Programmatic Advertising (PA) is an initial part of online marketing/ advertising. It could be called “the spine" of online advertising methods in recent days, such as Google and Facebook. However, people's knowledge about it is still limited, and there are a lot of misconceptions. This blog is going to give everyone a better overview of PA and its role in the marketing industry nowadays.
What is Programmatic Advertising?
First of all, let's get to know more about buying and selling Display Advertising (DA). There are two main methods
Direct buying
This is a common method when you connect to publishers for advertising banner booking at some position on their platforms. With this method, you can ensure that the position you bought will get a guarantee about the time and place it will be shown.
Programmatic buying
This is a fully automatic method of buying ads using the system and completely eliminating human intervention in advertising buying and selling between parties. This process is handled by systems such as Ad Network, Ad Exchange, SSP, and DSP. At this moment, if you want to buy ads, you don't need to contact the parties; just log in to the system and set up an order to buy ads. Inside programmatic buying, there are also two different buying methods
Direct programmatic
This means buying ads directly through an automated system with guaranteed inventory at a set price. It is similar to direct buying, but now everything is automated, and there is no human involvement anymore.
Real-time bidding (RTB)
This is when you buy ads using the auction method at a fixed price, but the inventory is not guaranteed.
- Programmatic advertising does not equal display advertising; rather, it is a subset of DA, which also includes non-programmatic advertising.
- This is also incorrect: RTB is a trading technique that is a part of PA, not programmatic advertising.
- Programmatic advertising = Marketing automation: Completely incorrect These two ideas are wholly dissimilar. Automating the trading of display advertisements is the focus of PA. Marketing automation, on the other hand, focuses on automating processes, marketing initiatives, and consumer-brand communication.
CPM is the shared currency of the entire programmatic system
Quite a lot of current brands still buy ads from agencies, Ad networks, Ad exchanges, or DSPs, as well as from publishers themselves. A payment method commonly used by two parties:
CPD (cost per duration): charges for ad purchases over a period of time (day, week, month). For example, you could book a banner on the homepage for $50 million per week, no matter how many impressions or clicks are generated in the process.
CPM (cost per mile): aka cost per thousand impressions. Each impression is an ad that is displayed when the user loads the website, and for every 1000 impressions on the system, a fee is charged. Note that the term used here is "display," but whether the user sees your ad or not is another matter. For example, if your ad is showing but it is at the bottom of the page, and 90% of users only see it at the top and never scroll down, it also means that your impression has no value.
CPC (cost per click): only charge when someone clicks on your ad, it doesn't matter how many impressions. Again, it should be noted that the word used here is "click." A lot of parties think that clicking will lead to a session on the website (measured by Google Analytics). However, that is a problem often caused when arguing between the two parties because the click and session metrics are too different.
CPA (cost per action): the action here can be registering an account, filling out a form, downloading an app, or making a purchase on the website. Depending on the complexity of this action, the cost of CPA will also change and only charge when an action is performed, no matter how many impressions or clicks come from that ad.
Except for CPD, we can see that the difficulty level for the ad side increases from CPM to CPC to CPA.
It's very simple to sell CPM; all you have to do is run ads, get system numbers, and charge. The only relevant metric is the number of impressions. As was already mentioned, all programmatic advertising systems use CPM as their primary method of communication.
Selling CPC is more challenging due to the related metric, CTR, which measures the proportion of viewers who will click on the advertisement when they see it and convert an impression into a click. The visual and written content of the advertisement, as well as the context in which it appears, are the main determinants of CTR. For instance, if the banner ad has a less-than-appealing image, the CTR will be lower (for example, the average number is 0.1%, but now it only reaches 0.05%), and logically, with the same number of impressions, the clicks generated from the campaign are lower.
CPA is much harder to sell than CPC, which is why there are fewer agencies that specialize in CPA. A conversion rate (CR), which measures how many people take the desired action in relation to the number of website visitors, will be present after a click-through action, much like it is after an impression through a click. The issue is that CR is affected by a wide range of variables, including website content, user experience, product quality, how that product compares to others on the market, and occasionally the reputation of the manufacturer. Although there are some agency-related factors that can be manipulated, such as website content or user experience, factors relating to products or branding are essentially out of reach. Not to mention that some industries, depending on the type, make it difficult to commit to actions like registration or sales.
Agencies can therefore sell ads as CPC or CPA, but ultimately it comes down to how they optimize each CPM to produce more clicks, more actions to deliver to their clients, and more. In this process, all risks are taken on by the agency. Due to their assured ability to optimize ads, they are able to sell what they do. As a result, it is clear that the only thing left to do is effectively optimize CPM (cost per mile) to produce more valuable results (clicks or actions).
The Pros and Cons of Programmatic Advertising
The benefits
#1: Highly efficient
Online advertising was previously purchased by humans before programmatic ad buying became popular. They would sit at their desk and call up other humans, bargain, and trade money for ad spots. This was slow and unreliable. Nowadays, algorithms do this for them. It’s like that story where a man spent two weeks creating a program that turned his 40-hour week into a single click of a program-and he spent the rest of his 39 hours doing something else.
Programmatic advertising is incredibly efficient.
#2: Fast-developing technology
Every day, the industry changes. It keeps getting faster, smarter, and better.
Programmatic media gets you there in a tenth of the time, regardless of the general structure of ad buys, the level of targeting that is possible, cost containment, or finding a better way to communicate with the target audience.
Check out: How to target your audience.
Programmatic advertising yields impressive results. Because there is no longer a comparison with traditional advertising, the majority of the sector is currently investing in programmatic buying.
How does the saying go? If you don't know the rules, you can't win the game.
You have the opportunity to discover your winning formula and to develop as the technology advances by using this type of automated ad buying.
#3: Outstanding Return on Investment (ROI)
When the hard bits are automated, machines can keep chugging along until your goals are met or your budget runs out. Either way, you save time, maximize your ad spend, and get a much higher return on your investment when you use programmatic ad buying.
The drawbacks
#1: Lack of human control
Ad automation's obvious human component is one of the main points of concern. That explains why the outcomes of various advertising agencies vary. To start, manage, and carry out successful campaigns, you need professionals who have undergone extensive training in programmatic advertising.
There could be a variety of problems for the advertiser if an agency has unethical practices or inexperienced staff. Ads that run on poor-quality inventory, inefficient viewability, or, even worse, a successful campaign that falls short of its full potential.
How would a marketer determine that their money is being used effectively in that case? The right team is crucial to the success of programmatic advertising.
#2: Online traffic fraud
There is a general understanding among business parties that when advertisers pay for views, these should be legitimate views. However, a large portion of these views are generated by bots, which are not actual people.
Some businesses develop software that automates the repetitive viewing of videos. Then they say, “Hey! Your video received 3000 views. That’s $100.00!” The issue here is that you're not paying for meaningless views; rather, you're paying to influence actual customers. Bots don't make purchases.
Thankfully, there are now workarounds for this in most respectable businesses.
#3: Inappropriate Ad matching
One disadvantage of paying for low-quality inventory is that your ad may appear next to content or on a website where you do not want your brand to appear.
For instance, air travel advertisements on a news page about an airplane crash are offensive and would not increase conversions.
Most businesses offer something called "Brand Safety" that helps prevent things like this, which is similar to the situation with online fraud.
YOOSE and vBase are a proud Gold Partner with HubSpot - the leading software solutions to all your B2B Programmatic Advertising needs. If you need help getting started with your programmatic advertising strategies or optimizing your B2B marketing funnel, please don’t hesitate to contact us for a 1:1 consultation.