Not so long ago, when advertisers had to buy advertising space (banners) on websites, they had to go through a labour intensive process. Speaking to the sales team of each media house (i.e. the website), negotiating a price, placing an order, sending the creative, managing the billing and invoices. Imagine scaling that and coordinating with thousands of websites? I’m not even discussing tracking performance and managing fraud clicks, yet.
Luckily came these things called ad networks. One location to manage all the ad buying.
Similarly, ad network is the one place for the publishers to get all their ad sales revenue from. Making thing a lot easier to manage.
Now, consider this, what if you could create a program to place these buy orders?
Basically, just tell the computer what you want i.e. define your audience demographics and other details. Male, aged between 18-25, living in California, interested in bikes and bid below $3 CPC.
That’s just an example. You can create as complex bidding logics, as you’d like. These bids are then sent to a real-time bidding platform, but essentially the computer is buying and selling the inventory and that’s called programmatic advertising. Now, let’s look at it in more detail.
What is programmatic advertising
Programmatic advertising is a system of trading ad inventory, but instead of manual work to determine where to buy your advertisement space from, who to sell your advertisement space to, or calling publishers and haggling prices with their advertising employees. Those times are behind us, because in today’s world publishers can sell their virtual real estate in real-time auctions or directly to publishers via easy to use advertising networks. The simple truth about programmatic advertising and why it has taken the world by storm is that it is efficient. As a publisher, you have never been able to sell your advertisement space faster to a higher paying advertiser. As an advertiser, you’ve never found a more efficient way to target specifically your ideal audience. This is a direct benefit from programmatic advertising.
Yet many people consider programmatic advertising only as selling advertisements and advertising space via the internet. While that may be the simplest definition to tell your grandmother, who finally found out that email is not an envelope with the letter ‘e’ stamped on it to tell the postman it is an emergency, programmatic advertising is so much more than that. Sure, many people define it to you as buying and selling advertisements and ad units by using technology, but that’s only scratching the surface.
Programmatic advertising can be categorized into two different separate sections, programmatic buying and programmatic selling. Naturally, these are just the two opposites that meet in the middle to exchange money for goods, advertisement space for a chunk of the company’s advertising budget. Technically speaking, both are just fancy ways of talking about automation, whether it is using automation and data while buying advertising, or selling using automated tools instead of a separate sales team calling companies that might be interested.
For publishers, programmatic selling has made everything easier by a multiplier of a hundred. No more sales teams calling people and no more worrying about empty advertising space, because they can utilize real-time bidding auctions or guaranteed premium placements exchanges that can be found from multiple providers, easiest of which to implement in comparison to the ROI is Google’s DoubleClick Ad Exchange. There are multiple other providers for advertising exchanges, but one of the major players in online advertising is undeniably Google, which allows you to access a selling platform to present your advertising space to hundreds of other networks as well, and that is why it is a good place to start. With more experience, you can always move on to experimenting with different ad exchanges and compare their profitability and ROI.
As can be seen from this short introduction to programmatic selling, the key term when it comes to programmatic advertising is efficiency. Selling stocks used to always literally happen at the stock exchanges’ trading floors, but has since moved online for nearly all of the exchanges, except for New York Stock Exchange, which still has an active trading floor where bids are shouted out everywhere. If you consider the efficiency of programmatic advertising to that of the traditional ways, you can easily see why programmatic advertising has been dubbed the future of advertising. The level of efficiency that exists in the online advertisement selling trade would never have been possible without the help of computers and automation.
Another factor that programmatic buying has that hooked advertisers from the get go is the data driven side of it. The analytical capabilities and statistics offered by many of the ad exchanges and ad platforms, which are used by advertisers to control their campaigns all over the web, enable the advertisers to see exactly how many people have seen the ad and how many people have actually clicked the ad, the different demographics their advertisement is reaching and way more. This allows for advertisers to focus their advertising budgets more effectively, knowing their audience they can actually target the advertisement down to the favourite colour of the internet user. And who knows, if your favourite colour is red, maybe next week you’ll see an advertisement for red t-shirts directed at you. Then you’ll finally understand the true power of targeting.
Targeting allows advertisers to press down on consumers who have already expressed interest in their product, whether it be via visiting the advertiser’s website or searching for similar keywords on Google, but whatever the reason is, the consumer has already been presold the product or service. They have either themselves or by recommendation found the advertisers website, and by targeting certain users you can push the product to the consumer who is ready to buy. The return of investment for such advertisements is massive compared to traditional bulk purchasing of advertisement space. The advertiser might end up paying slightly more per impression than before, but the conversion rate per impression is through the roof in comparison to the rate it was before.
Uncertainties and questions
There have, however, been complaints and uncertainty toward programmatic advertising. When you think about it, the increased efficiency is attained through the use of automation instead of using a human workforce to handle the advertising like it has been done traditionally. Doesn’t this mean that robots are stealing the jobs from people? And if thousands upon thousands of publishers put their advertisement space on offer through ad exchanges, it will result in reduced prices paid per impression due to the auction system and a much wider availability and selection, right? Both questions and concerns are valid, and partially true, but let’s consider each one a little bit closer.
First of all, the programmatic advertising that is handled by computers and the “robots” stealing everyone’s jobs is the manual labour part of the job, and just like in factories, machines can do it much faster and with more reliability and clarity.
Transparency is highly valued when it comes to statistics that could potentially multiply the advertisers ROI, and by using programmatic advertising we can achieve a whole another level of analytical capability for advertising.
But instead of purely replacing the human workforce in the advertising industry, the machinery in this case has only taken the complex, slow and in the dark buying and selling out of the equation, and replaced it with swift and analytically supported opportunities of selling and purchasing.
The human workforce thus has lost the manual and repetitive aspect of their jobs, and now focus on the planning and strategizing of advertising campaigns and ad designs, and marketers still have to find their target audience. Programmatic advertising does not steal jobs, it merely gives the advertising people something else to do than dull manual labour.
As to the point about publishers losing income due to programmatic selling, the result of this is in nearly every case caused by themselves. If your website is not up to par with the quality the advertiser expects, they won’t buy from you. It’s simple as that. Another factor contributing to this is the uncertainty people still have toward programmatic buying. In the near future when programmatic buying becomes something daily and regular, there is a good chance that the uncertainty disappears and more people start taking advantage of programmatic advertising.
When reading through this article aiming to teach you everything you need to know about programmatic advertising, you can see how much knowledge goes into a rather compressed explanation of the programmatic advertising industry, and there is a lot more to learn if you want to actually start taking advantage of programmatic advertising yourself. The industry itself is at a point where it’s doubling in size and worth each year, and there seems to be no end to it. But one question does force itself to mind when thinking about something growing on such a massive pace at an even larger scale; when does it crash?
Hopefully you’ve been able to get accustomed to programmatic advertising with the help of this article, and don’t forget to make use of what you’ve learned in your own advertising adventures.