Wondering how programmatic works, or whether it is right for you? We’ve put together an introduction to programmatic advertising and the technology that makes it work.
A few years ago, we published our beginner’s guide to programmatic (you can read it here). But as the digital marketing industry has progressed so dramatically since, and programmatic has continued to evolve into digital out-of-home (DOOH), TV, audio and more, we thought it would be helpful to write an updated guide.
What’s the history of programmatic advertising?
Programmatic is defined by the Display Trading Council as ‘the use of automation in buying and selling of media’, and it can apply to anything – from display and mobile, to digital out of home, audio and connected TV (CTV).
According to Marketing Week, programmatic actually began as a means of using up remnant inventory and increasing the efficiency of leftovers.
The beginnings of programmatic advertising can be traced all the way back to 1994, when the web’s very first banner ad was displayed. The ad was part of AT&T’s “You Will” campaign and appeared on the website hotwired.com. People were apparently so intrigued by the new concept that they clicked on it several times.
How does programmatic advertising work?
Of course programmatic advertising has evolved dramatically since then. So how does it work today? The simple explanation for how programmatic works is that brands or agencies use technology called a demand side platform (DSP) to choose which impressions they want to buy for their ads, and how much to pay for them.
On the other side of the transaction, publishers use technology called a supply side platform (SSP) to sell their ad space to those brands and agencies. The two platforms (DSP and SSP) are then matched up in real time.
Once a deal is struck – a price is agreed by the brand or agency and the publisher – the impressions appear on the website. With programmatic this deal can happen automatically in real-time (this is known as real-time bidding, or RTB), making it an efficient way of running digital ad campaigns.
What are DSPs?
Let’s now look at the technology that enables programmatic advertising to function. A demand side platform (DSP) is a type of technology that automates the decision-making process of how much to bid for an ad in real-time.
One key benefit of DSPs is that rather than just buying inventory from publishers, you are able to reach specific audience segments based on your DSP targeting capabilities, across a range of publisher sites. So instead of saying “I want my ad to appear on catfacts.com” you can choose for your ad to appear on the websites where the data says people who fit your demographic are.
So, thanks to DSPs, advertisers no longer need to contact individual publishers to ask if they can advertise on their website; instead the transaction is automated via the network.
What are SSPs?
Supply-side platforms (SSP) – also known as sell-side platforms – meanwhile, are the technology that media owners and publishers use to sell ad space. SSPs coordinate and manage the supply and distribution of ad inventories and are an important part of the programmatic real-time bidding process.
SSPs make it possible for publishers to optimise their inventory by connecting it to many different ad exchanges and DSPs. This gives them access to as many potential buyers as possible, so they can maximise the possible revenue they earn for their inventory.
What is real-time bidding (RTB)?
Real-time bidding (RTB) is the act of buying and selling online ad impressions through real-time auctions that happen in the time it takes for a webpage to load. These auctions are usually enabled by ad exchanges or supply-side platforms (SSPs).
And while RTB is a type of programmatic advertising, not all programmatic advertising uses RTB. In some situations, ad platforms allow publishers to sell their inventory in advance for a fixed price, rather than auctioning it. This is sometimes called programmatic direct, programmatic guaranteed or automatic guaranteed.
What’s a DMP?
There’s one more thing you need for programmatic advertising, and that’s a data management platform (DMP). A DMP is a centralised system for collecting and analysing large sets of data from various sources.
A DMP stores first, second and third party data, which is processed and integrated, making it possible to see a full customer view. It also enables the segmenting of gathered data into target groups, such as ‘frequent buyers’ or ‘cat lovers’, for example.
A DMP also enables you to find new users with similar characteristics to the users from your target group, expanding your customer network exponentially. The DMP connects to the DSP to find inventory that fits the profile of these users.
When programmatic ads are run, they can be run as static ads. This means that all ads are created manually before the campaign goes live, and they are run exactly as they were initially created.
However, this is very restrictive when running programmatic campaigns as you can only create a limited number of versions of your ads, so your messaging will always need to be fairly generic.
Dynamic creative optimisation (DCO) has been a game-changer for programmatic ads. Rather than create static, fixed ads, instead you create templates to which you can switch in any number of various elements in real time, based on the data you have on who will be viewing the ads.
So, for example, one person could see an ad featuring a cat basket if you know they have recently viewed similar products. While another person may see dog biscuits if they have been searching for them.
Or, if someone has bought a tent and sleeping bag, they may be served an ad with a camping stove or chair with a DCO ad, encouraging an up sell. With a static ad, however you would be limited to a generic camping product ad.
With the right technology, you can even run DCO ads showing products that someone has previously searched for, and show them how many are currently left in stock and how much they cost.
So if, for example, someone has been searching for a hire car for a weekend away, you can serve them an ad showing them how many of the model they were viewing are still available, for their exact travel date and destination, and the current price.
As you can imagine, this level of personalisation in ads dramatically improves the performance of programmatic campaigns.
What do you need for successful programmatic advertising?
In order to run successful programmatic campaigns, there are a number of things brands or agencies need. These are:
- To be able to build lots of interesting audiences (using DMP)
- To have inventory opportunities to deliver against those audiences (using DSP)
- To deliver a relevant message within those inventory opportunities (using DCO)
It’s also important to ensure that all advertising is delivered with the appropriate consent.
What are the issues affecting programmatic?
Two of the biggest challenges affecting programmatic are data wastage and data leakage.
Data wastage happens when you try to stitch together technology. It’s estimated that you lose around 30% of data at every step of the chain. So, for example, when you connect a DMP with a DSP, you lose 30% of your data. And when you connect up a DSP with DCO, you lose another 30%.
Data leakage usually happens when a brand, agency or ad tech company collects data about a website’s audience and then uses that data without the publisher’s permission.
To avoid this issue, it’s recommended to work with a programmatic partner who has all the technology in one place: DMP, DSP and DCO, like Crimtan (get in touch with us and we can arrange a call with one of our experts).
Not only does this eliminate the risk of data wastage and leakage, but it means that your programmatic partner can monitor customers as they move through your entire lifecycle, giving you far superior data on your campaigns, improved attribution and far greater transparency.
A single programmatic partner gives you improved attribution
When decision making takes place in a single technology, your programmatic partner is able to connect the dots much more efficiently and to a greater depth.
To give you an example, let’s say you are running a programmatic campaign across display, native, video, audio, DooH and CTV. Obviously you can connect IDs when people are viewing ads on their devices. But what if they’re walking through a train station? How can you know if they have seen the CTV ad you were running, and if that ad influenced their behaviour?
Because a single programmatic partner like Crimtan knows the time and place the ad was delivered, and can assign CTV to an IP address, giving a geo location. And when we look at browser behaviour, we can see whether activity not ID related either increased or decreased in that location.
Because everything is one place, we know when and where the ad was delivered, and can connect activity not connected to the ID, to an ID – meaning we can deliver accurate campaign attribution.