Programmatic Advertising – Why you should know this!

What is Programmatic Advertising?

While it is there for quite some time now, but Programmatic advertising has been considered by many as the ‘blackbox’ of online marketing, mostly due to the technical complexity involved with it.

Programmatic advertising is a type of buying, selling and optimizing digital advertising. The programmatic form uses Artificial Intelligence and machine learning to buy advertising in real time, instead of going through a traditional manual process, that involved requests for proposals (RFPs), human negotiations, and manual insertion orders.

And astonishingly, the whole transaction from beginning to end occurs in milliseconds involving multiple interacting platforms.

Why is Programmatic Advertising important?

Ads traditionally have been bought and sold by humans. As expected, this process is slow and irregular, done through RFPs, meetings, and negotiations before an advert reaches its audiences.

As this space grew complex with a growing number of publishers, advertisers and other entities (see the LUMA representation below), the manual process couldn’t keep up and start falling apart. The need was felt for a process that was faster, efficient and above all could automate the entire flow, thus resulting in the creation of machine-run “Programmatic Advertising”.

Programmatic is designed to minimize human intervention through machine learning and AI with the goal to increase transparency to both the advertiser and the publisher.

Current Landscape

As per the latest studies, digital will see nearly all the incremental growth in ad spends globally, with programmatic taking a significant pie of that spend. Below are highlights from a recent study from PubMatic on Digital Ad Trends.

In India –

India, (along with Indonesia and Brazil) is projected to be the fastest-growing programmatic digital ad market in annual terms in 2019.

As of 2018, the Indian advertising market stands at $8.76 billion and is estimated to grow at a CAGR of 10.62 % till 2021 to reach $12.06 billion, according to the Dentsu Aegis Network Report*. The digital part in this is ~ $1.3 billion with a CAGR growth of 31.96 %.

Currently, 18 % of all digital media is bought programmatically that has grown from 15 % last year. The rapid increase in the penetration of mobile devices and the internet has led to 47 % of digital media spends on mobile devices and is expected to grow at a CAGR of 49 % to reach a spend share of 67 % by 2021.

*Source – Digital Market Asia India Report https://www.digitalmarket.asia/indias-digital-advertising-growth-to-be-31-96-cagr-report/

Advantages of Programmatic

1.      Highly targeted ad performance

Programmatic advertising offers large amount of user data and machine learning capabilities that can be used to target audiences with the right message, at the right place and right time. This means the ad budget is used smartly, eliminating waste on viewers who are unlikely to be interested in the product.

2.      Real-time monitoring and fine-tuning

With programmatic, the performance of each ad is measured in real-time. So advertisers don’t have to wait for weeks to get data and use it to optimize the campaign. Programmatic allows advertisers to adjust and optimize ads there and then to test and improve results as well as have clear oversight on their ad spend.

3.      The transparent media buying process

Traditionally, brands were forced to rely on agencies to handle their ad spend with lack of transparency. Now, with a brand can have full transparency over fees. Plus, exactly where and how much of their money is being spent on what.

4.      It’s not all about the data

Of course, targeting through programmatic advertising doesn’t have to involve knowing everything about a user. That’s where contextual targeting provides a seamless – and less intrusive – way of reaching your desired audience. This way, you can target users based on keywords and contextual relevance of a page.

5.      Multi-channel and format reach

With the increasing number of digital touchpoints of your average user, your advertising should be keeping up. This is where programmatic advertising is leading the charge. It allows you to reach audiences across devices: on mobile, desktop, tablet, in-app, via TV and even out-of-home. The possibilities are endless!

Disadvantages of Programmatic

1.      Fraud potential

Since there is no direct interaction between the publisher and advertiser, it is somewhat easier for the publisher to deliver “bot” traffic, as opposed to the traditional transaction. The programmatic providers are diligently working towards removing this possibility.

2.      Misplaced ads

As the process is largely automated, there are possibilities that the ad content might not fit well with the publisher’s theme.  This can hamper the campaign effectiveness and potentially harm the brand reputation.

3.      Targeting narrowly can be expensive

The requirement of targeting with laser-like precision through programmatic comes with a premium. Getting the ad to play to exactly the intended audience, generating insights down to the last detail, can be a very expensive process and as with any other case, there is ultimately no guarantee of a higher engagement through this.

What are the typical bidding strategies used?

There are different bidding strategies employed in Programmatic but roughly 90% of programmatic buying goes through Real-Time Bidding.

Real Time Bidding - RTB is a way of buying and selling ads through a real-time auction, meaning a transaction is made during the time it takes a webpage to load; around 100 ms.

 Programmatic Direct

·    A way to buy a guaranteed amount of impressions on specific sites.

·    Usually used for large “premium” formats like full-page takeover ads

·    Often involves a fixed-price agreement rather than an auction

 Private Exchange buying (PMP)

·    An invitation-only marketplace where one or a select number of publishers invite specific advertisers to bid on their inventory space.

·    Used as a way of bypassing ad-exchanges altogether, where your buying platform plugs directly into the publisher’s inventory.

·    An auction usually takes place, but the terms of the deal are pre-negotiated, creating a more manual environment than regular RTB.

What are the components involved in implementing Programmatic Advertising?

Publisher: a corporation that distributes digital publications. Examples include Facebook, Schibsted, New York Times, Sanoma.

Supply-side platform (SSP): enables publishers to sell their inventory. Access to a variety of networks, exchanges, and platforms via one interface.

Demand-side platform (DSP): Interface where you can buy advertising inventory. They have access to multiple SSPs or ad exchanges. Uses algorithms to analyze bid requests and respond with bids and creatives in real-time auctions.

