What is Programmatic Advertising?
Programmatic advertising refers to a process that involves the automated purchase and sale of digital ad inventory. By using automation and machine learning, programmatic advertising enables efficient transactions where both parties’ needs are effectively met. It is a streamlined alternative to traditional transactional models, which require advertisers to negotiate with and submit manual ad orders to each publisher they work with.
How does programmatic advertising work?
In programmatic advertising, advertisers and publishers use separate automated platforms to facilitate their respective sides of ad transactions.
Advertisers use tools called demand-side platforms (DSPs). These platforms enable them to set parameters based on their budget and objectives, as well as targeting criteria for the kind of audience they wish to advertise their products or services to. Publishers, on the other hand, use supply-side platforms (SSPs), through which they set prices for their ad space and make their inventory available to potential buyers.
DSPs and SSPs both connect to ad exchanges. This enables them to match compatible advertisers and publishers together, enabling automated transactions to occur whenever a user visits a publisher’s platform. Since this process is algorithmic, it takes fractions of a second to complete.
What are the different types of programmatic deals?
Within the scope of programmatic advertising, there are several different transactional models:
- Real-time bidding (RTB): The model takes the form of an open auction. Whenever a user visits a publisher’s platform, advertisers submit automated bids for ad inventory, with the space being sold to the highest bidder each time. This is by far the most commonly used form of programmatic advertising.
- Private marketplace (PMP): With PMP, deals take place through private auctions. In this case, only certain advertisers are invited to participate in the auction, with publishers typically offering prime ad placements with greater control for advertisers.
- Programmatic direct: Also known as programmatic guaranteed, this is a non-auction model that bypasses the bidding component of the programmatic process. Advertisers agree fixed deals with publishers, then both parties utilize automated platforms for the ad delivery component.
- Preferred deal: As with programmatic direct, preferred deals also enable advertisers to bypass the auction process. In this model, advertisers are offered a fixed price at which they can purchase ad inventory. Advertisers can then choose to meet this price to purchase the inventory right away or can choose to pass on the advance deal and instead go to an open auction.
What are the advantages of programmatic advertising?
Programmatic advertising is widely utilized because it offers considerable advantages to advertisers and publishers alike. The following are some of the key benefits of programmatic advertising:
- Efficiency: Since programmatic advertising automates aspects of ad transactions and delivery, it reduces the need for manual processes, thus increasing the efficiency of operations.
- Cost-effectiveness: Programmatic advertising gives advertisers and publishers fast and easy access to suitable deals at their preferred price points. This allows both advertisers to achieve their goals and stay on budget while also enabling publishers to effectively monetize their inventory and maximize revenue.
- Scalability: Programmatic advertising helps advertisers to easily purchase and delivery ads across multiple platforms simultaneously. As such, the model can facilitate growth for those seeking to expand their reach.
- Precision: Programmatic advertising users machine learning and data to match advertisers and publishers whose audiences align. This enables the consistent delivery of relevant ads that generate higher engagement and conversion rates.
- Tracking and optimization: Through the utilization DSPs and SSPs, programmatic advertising can enable advertisers and publishers to gather data on the performance of digital ads. This facilitates better decision-making on both sides, allowing advertisers to tweak their targeting and publishers to adjust their pricing to suit their respective needs and goals.