To understand programmatic buying, one would need to understand the origins of media buying. But why buy media? Well, imagine that you have a great visual and some memorable copy (Just Do It, types!) along with it. You have defined your audience, and all you need is space to run the ad you have created. You need space or, in media parlance, inventory to run the ad. This is where the media buyers come in and negotiate the space for you in a newspaper or magazine, or TV spot. 

According to Investopedia, media buying is purchasing advertising space or inventory from a media company such as a television station, newspaper, magazine, blog, or website. It also entails the negotiation for price and placement of ads and research into the best new venues for ad placement. Before the advent of machines (read computers), this role (media buying) was executed by media professionals who brought media and negotiated rates on behalf of agencies and companies. 

Media buying was a time-consuming process with zero transparency. Relationships played a crucial role in negotiations. But all of this changed when digital advertising came into the scene. Fast forward to today, Programmatic advertising uses automated technology to buy media. 

The manual process of the yesteryears is replaced by automated buying and selling of online ad inventories. 

Programmatic advertising happens in real-time, primarily driven by state-of-the-art algorithms to allow advertisers to bid for the right to place an ad on a web page. All of this happens in real-time as in ‘Now’; hence, it’s also called real-time bidding or RTB. 

Who is involved in programmatic buying?

For programmatic advertising to work, there are three constituents. 

1. Ad Exchanges. What are Ad Exchanges? Think of it as a marketplace where advertising inventory can be purchased and sold (i.e. goods). Now, you would need two more players to make this exchange work—people who buy and people who sell.

2. Advertisers – companies who want to buy ad inventories or media. 

3. Publishers – companies who want to sell their space or inventory on their website or websites. 

For this marketplace to work, you will need a pricing model. In the case of programmatic advertising, it’s not people who decide the price but a computerized auction (that’s algo-driven) that determines who wins the bid in real-time- hence the term, Real Time-Bidding (RTB). 

The algorithm seamlessly handles the transaction and placement of ad impressions (across digital media) via ad exchange platforms in seconds. So, there you have it. If you ever wondered why, you were shown ads of a travel company you just visited when you went to MSN or Yahoo!, that’s programmatic working for you. 

According to Outbrain, this is how programmatic works:

• A person clicks on a website
• The website owner puts the ad impression up for auction (SSP)
• Advertisers offer bids for the impression (DSP)
• The highest bidder wins the ad impression
• The ad is served on the website to the user
• The user (hopefully!) clicks on the ad and converts

What are Supply Side Platforms and Demand Side Platforms? 

We spoke about publishers and advertisers. Now publishers are the ‘supply’ side of the story, i.e., they are the guys with the inventory, whereas DSPs or Demand Side Platforms are advertisers who need that inventory. If an advertiser needs to buy impressions on a publisher’s website (like MSN or Yahoo), it goes via a DSP. Simply put, a DSP enables access to supply-side partners so advertisers can efficiently place their bids on available inventory. So, if you as an advertiser want to buy mobile, search, or video ads from an exchange or marketplace (as opposed to just Google Ads), you would go via a DSP. 

If you are managing your digital ds through Google Display Network (GDN) or buying your ads from Facebook, you are buying impressions from these two networks only. DSP goes beyond these.  

Why would you use programmatic advertising? When is it right for your campaigns? 

Retargeting

According to Wikipedia, DSPs (programmatic ads) are commonly used for retargeting, as it is able to see a large volume of inventory in order to recognize an ad call with a user that an advertiser is trying to reach. 

So, reach and re-targeting is one of the major reasons. It’s worth noting that retargeting is a powerful conversion technique. According to Forbes, Retargeting is the process whereby visitors who have left your website are shown your ads on other websites. 

Better data to work with

High inventory quality is the one benefit that post advertisers cite when they talk about programmatic. You have a lot of choices and can work with pretty granular targeting. For instance, you could target those owners who are looking out for a Lexus (instead of owners who are ‘in-market for cars). So if you are targeting only Lexus users, this inventory is premium. But this comes at a significant cost. But then again, if you know how much are willing to pay and what you need from your ad spends ( more commonly known as ROAS), you are good to go. 

So, What are the cons? 

Complexity and cost are the two main reasons for programmatic adoption. DSPs come at a cost and companies that run a $1000 budget on ads can’t afford them. So, if you are running campaigns at scale, programmatic is for you. Programmatic is not for everyone – you would need an expert resource to run your campaigns and perhaps a specialized agency to program manage the whole thing. So, yes, your ROI may be under pressure, if you are not running campaigns at scale. 

The Future? 

Statistics from Statista says it all. In 2020, global programmatic ad spend reached an estimated 129 billion U.S. dollars, with spending set to surpass 150 billion by 2021. The United States remains the leading programmatic advertising market worldwide.

The last decade has seen newer concepts of touchpoint marketing come to the fore – remarketing being one of them. Re-targeting or the “seek and market” landscape is changing rapidly. Statista numbers tell you just that. But that’s not all. Newer audiences are being added. Consider Connected TV audiences, a hygiene factor in every home now where a TV is connected to the Internet) are now available on programmatic platforms. Clearly, the possibilities are endless. 

Programmatic is here to stay. The future has already arrived. Now the question is how deep is it? 

A Bonus Give Away!

If you need to work on a programmatic strategy, write to me at robin@digitalonmyplate.com, and I’ll send them to you in an instant!

Thank you for reading!

–Robin Thomas

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