platform will be a critical component of your programmatic success.