What is Programmatic Advertising? Importance and Types

By Hitesh Bhasin 

Programmatic Advertising is when an automated bidding system is used for the real-time automation of buying and selling of ad inventory. It is one of the most popular contemporary methods of running ad campaigns on the web.

Programmatic advertising lets businesses and agencies purchase the ad slots/impressions on publisher sites or apps for their streaming, DOOH (Digital Out of Home), voice, video, TV and online Ads.

In simple words, you can understand programmatic advertising as an advertising technique that lets advertisers place their ads on the sites or applications of the publishers by using AI-powered algorithms and programmatic system that needs zero or next-to-zero human participation.

In this post, we will dive deep into the world of programmatic advertising, and understand what it is and how you can use it for your benefits. So, without any further ado, let us straight jump into this automated bidding system-

Table of Contents

What is Programmatic Advertising?

Advertising is an essential way of marketing. It is a way of sponsored messaging for the product’s better sales or the service offered by a company. Out of the many methods used for advertising, one of them is ‘programmatic advertising’.

Digital advertising has inventories or repositories of advertisements. Earlier, it used to be bought through proposals, tenders, personal negotiations, and quotations.

However, this is the age of an upsurge in technology. Today, everything is done with the help of digital media. Software is used to buy these digital advertisements. There is an automatic bidding system that allows the companies to purchase publisher sites or ad impressions and make use of them for digital marketing. It is a programmatic bidding.

It has facilitated a revolution in online advertising and has opened huge digital markets.

Now you must be wondering why programmatic advertising is so essential when other means of online advertising are already there! Let us understand that as well-

Importance of Programmatic Advertising

In the older days, humans worked more than robots and technology.

However, it has been observed that humans are expensive and unreliable. They have emotional capabilities which might pose as a threat to their practical strengths.

They are more prone to committing mistakes. It can decrease their efficiency and create problems in their productivity.

Here, the solution is programmatic advertising.  – It eliminates human intervention wherever possible.

Humans are replaced with AI-enabled automated tools to a large extent.

It eradicates the possibility of human errors. The software does not fall sick or demand leaves. It just keeps on working unhindered. That is why programmatic advertising has made significant profits.

However, humans are not replaced entirely. They still have quite an important role to play. They can plan strategies and optimize ad campaigns.

It can lead to customization in the plans of advertising and create more focused services. It maximizes the ad campaigns which are not bogged down by the shortcomings of the humans.

Types of Programmatic Advertising

There are four basic types of programmatic advertising. The nature of deals is distinct, and so is its purpose. Also, the type of ad delivery is different in different modes. Here is a list of the four primary types of programmatic advertising-

1. Private Marketplace (PMP)

A private marketplace has a system that is much like the Real-time bidding system. However, there are some small differences.

In a real-time bidding system, there is an open auction that is free for all the advertisers who are interested in buying a sure ad inventory. In a private marketplace, there is closed-door bidding of the ad repository. The collection of the ads is limited to be auctioned only by those who are granted access to it. There can be privileged advertisers or some old clients or some who have shown interest in similar kinds of ads who bid in this auction.

The inventory for an exempt marketplace is premium and is reserved for privileged clients. One advantage of this system is that the advertiser knows on which website the ad is being served.

It is very beneficial in measuring the ROI of the ads with the utmost accuracy. If an ad repository is not sold in a private marketplace setting, it is taken for real-time bidding.

 2. Real-time Bidding (RTB)

In real-time bidding, there is an open auction. The slots for the ads are free to everyone. The slots are predefined, and one gets to choose them from this collection of slots according to their convenience and requirements.

For each slot, bidding is done. The advertisers bid on the slots, and the highest bid gets the slot. The tender is done in terms of its pricing. The one who offers the highest price for a niche is the winner of the auction.

But, there is one small condition in real-time bidding. The state is that the highest bidder needs to pay only $0.01 more than the second-highest bidder. This system is referred to as the second-price auction.

In the same manner, the second-highest bidder needs to pay an amount which is just slightly higher than the price of the third-highest bidder. This system ensures transparency and fair opportunity of bidding for all.

 3. Preferred Deals

This is done before taking the deal to a private marketplace and even before taking it to real-time bidding. These favourite deals are available for the buyers who get a sneak peek into the publisher’s ad repository before buying it.

After that, there can be one-on-one negotiations about the pricing and the options for advertisements offered in the package. Even after the meeting between the publisher and the advertiser, the advertiser is not bound to buy a package. If the advertiser rejects the offer, it goes to the private marketplace.

If it does not find a suitable customer there as well, it is taken for real-time bidding and open auctions. The preferred deals are a way of privileging the customers even before the inventory of ads goes for public auctions. Personal meetings and private negotiations are happening in this kind of programmatic advertising.

4. Programmatic guaranteed

This is the last but the most trusted type of programmatic advertising. It is also referred to as automated guaranteed or programmatic direct. In this type, the advertiser and the publisher directly have meetings about the pricing and other specifications of the ad repository.

Sometimes, the collection of the ads is curetted especially for a specific advertiser. This method is generally adopted by those who have huge budgets for marketing and advertising. This method involves the conduction of meetings in a one-on-one manner. The negotiations are done concerning the pricing and other specifications of the package of the ads.

When the advertiser and the publisher, both agree on the same terms, the deal is finalized. It is an excellent way of buying ad inventories. Here, the advertiser has the power of choosing. He/she can choose the right package according to their needs.

