Programmatic Advertising: How does it work?

Programmatic Advertising is a hot topic in today's advertising world. As media and social networks develop as well as the environment for information connection is becoming increasingly open, the difficult problem for marketers and businesses is to create a plan to impress and connect with the audience naturally, quickly and effectively. By understanding how Programmatic Advertising works, you will master the media game and create unexpected results.

How Does Programmatic Advertising Work?

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

While there may be a few variants in the process, these are the key steps that need to occur for a programmatic advertising campaign to go live:

1. Publishers use their SSP software to create ad space on their websites and link their proposals to an ad exchange.
2. Advertisers connect their DSP software to a compatible ad exchange and establish their target audience, cost, budget, and other relevant data.
3. A visitor comes to a website and the ad exchange receives all the user's information thanks to the displayed cookies.
4. The visitor will participate in the real-time bidding (RTB) auction if their information matches the target audience that the advertiser specified before.
5. The advertiser with the highest bid will win the programmatic RTB ad space and the ad will be shown to the desired visitor. Note: ads must be submitted before bidding begins.
6. The publisher finally gets paid for the displayed ad, and the process starts over with every new visitor.

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.

Real-time bidding contributes to around 90% of the programmatic ad buying process. Nevertheless, there are additional elements inside the programmatic advertising system that need to be considered for success.

Is Programmatic the future of marketing?

Now that you know what programmatic is and how it works, a question may be asked by many people: “Is programmatic advertising the future of marketing?”. While no one can fully predict the digital future, many experts believe it could be the future of digital advertising.

Programmatic Advertising is becoming a popular method and plays an important role in the advertising exchange process between marketers and publishers. For brands, this approach has the potential to drive more impressions, attract the right audience, and speed up transactions to create a profitable opportunity that grows every day.

However, the answer to whether programmatic is the future of advertising will largely depend on industry developments. As more publishers saturate the market for brands, the need for Programmatic Advertising becomes more and more important. With so many options for online marketers, it's no surprise that AI technology, integrated with a complex algorithm, is needed for advertising to be effective. So at this rate, the future of programmatic advertising looks bright.

How much does Programmatic Advertising cost?

Programmatic Advertising works on a CPM (Cost Per Mille), or Cost Per Impression, model. CPM is the price per 1000 ad impressions that appear on a website. Programmatic Advertising's CPM is usually believed to cost somewhere between $0.50 and $2. Certainly, programmatic CPM is far cheaper than other platforms, such as social media networks, where CPM can go as high as an average of $6-$7.

In fact, the cost of programmatic advertising depends on many factors and parameters. See a more detailed analysis of CPM currency in Introduction to Programmatic Advertising - Digital Marketing.

5 ways to make Programmatic Advertising work effectively for your business 

#1. Ask the hard questions

When picking a programmatic partner, don’t be afraid to get tough. What ad exchanges do you partner with? What third-party data sources will I have access to? What are the different variables I can adjust my bid on? Do you have direct access to ad exchanges, or do you work with a DSP? Do you invoice with a dynamic CPM or fixed CPM?

Then, once you’ve picked a partner, continue to lean on your partner’s rep to help you launch and optimize your campaigns. Ask for insight from other companies’ campaigns. What have they seen work successfully or fail? What CPMs would they project for a particular channel?

#2. Target broadly

Cast a wide net, and then optimize based on results to narrow your audience. You may have expectations or historical learnings about who your target audience is when launching a campaign.

Keep those in mind and use them when building your audience, but cast the net wider to confirm those expectations. Your instincts might be spot on, or you could realize you’ve been missing out on opportunities in the past.

Learn more: Location-Based Marketing use cases

#3. Use your pixel to the fullest

Whether you’re running an awareness, consideration, or direct response marketing campaign, you should set up conversion tracking, retarget valuable areas of your website, and create lookalikes to use in your prospecting campaigns.

#4. Align your channel with your content, target audience, and campaign goals

It is so important to align your channel to every piece of your campaign. Channel performance can vary widely based on the demographic you’re targeting and the content you’re promoting. For example, some content pieces may work well with display, while others may perform better with native. And not all channels are created equal for all campaign goals.

If you’re wanting to run a campaign that will drive a high volume of lead form submissions on your website for a low cost per submission, connected television probably isn’t the best place to start because it doesn’t drive direct traffic and has higher CPMs than running a display campaign. But if you want to increase awareness and have the opportunity to educate your audience on a new product you’re launching, then connected television might be the first place to start.

#5. Test different channels

It’s hard to move the budget away from a channel you know is working to test a new channel you haven’t used before. But one of the benefits of programmatic advertising is there are a lot of partners that have inventory across multiple channels.

For example, in The Trade Desk, we’re able to run display, native, digital audio, connected TV, and programmatic video. The benefit of being able to run all the channels in one platform is the software’s ability to attribute conversions so you aren’t duplicating across channels. This allows you to test channels directly against each other.

How to get started with Programmatic Advertising?

For those new to programmatic advertising, the best way to approach this game is in conjunction with a market strategist. YOOSE believes it will help your business realize which audience programmatic advertising is suitable for. How to implement strategies and actions?

Don't hesitate to book a 1:1 consultation with YOOSE!