This guide to programmatic advertising, also known as programmatic marketing, provides you with a complete overview of programmatic ad buying. Learn what it is, how it works, and why it matters in this helpful guide — no download required.
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What is programmatic advertising?
Programmatic advertising, also known as programmatic marketing, automates online ad management. Instead of manually managing ad sales and purchases, programmatic ad buying uses artificial intelligence (AI) to automate and expedite the ad buying and selling process.
What do all these programmatic advertising terms mean?
If you research programmatic advertising for a few minutes, you’ll come across several confusing terms.
Take real-time bidding (RTB), for example, or demand-side platforms (DSPs). While you don’t need to memorize these terms to understand programmatic ad buying, it’s helpful to have a cheat sheet for them, like the one below.
Real-time bidding (RTB)
RTB happens when ad inventory gets bought and sold on a per impression (or view) basis in real-time using programmatic advertising.
Demand-side platforms (DSPs)
DSPs, like Google Ad Manager, are platforms that allow users (specifically advertisers) to manage all their ad exchange and data exchange accounts.
Supply-side platforms (SSPs)
SSPs, like OpenX, are platforms that allow users (specifically publishers) to manage all their available ad inventory space.
Data management platform (DMP)
A DMP serves as a data storage, management, and analysis platform for marketing and advertising campaigns.
An ad exchange operates as a marketplace for buying and selling ad inventory via bidding and real-time auctions.
Viewability serves as a metric that tracks the number of impressions or views earned by a programmatic ad.
How does programmatic advertising work?
“What is programmatic advertising?” is only the beginning when it comes to learning about this strategy. Once you hear the definition of programmatic advertising, you want to learn how programmatic ad buying works.
From a beginner’s viewpoint, programmatic advertising works as follows:
- A user visits a website that features ads
- The DSP and the SSP coordinate with one another to deliver a relevant ad
- A relevant ad appears on the site
If you want to go a level deeper, the second stage breaks down into several steps:
- The website uploads its ad inventory to the SSP
- The SSP analyzes the user’s browser cookies to find relevant advertisers and ads
- The DSP reviews the SSP’s user data and assigns the user a monetary value
- The DSP submits a bid to the SSP on behalf of the advertiser and their pre-determined budget
- The SSP reviews all the bids and selects a winner
- The SSP uploads the ad to the page and the user
This process happens at lightning speed. That said, users experience zero delays when viewing a page that supports programmatic advertising. All they’ll see is the page with ads relevant to their interests, location, and browsing history.
Why is programmatic ad buying worth my advertising budget?
If you’re looking to advertise online, programmatic ad buying is a smart choice for a few reasons:
PROGRAMMATIC ADVERTISING REACHES YOUR EXACT AUDIENCE
No matter how your company advertises online, whether with or without programmatic advertising, targeting is a massive advantage of digital advertising. You can use targeting options to build ultra-specific audiences that capture your target market.
A few examples of targeting options in online advertising include:
- And more
With programmatic ad buying, you can become even more specific with your targeting.
For example, a dental office may promote its weekend hours with the following targeting settings:
- Day: Saturday and Sunday
- Time: 9 a.m. to 6 p.m.
- User: 25 to 65 years old
- Location: 25 miles from the office
In comparison, a ski resort may use the following targeting:
- Day: Monday through Friday
- Time: 3 p.m. to 8 p.m.
- Weather: Sunny
- Interests: Snowboarding, skiing, snow tubing
- Location: 15 miles from the resort
- Device: Desktop, tablet, and smartphone
This targeting creates a specific audience.
The resort wants to reach people looking for some adventure after work. It also wants to connect with users when it’s prime time for some outdoor fun. The resort knows that people won’t visit if the forecast predicts a storm or dangerous temperatures.
Your company can take advantage of the same targeting options with programmatic advertising.
PROGRAMMATIC ADVERTISING LETS YOU DO MORE WITH YOUR AD BUDGET
With AI, your team can streamline ad management while saving your business money.