In the case of real-time bidding or private marketplace, there is one package on which all of the advertisers bid. But, here, one can choose the right set of ads for the company.

Process of Programmatic Advertising

Programmatic advertising is a new revolution in the world of advertising. Its process is pretty uncomplicated and straightforward. Here are some essential tips involved in achieving the best programmatic advertising.

1. Know the marketplace

For any person who wants to venture out in advertising, it is more than essential to know the marketplace where you are going to advertise about your product or service. It gives you an insight into the working of the market.

The production is concerned with the requirements of the market. On the other hand, the advertisers are concerned about the psyche of the market. Once they understand that, they can bid for the correct ad repository. Also, this gives them a clearer picture of the conditions prevailing and the market, and they can devise better ways of advertising.

2. Set goals for yourself

Printed advertisements take more time in reaching the audience and even more time in garnering a positive response. However, when it comes to digital advertising, there is an immediate response from the clients.

It boosts the urgency of work. One has to work better and with more efficiency. The advertising should be more focused and sharp. It should hit the target audience correctly and compel them to invest in your product.

For this, you require the perfect inventory of ads that you can get through programmatic advertising.

3. Always keep a human touch

Advertisements these days are designed and structured using the software. That is the essence of programmatic advertising. However, one needs to understand that this does not lessen the importance of humans in the work chain.

We have discussed earlier that humans have lesser efficiency than robots. But, that is not enough to conclude that humans are unimportant. In every process, human touch counts. In advertising, it helps you optimize your ad campaigns and make them focused on the target audience.

The behaviour of the audience can be deciphered through statistical data, but humans can understand their psychology. It helps in managing the people and the services offered to them in a better way.

4. Be appropriate in digital advertising

Programmatic advertising is a way of digital advertising and works primarily on predefined algorithms. It can cause a threat to the appropriateness of the ads. If they appear in the wrong places, it can endanger the reputation of the brand it represents.

To avoid this, you need to make sure that the demand-side blacklist of the ads and websites is maintained and updated from your end. It will help you exclude those websites and not get into unnecessary trouble.

Also, if your product is too sensitive, you can maintain a whitelist. This list will highlight the websites which can take your ad and not cause any threat to your brand. It will lead to targeted advertising, and you can get much better responses using this technique.

5. Beware of frauds

In the online medium of advertising, frauds are not new. There have been numerous frauds in digital marketing as well. Programmatic advertising works on algorithms. Hence, if one manages to find any loophole in these algorithms, it can lead to their malfunction.

It will cause fraud. Such frauds take a toll on the reputation of the brand. Along with that, it can also lead to financial losses. It has been observed using statistics that the visibility of programmatic advertising is about 44%-55%.

The use of bots hampers this. It causes losses in billions. It needs to be taken care of while going for programmatic advertising.

Advantages

Programmatic advertising has many advantages that prove to be beneficial and profitable for companies using it. Some of these advantages are listed below.   

1. Imbibes transparency

In an ad campaign, there needs to be transparency of the statistics and the resources used. Programmatic advertising allows the advertiser to know the exact repository of ads to which they are referring.

It creates more transparent and fairer statistics. One can rely on this transparency to plan out other strategies of advertising.

2. Real-time statistics

In the physical medium of advertising, it is quite challenging to obtain and understand the real statistics. The response of the audience is received late; this creates a breach in planning and understanding of the success of its execution.

However, in programmatic advertising, there are real-time statistics and insights provided to the advertiser. It makes the advertiser plan the ad campaigns better and gains more output.

3. Sharp targeting capabilities

Other advertising media have an audience that is spread out. It makes them take more effort and gain lesser output. On the other hand, if one considers programmatic advertising, there is a focused set of audiences.

It allows the advertiser to plan the advertising strategies accordingly. The company can bid only on those ad repositories which they find fit for their sort of advertising. The delivery of the ads happens in a concentrated manner.

It creates more scope for business with the right clients.

4. Better use of the sanctioned budget

The budget for marketing and advertising is crucial for a company. Many companies invest very hefty amounts in this domain as its importance is unmatched. However, there are times when lame and unrelatable ads ruin the marketing campaigns.

This issue can be solved using programmatic advertising. In this type of advertising, the targets are focused, and the insights are clear. It promises better profits to the company at large. The investment done gets fair returns.

Hence, there is a better use of the budget, which is sanctioned by the higher management of the company.

Most Popular Platforms

With a programmatic advertising platform, you will be able to automate the buying and management of your digital ad campaigns. The process revolves around-

• Media buying
• Ad placement
• Performance tracking
• Campaign Optimization

Some of the top-rated platforms that can help you do all this to move ahead with your programmatic advertising campaigns are-

• SmartyAds Programmatic Advertising Platform
• TubeMogul (A Part of Adobe Advertising Cloud) Programmatic Advertising Software
• fi Programmatic Marketing Platform
• MediaMath’s omnichannel programmatic marketing platform
• PubMatic Programmatic Advertising Platform

Final Thoughts about Programmatic ads while planning for publishers and for consulting

Programmatic advertising is the innovation in the field of marketing and advertising.

It comprises the use of software to buy and sell a repository of ads. The publisher sells these ad inventories to advertisers who are looking for similar ads. They get published on various websites, and this boosts the marketing of a specific product or service.

The software takes care that the ad reaches the right audience and fulfils the requirements of the viewers and the advertisers. Programmatic advertising is truly the future of marketing and advertising.