What is Programmatic Advertising?

22 July 2016

I bet if I walked into any given digital marketing agency these days and asked around what “programmatic advertising” was, only a handful of people would actually know.

Remember when everyone was talking about Content Marketing? Yea, that’s what’s going on with Programmatic Advertising. Everyone speaks about it – only few know what it is and how it works.

‘Is it a new thing?’, you might ask. Nope it’s not. As a matter of fact it’s been around since 2006 when Right Media, Inc. developed the first ad exchange. It has gained a lot of traction in recent years though and in 2016 programmatic ad spend is estimated to account for two-thirds of all digital display advertising totalling in over $22 billion (eMarketer, 2016).

So bare with me and let me help you wrap your head around all this fuss. Here’s the good news: it’s not rocket science – yet.

In simple words

We assume you know what Google AdWords is. In a nutshell, you as an advertiser pick a keyword, create an ad based on that keyword and then show it to searchers on Google who search for that keyword.

Programmatic Advertising is kind of the same thing, but for display ads and across a variety of different websites beyond the Google universe.

Programmatic means automated. So programmatic ad buying is the process of automatically buying ad space on websites. Either you bid for this space (programmatic real time bidding) or you buy it to be yours only (programmatic guaranteed, programmatic direct).

How does it work

When you load a website that has ad space on it available for real time bidding, information about the website and yourself as a user is passed to an ad exchange. Think about an ad exchange as a platform, that orchestrates all the bidding and auctions the available space off to the highest bidder.

This all happens within the (mili-) seconds it takes a page to load. You as a user ultimately get to see a display ad. Real time bidding for display ads has eliminated the requirement for advertisers to purchase an ad at a set price for a set duration on a set website.

Let me give you a quick example. Recently I was looking at flights from Zurich to Dubai and amongst others I visited the website of Qatar Airways. There I entered Zurich as my city of departure and Dubai as my destination. A couple of days later I looked up one of my favourite blogs, where I got to see the following:

Qatar Airways Display Ad

See that box at the right suggesting me attractive prices for a flight from Zurich to Dubai? At the time I viewed this ad, there were lots of other users on the same website and they all got a different ad catered to what they had shown interest in.

As a matter of fact, a lot of the display advertising you see today would be considered programmatic advertising, even on social media platforms such as Facebook, Twitter and Instagram.

How to get started

Advertisers tend to use so-called Demand Side Platforms (DSP) to help them decide which ad space to buy. A DSP is a fully automated software that bids on ad space available over an ad exchange. Google’s DoubleClick Bid Manager is a great example of a DSP. This is how Skoda Switzerland used Double Click to decrease their cost per lead by 9x.

Publishers rely on Supply Side Platforms (SSP) that help them sell their available inventory to the highest bidders. AppNexus, for example, is a technology provider that helps publishers distribute their ad space. Here’s how Shazaam benefitted of AppNexus’ SSP solution.

And by the way, Facebook is working on a DSP called Atlas that will allow advertisers to track users across devices, browsers, publishers and channels.

What’s next?

Brian O’Kelly, the guy who started Right Media Inc. and now runs AppNexus recently claimed that “programmatic advertising is dead” because it represented a one-dimensional technology that is obsolete. Instead, he introduced the notion of “programmable advertising”.

In the programmable advertising age, sophisticated algorithms customise ads to individuals based on a wealth of data. Take that ad from Qatar Airways and enrich it with even more information about me as a user: my age, location, liked pages on Facebook, friends who live in Dubai etc.

The wealth of data available will also largely impact how advertisers and marketers run statistical analysis to predict future events and to increase return on advertising spend. Based on the behavior other users have demonstrated before me, am I more likely to book a flight if you show me who of my friends is living in Dubai or the fact that you remind me how Dubai is nice and warm in December whereas the weather in Zurich will be quite depressing?

Programmatic advertising automated a process, but programmable advertising will fundamentally change the way individuals are marketed to and presents a huge opportunity for advertisers to create fluid and relevant experiences designed around the eye of the consumer.

Header image credit: Copyright Google