That’s because programmatic marketing takes complete advantage of the power and sophistication behind artificial intelligence. Using your team’s targeting guidelines and budget settings, AI can help you reach the most relevant users.
Your business can stop wasting money on views that don’t matter when using programmatic advertising.
Instead, you can get the best return on your investment. Every view now comes from a relevant and interested user. You’re also reaching users at the best time, making it easier for them to act on your call-to-action (CTA).
You can see the cost-effective advantage of programmatic ad buying with Google.
Google adopted programmatic advertising to promote its Google Search App. The company saw its cost-per-thousand impressions (CPM) drop by 30%. Even better, Google’s programmatic digital advertising campaign reached 30% more people in its target audience.
Imagine that kind of impact on your programmatic ad buying campaign.
If your company paid an average CPM of $3 and it dropped by 30%, that would save your business $0.90. Instead of paying an average CPM of $3, you’d pay around $2.10. Those savings could help your company earn more impressions — without increasing your ad spend.
Essentially, programmatic advertising can help your business do more with your ad budget.
PROGRAMMATIC ADVERTISING EXPEDITES AD SETUP AND CAMPAIGN MANAGEMENT
Programmatic advertising saves your company not only money but also time.
When you use programmatic ad buying, you eliminate some time-consuming (but required) processes, like placing bids. You can rely on an advanced AI system to bid and purchase ad space for you in real-time.
Keep in mind, however, that programmatic marketing isn’t 100% automated.
Like any other advertising strategy, it requires routine maintenance. If you want to maximize the impact of your programmatic advertising strategy, then you need to monitor the performance, bids, and results of your ad campaigns.
While you can take care of your campaign management in-house, you can also use programmatic advertising services. These services, like from WebFX, allow your business to automate programmatic advertising completely, as your dedicated agency manages your ads for you.
If you manage your programmatic ads in-house, a few areas that generally require maintenance include:
- Landing pages
- Ad copy
- Ad design
You’ll also want to look at your conversion rates.
If you have low-performing ads, then you want to investigate. A lackluster CTA, slow-loading landing page, or clustered ad design could all cause your ad to underperform. It’s up to your team to discover why.
The benefit of programmatic advertising, however, is that your team has more time to dedicate to improving your ads. Time spent previously on manual ad bidding, for example, can now get directed towards assessing and upgrading your ads.
Why not choose an ad strategy that gives you more time to create better ads?
PROGRAMMATIC ADVERTISING USES MACHINE LEARNING TO YOUR ADVANTAGE
Machine learning, as well as AI, offer your business a brand-new team member.
While some professionals approach AI with hesitation, it’s not a replacement for your expertise. Instead, machine learning and artificial intelligence rely on your skills and experience. They may analyze billions of data points, but they need your knowledge to draw action from that data.
Programmatic advertising leverages machine learning and artificial intelligence in the same way.
Yes, programmatic ad buying automates the bidding and purchasing process, but your company sets your bid and targeting options. Programmatic marketing operates based on your settings versus commandeering the whole process.
That’s why businesses embrace programmatic advertising.
It helps them take advantage of machine learning and artificial intelligence, and your team can do the same. You can use this technology, for example, to optimize your bids to the most cost-effective amount, narrow your targeting to the most profitable audience, and more.
This programmatic ad perk isn’t one your business wants to miss.
PROGRAMMATIC ADVERTISING DELIVERS ACTIONABLE AUDIENCE INSIGHTS
When you use programmatic advertising, audience targeting is one of your most powerful tools. You can create broad audiences to build brand awareness or niche audiences to drive product sales with programmatic ads.
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The best part, however, is that you can improve your audience targeting with programmatic advertising.
Programmatic ads help your business enhance its audience targeting via browser cookies.
The programmatic ad buying process relies on cookies, which share user information like browsing history, to bid on the most relevant users and ad placements. Your company (or your programmatic ad agency) can use that data, which will appear in your advertising analytics, to improve your targeting.