Ad tag: advertisers use ad tags to direct the browser to a particular ad. Determines the size, type, and URL of each individual ad. What’s more, ad tags also collect campaign data and verify certain metrics, such as impressions and clicks.

Ad server: Aggregates all the campaign information (reporting, audience) across publishers, ad networks, search, social etc. Moreover, they verify whether the impressions were served properly and help perform creative optimization.

Affiliate network: a program that connects advertisers and affiliate marketers. Affiliates are paid when an ad successfully converts a viewer on their site.

Ad network: Acts as a broker between a group of publishers and advertisers. It aggregates unsold inventory from publishers and sells impressions at a cheaper price (usually lower quality).

Data Management Platforms (DMP) - A data management platform is used to collect, store and sort information.

How does Programmatic Advertising works?

Below is a step-by-step guide to the most common format of programmatic, from beginning to end, to help you understand the process:

Step 1:

When a viewer lands on a website that uses programmatic advertising, it starts the automated bidding to serve an ad to this particular viewer.

Step 2:

The publisher lists the ad space for this viewer on their supply-side platform (SSP). The SSP acts as the seller for the publisher, letting advertisers know the characteristics of the site, user, and ad space that allows DSPs to make their bid. Essentially, they advertise the product (the ad space) for sale.

Step 3:

Once the SSP receives the information on the ad space, they analyse the user’s cookies to determine factors such as their geography, demographics, interests etc.

Step 4:

Next, the corresponding demand-side platform (DSP) reviews the information on the user provided by the SSP. DSPs act for advertisers to choose ad space that aligns with the advertisers' budget and targeting parameters. It assigns the ad placement a value based on the website and user’s characteristics.

Step 5:

On behalf of the advertiser, the DSP makes a bid on the ad placement. All this happens in real-time which why programmatic advertising can often be referred to as real-time bidding (RTB).

Step 6:

Once the SSP receives the bids from various DSPs, the SSP will then pick the winner. There are different bid strategies out there for different SSPs. Waterfall bidding, Client-side, and Header bidding with header bidding widely considered the most efficient and fair.

Step 7:

Once the winning bid is picked, the SSP displays that ad to the user on the publisher’s site. This entire process happens in milliseconds all while the page is loading for the user.

Who are the platform vendors?

Demand Side Platforms (DSP)

1.   DoubleClick Bid Manager

2.   Amazon Advertising

3.   Sizmek

4.   Oath DSP

5.   Adobe Media Optimizer DSP

6.   theTradeDesk

7.   MediaMath

8.   AppNexus

9.   DataXu

Supply Side Platforms (SSP)

1.   AerServ

2.   Appnexus

3.   DoubleClick for Publishers

4.   BrightRoll Ad Exchange

5.   MoPub

6.   OpenX

7.   ONE by AOL

8.   PubMatic

9.   Rubicon Project

10.  ADYOULIKE

11.  SmartyAds SSP

Ad Exchange

1.   AppNexus

2.   AOL’s Marketplace

3.   Microsoft Ad Exchange

4.   OpenX

5.   Rubicon Project Exchange.

6.   Smaato

7.   DoubleClick

How much does programmatic advertising cost?

Other than the platform costs (DSP, etc.), the operational cost comprises of trading the ad inventory specifically on a CPM basis (cost per 1,000 ad impressions). CPMs can range wildly based on the quality of the list and the level of targeting. Higher the quality of inventory, or more specific the targeting, higher the price. Other factors that influence prices are industry, device, format and placement of ad on the page.

On average, programmatic CPMs range around $0.50 to $2 per CPM. This offers a huge cost advantage compared to traditional manual trading, which normally sees prices > $10. Another advantage why programmatic should be considered and adopted.

The Road ahead

While not new, programmatic is a highly evolving field. New technologies, regulations, and best practices make this a volatile element of digital marketing. Yet, what should we foresee in the future of programmatic -

AI, Machine Learning & Blockchain technology playing a major role

These technologies have several use cases in programmatic advertising. We’re already seeing a significant impact in fraud-detection, personalization, and optimization of the process through these. Plus, IBM Watson has proved that it can drastically reduce CPC using AI technology.

Cookie-less tracking

Thanks to increasing difficulties with tracking imposed by different browsers, and regulatory norms, cookies are becoming less and less effective for targeting. Expect to see the rise of deterministic and probabilistic tracking in 2019 and beyond.

Privacy around personal data

In 2018, the European marketing industry was transformed with GDPR, it placed restrictions on the use of third-party data and how advertisers could use personal data for targeting use. ePrivacy is set to shape 2019 and beyond.

Self-Service Platforms

Programmatic self-service platforms make it easier for smaller brands to compete with companies with larger budgets. Programmatic ad-tech for SMB’s is a rapidly rising trend in the advertising industry. It’s opening up a whole new dimension that’s previously been largely inaccessible for smaller companies.

In-house programmatic advertising

With self-service platforms, brands are finding ways to take their programmatic ad buying in-house rather than going through media agencies or other middlemen. In an age of transparency, self-reliance in digital marketing is a key consideration, brands taking control over their programmatic ad production and buying comes as no surprise. In fact, as many as 45% of brands did their programmatic buying themselves in 2018 – and this number is predicted to climb to 62% by 2022.

Conclusion

The future is bright for programmatic advertising and right now is an excellent time to get in on a rising trend. The scope of growth is huge, globally, and more importantly in India with a large set of users still waiting to move online.

Accessibility and affordability have never been better, especially for smaller businesses, and hopefully with tools/platforms leveraging the latest technology for fraud-detection and adhering to norms on data usage, the future is looking brighter for programmatic.