How Does Programmatic Advertising Work? (New Way Of Advertising)

What is programmatic advertising?

Programmatic ad buying is the use of software to buy digital advertising. While the traditional method includes requests for proposals, tenders, quotes, and negotiation, programmatic buying uses algorithmic software to buy and sell online display space.

How does programmatic advertising works?

Programmatic ads help connect publishers - those who have websites with ad space (ad inventory) to sell - and advertisers - those who want to buy that ad space to promote their brand.?

When an advertiser wants to launch a digital campaign to promote their product or service, they contact their programmatic ad agency or trading desk. The agency uses a?demand-side platform?(DSP) to automate the process of buying ad impressions to meet the goal of the campaign.

A DSP allows advertisers and their agencies to purchase ad inventory from multiple publishers. The DSP ensures the ads are aimed at the right audience through the use of a data management platform (DMP), which manages audience data. This data is used to target the right audience, taking a variety of factors into account, such as location, demographics, user behavior, and online activity.

When a person who falls within the target audience of the advertiser lands on a publisher's website, the website will send an ad request to the?supply-side platform?(SSP). An SSP is used by a publisher to sell ads, with the aim of maximizing the value the publisher receives from an impression. The SSP runs an auction among its buyers, and the DSP is connected in.?

The DSP uses the data that it receives to evaluate the ad and match it with their data and target parameters. This is used to decide a bidding price for the first impression. Held within the SSP or?ad exchange?in real-time, the process is often referred to as?real-time bidding.?

Although this sounds like a long process, it takes just 100 milliseconds to complete the bidding. After the impression has been sold, it is sent to the publisher's website to be displayed. The process repeats whenever a user lands on the website or refreshes.

What is a Supply-Side Platform (SSP)?

An SSP holds the publisher's inventory. The publisher submits a webpage as a source for an advertisement, and after all is agreed on the Ad Exchange, they will put a pixel code on their page to track visitor behavior.?

The code delivers anonymous data about visitors and the actions that they take. The SSP is programmed to maximize the value that publishers receive from an impression of an ad (an impression being an instance of the ad being shown to someone).?

An SSP allows publishers to filter ads by the advertiser and other criteria, as well as set different rates for ad spaces to define the cost.

What is a Demand-Side Platform (DSP)?

A DSP is a type of programmatic platform for the advertiser side of the process. Advertisers make their bids to a DSP, and the platform makes the decisions for them.

A DSP stores user-profiles and third party data and combines information with bids from advertisers. The DSP makes the decision about which ad to serve where when visitors land on webpages. It must consider the bid made, with the highest bidder winning, the content of the ad, and the cost to the advertiser.?

The pixel that publishers include on their website provides data so that audience segments can be created, sending the information to the DSP. The DSP has advertisers ready to make their bids automatically so that the best ad can be shown to the correct audience.?

Advertisers benefit from accurate placement of the ad, while publishers benefit from the highest bidder winning. When the DSP and Ad Exchange have made a decision about which ad to match to which webpage, this is communicated to the SSP.

Why Programmatic Advertising is Important for Advertisers

Before programmatic advertising, it was difficult for advertisers to access ad inventory. This meant that?60% of publisher ad space?went unsold. Automation helped to solve the problem by making it much easier to understand and buy ad inventory.?

For advertisers, the benefits of programmatic advertising include:

• Ability to scale.?Programmatic advertising allows advertisers to reach a large audience by purchasing ad space from any ad inventory available, rather than being limited as they might have been before.
• Real-time flexibility.?Advertisers can make real-time adjustments to ads based on their impressions, and they can take advantage of a broad range of targeting criteria.
• Targeting capabilities.?With programmatic targeting, an advertiser's budget can be put to better use and spent more efficiently.
• Efficiency.?The process is more streamlined, and more relevant ads are served through targeting. Access to a large pool of publishers means advertisers can get a better return on their investment, while publishers can maximize their revenue too.

How much does programmatic advertising cost?

The cost of programmatic advertising can vary, because it is priced using a?CPM (cost per mille)?model. CPM is a term used in online advertising that means costs per 1,000 ad impressions.

If publishers/advertisers want more specific targeting, the cost increases. The prices vary according to the following factors:

• Type of industry?
• Targeted device
• Ad format
• Ad placement on the page

On average, programmatic CPMs tend to be a cheaper option than social media advertising methods and significantly better value than traditional offline approaches.?

This means that small businesses with limited marketing budgets can also use programmatic ads as part of their digital marketing strategy.?

Why Programmatic Advertising is Important for Publishers

With the right tools, programmatic advertising protects publishers and can keep their readers in mind, hosting ads that are relevant to them. They can also access deals that bring them higher revenues and maximize revenue through different types of bidding, such as header bidding and exchange bidding.?

For publishers, the benefits of programmatic advertising include:

• Simplicity.?Programmatic advertising makes it so much simpler to?sell advertising space. Publishers are able to optimize their ad sales with automation tools that reduce the time investment required to find advertisers.
• Communication.?Publishers can communicate and collaborate with advertisers with ease, ensuring both the publisher and the advertiser benefit.
• Relevancy.?When visitors come to a publisher's site, they will be served with ads that are relevant to them because they are part of the target audience of the advertiser. Programmatic advertising enables advertisers to access a range of publishers, removing the need for back-and-forth phone calls, emails, or other slow forms of negotiation.
• Efficiency. Programmatic advertising can lower costs and raise margins for publishers, helping them to earn more from their available ad space.

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