Programmatic Advertising: How It Works And Why Is It Important?
Most people think of programmatic advertising as something that only applies to digital media.
However, the truth is that programmatic buying and selling is happening across all forms of advertising—including traditional channels like TV, radio, and print
In this article, we’ll take a look at what programmatic advertising is, how it works, and why it’s so important.
Definition of Programmatic Advertising
So, what is programmatic advertising? In short, it is the use of technology to automate the buying and selling of advertising. This means that, instead of negotiating prices and contracts manually, advertisers and publishers can use software to automatically buy and sell ad space in real-time.
Programmatic advertising is often used in conjunction with real-time bidding (RTB), which is a type of auction where advertisers compete for ad space on a publisher’s website or app.
How Programmatic Advertising Works
Programmatic advertising is made possible by demand-side platforms (DSPs) and supply-side platforms (SSPs). DSPs are used by advertisers to buy ad space, while SSPs are used by publishers to sell ad space.
Both DSPs and SSPs are connected to ad exchanges, which are marketplaces where advertisers and publishers can buy and sell ad space in real-time. Ad exchanges use RTB to auction off ad space to the highest bidder.
When a publisher’s website or app is visited by a user, an impression is generated—this is an opportunity for an ad to be shown.
Advertisers compete in real-time auctions to win the right to show their ads on these impressions. The winning bid is then matched with the appropriate ad space, and the ad is served to the user.
Why Is Programmatic Advertising Important?
Programmatic advertising is important because it allows advertisers to reach their target audiences more effectively and efficiently.
With programmatic advertising, advertisers only pay for ad space that is actually shown to users—this is in contrast to traditional advertising, where advertisers often have to pay for ad space whether or not it is actually seen by anyone.
In addition, programmatic advertising allows advertisers to target their ads more precisely. For example, if an advertiser only wants to show their ads to users who are in a certain geographic location or who have visited a certain type of website in the past, they can use programmatic advertising to target those users specifically.
Programmatic advertising is also important because it allows for more transparency and easier tracking of ad campaigns.
With programmatic advertising, advertisers can see exactly how much each impression costs, how many impressions their ads are getting, and what types of users are seeing their ads. This data can then be used to optimize ad campaigns and make them more effective.
The Benefits of Programmatic Advertising
Programmatic advertising has many benefits for both advertisers and publishers.
Benefits for Advertisers
- Increased Efficiency: Programmatic advertising allows advertisers to automate the process of buying and selling ad space, which makes it more efficient.
- Better Targeting: With programmatic advertising, advertisers can target their ads more precisely to reach their target audiences more effectively.
- Increased Transparency: Programmatic advertising provides advertisers with more data and insights into their ad campaigns, which allows for more transparency and easier tracking.
Benefits for Publishers
- Increased Revenue: Programmatic advertising can help publishers increase their revenue by selling ad space more efficiently.
- More Control: With programmatic advertising, publishers have more control over which ads are shown on their websites or apps.
- Improved User Experience: By showing relevant and targeted ads, programmatic advertising can improve the user experience for visitors to a website or app.
Do Users Benefit?
Yes, users can benefit from programmatic advertising as well. By showing relevant and targeted ads, programmatic advertising can improve the user experience for visitors to a website or app.
In addition, by only paying for ad space that is actually shown to users, advertisers are able to invest more in quality content—this can benefit users by providing them with better content to read, watch, or listen to.
For example, if an advertiser is only targeting users who are interested in buying a new car, the ads that they show will be more relevant to those users—this can save users time and improve their overall experience of using the internet.
What Are the Disadvantages of Programmatic Advertising?
There are some disadvantages to programmatic advertising as well.
- Ad Fraud: One of the biggest concerns with programmatic advertising is ad fraud. Ad fraud is when advertisers are charged for ad space that is not actually shown to anyone, or when ads are shown to bots instead of humans.
- Lack of Transparency: Another concern with programmatic advertising is the lack of transparency around the process. Because programmatic advertising is automated, it can be difficult for advertisers to understand how their ads are being bought and sold.
- Inadequate Inventory: Another disadvantage of programmatic advertising is that there may not be enough ad inventory to meet the demand. This can happen when too many advertisers want to buy ad space on a website or app, but there are not enough ad spaces available.
How Programmatic Advertising Is Changing
- Programmatic advertising is constantly evolving, and new technologies are emerging all the time, which is a great thing in general but also in terms of overcoming the above-mentioned challenges. Here are some of the ways that programmatic advertising is changing:
- More Targeting: Advertisers are increasingly using programmatic advertising to target their ads more precisely. This allows them to reach their target audiences more effectively and avoid wasting money on ads that are not relevant to their target audiences.
- More Transparency: Advertisers and publishers are demanding more transparency around programmatic advertising. This is leading to more transparency around the process, which is beneficial for everyone involved.
- Better Fraud Detection: As programmatic advertising has become more prevalent, so has the need for better fraud detection. This is why there are now many companies that specialize in detecting and preventing ad fraud.
- Improved User Experience: As programmatic advertising has become more sophisticated, it has also become better at showing relevant and targeted ads, which can improve the user experience.
What Does the Future Hold for Programmatic Advertising?
Programmatic advertising is here to stay, and it is only going to become more prevalent in the years to come.
As programmatic advertising becomes more common, we can expect to see more transparency around the process, more sophisticated targeting, and improved fraud detection. We can also expect to see improved user experiences as programmatic advertising continues to evolve.
Additionally, we can expect to see more regulation around programmatic advertising, as it is still a relatively new and unregulated industry.
In the future, we may see government regulations around programmatic advertising, similar to the way that there are regulations around traditional advertising.
Is it Expensive?
The cost of programmatic advertising varies depending on a number of factors, such as the type of ad, the website or app where the ad will be shown, the targeting options that are used, and the amount of competition for the ad space.
In general, programmatic advertising is more expensive than traditional advertising, but it can be more cost-effective because it allows advertisers to target their ads more precisely.
How Can I Get Started with Programmatic Advertising?
If you are interested in getting started with programmatic advertising, there are a few things you need to do.
First, you need to choose the right programmatic platform for your needs. There are many different programmatic platforms out there, so it is important to choose one that is right for you.
Second, you need to create a campaign that is targeted and relevant to your audience. And third, you need to set a budget for your campaign.
When it comes to choosing the right platform, you should pay attention to the targeting options that are available, as well as the fees that are charged. For example, if you want to target a specific country or region, you will need to choose a platform that offers this option.
And if you want to avoid paying high fees, you should choose a platform that charges lower fees but has fewer features.
In terms of creating a targeted campaign, you will need to spend some time researching your target audience. This can be done by looking at demographic data, such as age, gender, and location.
Once you have a good understanding of your target audience, you can create a campaign that is tailored to their needs and interests.
And finally, when it comes to setting a budget for your campaign, you should consider how much you are willing to spend on each ad impression.
Keep in mind that programmatic advertising is more expensive than traditional advertising, so you should set a budget that you are comfortable with.
As you can see, programmatic advertising is a complex and ever-evolving industry. However, it is an important part of the modern advertising landscape, and it is only going to become more prevalent in the years to come.
If you are interested in getting started with programmatic advertising, follow the tips above or try hiring someone who already has a foot in the industry.