For example, a flower shop may discover that users within 15, versus 35, miles have the best chance of placing an order. The shop can change its location, targeting up to 15 miles using this information. Instead of guessing, the shop knows that users within 15 miles have the best response to their ads.
A real-life example of programmatic advertising’s benefits comes from Kellogg’s.
Using programmatic ad buying, Kellogg’s generated two to three times better targeting. This increase helped Kellogg’s target the people it wanted to reach. Even better, its viewability rates (or the number of impressions) increased by more than 70%.
Your company can use programmatic marketing to achieve the same goals.
Is programmatic advertising a trend or the future of advertising?
While programmatic advertising offers several impressive advantages, many businesses wonder about its long-term value. Every year, you hear about the latest advertising trends. Is programmatic marketing one of them?
Since 2016, programmatic advertising has shown steady growth.
In 2016, for example, spending on programmatic digital advertising reached almost $26 billion. In the years since, companies have continued to increase their programmatic advertising investment. Now, businesses spend over $55 billion on programmatic ads each year.
That steady growth (analysts predict programmatic ad spending will only increase) emphasizes the longevity of this ad strategy. It also demonstrates the value and impact that programmatic ad buying has on the companies that use it.
If programmatic marketing didn’t work, why would businesses continue to invest in it?
How can I use programmatic ad buying effectively?
Are you ready to try programmatic ad buying? Then get prepared with these six steps:
1. DETERMINE YOUR TARGET MARKET
First, you want to research your target market.
This step can help your business create an outline for your audience targeting. Don’t worry about building an in-depth audience profile — you want to focus on the basics, like why people need your products or services or why they choose your company.
When you think about those motivations, you can write some initial ad copy that appeals to your audience. You can also provide your design team with some rough draft ideas for ad creatives, like images or GIFs.
In some cases, your team may also have information on your audience that includes:
- And more
While you can use these targeting options when launching your campaign, avoid creating an ultra-specific audience. Start broad with your targeting, and then refine your audience using campaign data. If you start with a hyper-targeted audience, you could prevent your ads from reaching valuable users.
2. PICK YOUR ADVERTISING GOALS
Next, you want to pick your advertising goals. A few examples include:
- Form submissions
- Phone calls
- Website visits
- And more
Your goal will depend on what you want to accomplish with programmatic advertising.
If you want to drive brand awareness, for instance, you may focus on earning clicks and traffic to your site. In comparison, if you’re looking to increase orders, you may emphasize phone calls, form submissions, or online purchases.
Remember, though, that you can create multiple ad campaigns for different goals.
Maybe, for example, you want to focus on brand awareness and product sales. You can set up two separate campaigns. One dedicated to brand awareness and the other committed to product sales, each with unique targeting, bids, and budgets.
Goals go beyond what you select when setting up a programmatic ad campaign. They also extend to your company’s goals for programmatic advertising.
Yes, you want to drive product orders, but how many orders do you want to earn, and when? These goals contribute to your organization’s short- and long-term aspirations, plus motivate your team to create a stellar campaign.
For these goals, focus on specific, measurable, attainable, realistic, and timely goals, or S.M.A.R.T.
A few examples of some S.M.A.R.T. advertising goals include:
- Generate 25 qualified leads in quarter three
- Achieve an average CPM of $2 after six months
- Earn product orders totaling $5000 every three months
Whenever you create S.M.A.R.T. goals, make sure they’re realistic, but also competitive. You want to motivate your team, like by writing more compelling ad copy or by compiling better ad targeting settings, to achieve your goals.
3. SET YOUR AD BUDGET
Once you outline your advertising goals, you can move onto your ad budget.
Your ad budget or ad spend determines how much your business will invest in programmatic advertising. In most cases, companies will have an annual advertising budget, and then a monthly ad spend.
For example, your business may spend $12,000 a year on advertising with a $2000 monthly ad spend.
If you want to earn the best results from programmatic marketing, it’s essential to research ad spend averages in your industry. That’s because CPMs influence ad spends. If your company doesn’t have a realistic ad spend, it’s difficult to bid competitively for ad space.
