If you’re sitting there asking yourself, “what is programmatic advertising?” you’re probably expecting a pretty convoluted answer.
But the truth is, it’s really not that complicated.
The term programmatic advertising simply refers to the use of software to automate the process of buying and selling digital advertising.
That’s it. It’s that simple.
At this point, many of you might be saying to yourselves, “Okay. So now I know what it is, but why should I care?”
Well, programmatic has made advertising transactions easier for both advertisers and publishers, and it’s also made advertising more effective and efficient.
This explains why programmatic is becoming so popular.
According to eMarketer’s 2018 Programmatic Ad Spending Forecast, in 2018, American advertisers will spend more than $46 billion on programmatic ads, and by 2020, more than 86 per cent of all digital display advertising will be purchased programmatically.
But in order to wrap your head around the popularity of programmatic, you’ve got to understand how it works.
Check out the video below if you want to learn more about programmatic advertising.
What is programmatic advertising and how does it work?
Programmatic started as a more efficient way for publishers to sell what they call remnant inventory, which is just a fancy term for unused ad space.
You see, before programmatic, every time ad space was sold, it would involve things like proposals and negotiations, which are very time-consuming, both for buyers and sellers of advertising.
But when you’re buying or selling ad space programmatically, there’s no need for tedious tasks like negotiations between advertisers and publishers.
As a publisher, you put ad space up for sale on ad exchanges using a supply-side platform and as an advertiser, you can access these exchanges and buy ad space using a demand-side platform.
Data management platforms provide user data for both the demand- and supply-side platforms.
This helps publishers to understand the audiences they serve, allowing them to provide more valuable ad inventory and therefore sell their ad space for a higher price.
It also helps advertisers to target the right audience(s) and track those who’ve been served their ads, which makes their advertising much more effective.
These platforms facilitate the sale of any kind of digital advertising, including everything from display advertising on desktop and mobile devices to ad space on digital billboards.
But I’m getting a little ahead of myself here, so let me break down these terms a bit more.
Data Management Platform (DMP)
A data management platform is used to collect, sort, store and analyze information.
In the context of programmatic, DMPs are invaluable because they provide the data that DSPs and SSPs need to automate the buying and selling of advertising.
Without this data, programmatic advertising simply wouldn’t exist.
Demand-side Platform (DSP)
A demand-side platform allows advertisers to create campaigns, access ad auctions, bid for ad space, and track the performance of their advertising, all in one place, which makes optimizing ad campaigns much easier.
Advertisers just feed the software the information it needs to do its thing, such as target audiences, performance indicators and budgets, and then an algorithm will automatically bid on the most appropriate ad space.
Supply-side Platform (SSP)
A supply-side platform allows publishers to simplify several processes, such as listing ad inventory, determining where each piece of inventory should be listed, and deciding what the price of ad space should be.
An SSP also gives publishers access to more potential buyers and lets them offer more valuable ad inventory, thus allowing them to get the most money for each piece of ad space.
Why Has Programmatic Become So Popular?
If you’ve made it this far, you might be mumbling to yourself that I should just get to the point already.
So, let’s get down to brass tacks.
Programmatic has exploded in popularity because it’s more efficient and more effective than traditional forms of advertising.
A survey from London Research and TRUTH asked marketers what they regard as the greatest benefits of programmatic ads.
The top five answers included the ability to effectively target, optimize and scale campaigns, better return on investment, increased efficiency and reduced costs.
As I said above, programmatic eliminates a lot of tedious, time-consuming tasks, such as negotiating with publishers.
But it also improves efficiency because it removes as many humans from the equation as possible.
This makes the ad buying process cheaper and eliminates human error, which often results in money being wasted on ineffective advertising.
Which brings me to my next point.
The effectiveness of programmatic ads is vastly superior to other kinds of advertising.
With the data provided by DMPs, you can target and track your audience using an array of different strategies, ensuring your ads will be served to the right people at the right time in the right place.
The precision of these targeting and tracking capabilities results in a better return on investment, as you won’t be wasting money serving ads to the wrong audience, and you have a greater ability to determine the effectiveness of your ad campaigns.