What is Programmatic Advertising?

Published on June 5, 2018 in Frank Blog

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Programmatic advertising is an automated marketing method based on real-time bidding on advertising inventory, targeting specific customers, in a specific context. However, defining what is programmatic advertising is not always that simple, mostly because a consistent definition is a job in progress that depends on the adoption of emerging digital media technologies and on the programmatic ad buying model.

Programmatic marketing can include anything from online ads to programmatic television buying and programmatic video ads, mobile ads, native ads, and display ads. It’s not easy to follow the multitude of concepts – therefore, this guide to defining programmatic advertising will help you to better grasp the concept and use it to your business advantage.   

Programmatic Ad Buying: From a Modest Start to Advanced Automation

The idea of programmatic digital advertising was hatched as a method to monetize the remnant inventory. The remnant inventory refers to the unsold portion of available ad impressions. These are the impressions left after the premium inventory by a publisher was all sold out.

This definition of programmatic advertising is an outdated concept, though. Today’s programmatic ads are much more sophisticated than the former automation models that were used by publishers with the primary purpose of monetizing unattractive, cheaper, leftover impressions.

Current programmatic marketing models use automated, data-driven technologies with machine learning and artificial intelligence to buy and sell digital media to the most relevant customers.

Balancing Premium and Remnant Advertising Inventories

Programmatic advertising is not the same as real-time bidding (RTB). RTB is only one way of explaining programmatic ads. RTB uses the instant auction method to buy advertising inventory on a per-impression basis. Programmatic advertising companies now use advanced AI marketing software to generate best match data between the demand side platform (DSP) and the supply side platform (SSP).

In a way, computers help advertisers turn the campaign tables in their favor. They allow advertisers to run marketing campaigns by buying digital space in real time, deciding autonomously which ads and for how much money will bring the greatest ROI.

In the vast digital space where customers, publishers, and advertisers are all looking for each other’s best match, the programmatic marketing provides an intelligent calculation model that brings corresponding people on board.

Programmatic advertising demo

The small bits and pieces that otherwise get lost as remnant inventory are now used in the best possible way to the interest of everyone involved.

For instance, when AI marketing software comes into play, programmatic advertising is no longer about selling furniture to people looking to revamp an apartment; it’s about selling a wood slab coffee table to a buyer interested precisely in wood slab coffee tables, in the least intrusive moment and via the customer’s preferred device.   

How Programmatic Advertising Works

The conventional way of running a digital marketing campaign gives the reigns to the publisher. Programmatic ads let advertisers get a better hold of how they reach out to a target audience. Advertisers start managing and measuring media transactions on an impression-by-impression basis.

As illustrated by the previous practical example with the coffee tables, programmatic media buying defines the type of an audience a business needs to reach, as well as the best day, the outreach frequency and the most appropriate device for each customer.

How programmatic advertising works

Demographic and behavioral data is collected and analyzed over time, using customers Internet browsing habits as a starting point for directing campaign efforts to the most relevant customers. Unlike traditional ad campaigns, where an advertiser would need to buy a certain number of impressions on a specific medium, programmatic advertising enables buying ad space from multiple media resources and targeting specific customer segments.  

It’s easy to get lost in the programmatic advertising jargon. Acronyms such as DSP, SSP, RTB, and CPM (cost-per-thousand) belong to the standard vocabulary of a marketing pro. While such vocabulary must become your second nature, programmatic marketing will help you not only understand the concept, but also do most of the “manual” labor for you.

If you want to optimize your budget with programmatic display marketing, you will set a budget and define your campaign specifics on a DSP (demand-side platform). The DSP, in turn, will use RTB to connect to an Ad Exchange and get the optimal number of impressions from various SSP (supply-side platforms) that fit most the customer’s demands.

In a matter of seconds, the customer will see the most appropriate personalized ad results on the screen.

Programmatic Advertising Models

Many marketers use combined advertising models, involving both human interactions and machine learning. A programmatic marketing campaign can involve reserved or unreserved (remnant) inventories, depending on whether the publisher allocates a web space for a fixed rate or sells inventory directly through external ad networks and ad exchanges via RTB.  

How programmatic advertising platforms create different ad models and what are those?

Direct Programmatic Advertising

This model is also called programmatic direct or automated guaranteed impressions. The advertiser gets access to a reserved publisher’s inventory at a fixed price. Third-party platforms are included as a means of control and delivery.

Private Marketplace

Private marketplace or preferred deals are similar to the programmatic direct method but they are sold at a previously agreed price via direct communication between the advertiser and the publisher.

Invitation-only Auctions

Invitation-only auctions include exclusive private marketplaces where individual and group advertisers get access to premium deals by invitation.

Open RTB Auctions

Advertisers bid on the remnant inventories, getting access to global advertising space on a massive scale.

Programmatic advertising is a solution to a number of problems marketers face: it saves time by reducing the human involvement in deal-making.

With better audience targeting, it improves the number of conversions and optimizes your budget. It provides a quick access to an increased number of ad inventories – companies can reach a relevant marketplace faster than before and with less time and effort.

Programmatic ads created with artificial intelligent algorithms like Frank.ai can help you connect with over 2 million publishers worldwide. To find out how to launch a cross-platform campaign in under 5 minutes, get your free demo now.   

 

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