While programmatic advertising isn’t pay-to-win, your ad spend will impact your ad campaign’s performance. A small ad budget, for example, may get spent within a few days, which hurts your campaign’s short- and long-term performance.
Overall, you want a realistic budget. That way, you can drive the kind of results your business wants.
4. BUILD YOUR AD CREATIVES
Next, your team can move forward with generating your ad creatives, which include:
- Ad copy
- Ad multimedia, from images to GIFs
Depending on your business, you may collaborate with copywriters and graphic designers. If you don’t feature an in-house copywriter or graphic designer, consider working with a freelancer. You can also partner with agencies that specialize in programmatic advertising, like WebFX.
In most cases, your business will continuously create ads to provide users with a fresh experience. If you’re using programmatic advertising for remarketing, for instance, users will most likely get bored of seeing the same ad.
No matter who creates your programmatic ads, it’s essential these ads:
- Capture your audience’s attention
- Convey your message clearly
- Offer your audience something of value
- Direct your audience with a CTA
Your ads should also coordinate with your landing page (or where users go when they click on your ad). If you get your audience’s attention with a promotion for a clearance but take them to a page for your newest, full-priced items, you can expect them to leave your site.
Create transparent yet captivating ads for your audience.
5. PLACE YOUR BIDS
With your budget, goals, ads, and audience created, your company can build your bids.
In programmatic advertising, your bid serves as the maximum amount your business will pay for a view. When the programmatic ad buying auction launches, the AI system will place your bid. Your company, however, will not necessarily pay your maximum bid.
It’s also essential to remember that a higher bid does not equal an instant win. In online advertising, relevancy, and quality matters. Your business needs to create relevant, helpful, and useful ads if you want them to perform.
If you create low-quality ads, as well as lackluster experiences on your website, don’t expect impressive results. Your ads won’t win auctions, which means they won’t reach your audience, and that means your ads won’t achieve their goals.
For the best results with programmatic ad bidding, start with a higher bid. Like your audience targeting, you can improve your bidding as you gain more user data. If you generally pay a lower amount for views, for instance, you can lower your bid with confidence.
6. ANALYZE YOUR ADS
Finally, your business wants to prioritize campaign maintenance.
Even though machine learning and artificial intelligence algorithms take care of the day-to-day processes, your team needs to handle the overall maintenance of your campaign. These routine check-ups can help your company improve campaign results, as well as its return on investment (ROI).
As a part of your programmatic advertising maintenance, you should look at your:
- Ad creatives, including copy and multimedia
You should look at your campaigns on a weekly and monthly basis.
A brand-new campaign, for instance, should receive weekly check-ins. Looking at these new campaigns every week can help your team spot trends or patterns faster, which can improve your targeting and campaign results sooner.
If your company launches a new campaign but doesn’t check it for a month or more, you risk wasting money. You may continue targeting users on a particular device, for example, even though they offer zero return.
Make the most of your ad spend by taking a proactive approach to monitoring your campaigns.
When you look at your campaigns, look at your audience size.
A small audience will require more time before your team can make an informed decision about your audience targeting. In comparison, a large audience may provide all the data your business needs in a few days.
If campaign management costs too much of your time, you can always invest in programmatic advertising services. These services let your company take advantage of programmatic marketing, even if you don’t have an advertising background or the time to manage a campaign.
Once you take these six steps, you can go forward with launching your programmatic ads.
Launch your first programmatic advertising campaign
Programmatic advertising can provide your business with an immense advantage in your marketplace. Not to mention, it can help your company maximize its advertising budget, save its internal team time, and increase its overall profits.
Starting your first programmatic ad campaign, however, can seem intimidating.
Partnering with an experienced online ad agency, though, can make the experience seamless. It can also help your business amplify programmatic advertising’s benefits. With decades of experience, plus over 200 ad experts, WebFX is a trusted programmatic advertising partner to companies worldwide.