Don't have a handle on programmatic advertising just yet? It's time to take a crash course. Programmatic, which mechanizes the buying and selling of ads, is growing up fast. And it's not going anywhere.
"We're really talking about simple automation and audience targeting, and those can be applied to every media channel in the world," says Matt Prohaska, CEO and principal of Prohaska Consulting, which specializes in programmatic. "Ultimately, we think programmatic buying and selling is just going to be part of what buyers and sellers do."
A large chunk of ad spending is already being done programmatically. eMarketer predicts programmatic will make up 67% of total digital display ad spending, or $21.55 billion, in 2016. That's up from 2015, when it accounted for 59% of spending, or $15.43 billion, according to the researchers. The figures include programmatic buying for banners, rich media, video, sponsorship, and additional ad units showing on desktops, tablets, mobile, and other internet-connected devices. Programmatic advertising is creeping into more forms of media too, including television and radio.
Delivering Targeted Audiences at Scale
Many people equate programmatic to real-time bidding (RTB) on an open exchange. It's not the sole transactional method for programmatic, but it's a popular one. Publishers invite media buyers to bid for the opportunity to show an ad to a specific visitor who comes to a page. Making bids on behalf of buyers are ad networks or systems called demand-side platforms (DSPs). When someone shows up on a publisher's website, its ad exchange tells a group of bidders that a recognized user has arrived and asks if they want to bid on a particular ad space. The machines make decisions in milliseconds on whether to bid and, if so, how much, based on data about the visitor and the rules set by the client.
DSPs and ad networks consider factors such as, "Do I know anything about where this user has been in the past? Do I know which segments they belong to?" explains Kevin Reilly, SVP of platform services at the data intelligence company Dstillery, which operates a DSP. "All those things go in at a very fine-grain basis on a single impression opportunity to say, ‘At this time, for this user, on this content, how much am I willing to pay for this opportunity?'" The auction winner's ad gets served.
This kind of buy enables folks such as Christopher Penn, VP of marketing technology at the public relations firm SHIFT Communications, to find and reach targets wherever they are in the digital ecosystem. These might be people who read a series of online publications or those in the market for a new car, for instance. His clients' ads may turn up in a variety of properties, including Candy Crush, cnn.com, or in-app. "The software is very good at intelligently saying, ‘We know who these people are, and we want to go bid on them and try to get their attention,'" Penn says.
Sometimes, Penn wants to have ads show up for readers who are in a designated physical location on certain days, such as those at a trade show, and he can do that programmatically too.
Bidding on the open exchange is particularly useful for marketers who want to send mobile ads that specific visitors will see when they are near a client's store or a competitor's location. "To do location-based media at scale, whether it's geofencing or audience targeting based on location, you really do need to do it programmatically in some form," says Adam Meshekow, EVP of strategy and national sales at SITO Mobile, a mobile ad tech company that operates a location-based DSP.
Media buyers often take a mixed approach with campaigns for a client. For example, Brittany Bayer, a digital media strategist at the marketing agency DDCworks, might buy ad space on a local newspaper site to reach people in the Philadelphia designated market area (DMA). She might complement that direct buy with a programmatic element to find local targets who, based on their online behaviors, are likely to go to her client's website and convert.
Programmatic Has Other Flavors
There are three other types of programmatic transactions beyond RTB on open auctions. The Interactive Advertising Bureau (IAB) defines these as automated guaranteed, unreserved fixed rate, and invitation-only auction. The latter two may be offered through what's known as a private marketplace (PMP).
Automated guaranteed, which is also commonly referred to as "programmatic direct," uses automated means to carry out a direct buy. eMarketer predicts programmatic direct is actually growing more quickly than RTB and accounted for 52% of all programmatic spending in 2015.
Unreserved fixed rate, or "preferred deals," exists within an exchange environment but has pre-negotiated, fixed pricing, according to IAB.
Meanwhile, publishers who use an invitation-only auction invite a limited number of advertisers to bid on inventory, often before it hits the open auction.
IAB notes that publishers using programmatic means can offer buyers different levels of transparency about inventory, from fully blinded to fully transparent URLs. However, bidders with low transparency can generally set limits to reduce the chances that an ad will appear on websites that could hurt a brand.
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