What is programmatic advertising?

By IBM Watson Advertising

What is programmatic advertising?

Programmatic advertising is the automated bidding and placement of ads on a given platform. Traditional ad placement involves a long, tedious process of negotiations, bidding, contracts, and requests for proposals. Programmatic, on the other hand, streamlines the process into mere seconds. How? Through the use of machine learning and AI to handle the sale and placement of digital ads.

More specifically, programmatic advertising uses historical traffic data and online targeting methods to put these ads in front of people who are the most likely to want to see them, which helps to improve conversions and ROI for your business.

Benefits of programmatic advertising

There are a number of benefits to using programmatic advertising in your ad campaigns, including:

Relevancy

Programmatic advertising helps ensure that ads placed in front of your target audience are relevant to their interests and preferences through superior targeting capabilities. Fifty-eight percent of advertisers note that the main drivers for their investment in programmatic are the ability to better use data and for the benefit of targeting efficiencies. Gaining access to premium inventory at scale ranked at third place in driving programmatic investments for advertisers, which saw substantial growth from 20% in 2020 to 50% in 2021.[1]

Real-time data and analytics

Advertisers can optimize their campaigns by gaining access to real-time data and reporting how their ads are performing at that moment.

Reach

Programmatic advertising allows users to choose from an abundance of platforms and websites for the placement of your ads. Additionally, you have the option to advertise at scale, enabling users to use their resources more efficiently.

Conversions and ROI        

While a lot of advertising methods focus on clicks, programmatic focuses on conversions. Clicks are certainly valuable regarding expanding reach, but they don’t matter much if they don’t turn into leads or conversions. With programmatic advertising, conversions can increase due to better ad placement.

Additionally, with advertisers reporting the need for greater control of inventory and at a lower cost, it’s not surprising that supply chain transparency ranks as their primary concern, seeing a significant increase over last year (60% in 2020). 

How programmatic advertising works

Programmatic advertising distinguishes itself by automating the bidding and placement of ads. There are several components to this method of advertising, including the publication and advertiser’s side. Below are some key terms to know before getting started with programmatic: 

What is the ad exchange?

An ad exchange is an online marketplace in which advertisers and publishers can bid on advertising space as well as buy and sell digital inventory. It enables advertisers to make the media buying process more efficient and cost effective since they don’t need to negotiate with publishers individually to place their media.

Today’s digital market happens in real-time with bids happening on the back-end while users load the page. This can expedite and simplify what used to be a long and tedious process of negotiating. However, there are some disadvantages to this model including the increased potential for ad fraud or difficulty in tracking which websites ads appear.

What is an ad network?

An ad network offers ad placements from a specific number of websites. It is a technology platform that connects publications to advertisers who want to purchase digital inventory. The ad exchange often features different ad networks in the auction.

What is a DSP?

Demand Side Platform (DSP) is an automated buying platform where advertisers go to purchase digital ad inventory. It allows buyers to manage multiple accounts on one platform.  

What is the difference between an SSP and DSP?

DSP is the advertiser side of the ad exchange. SSP is the publisher side of the exchange.

Types of programmatic advertising

For advertisers, there are a few different types of programmatic advertising to choose from.

Programmatic guarantee

With programmatic guarantee, the advertiser is guaranteed ad impressions on certain websites as well as assured ad space on specific publishing sites.

Real-time bidding (RTB)

Real-time bidding automates auctions for online ad space, enabling advertisers greater control over costs and the channels and platforms where they want to publish.

Private Exchange Buying (PMP)

Privacy Exchange Buying (PMP) is a private auction for ad bidding versus a public marketplace. PMP allows publishers to choose which ads appear on their page and maintain exclusivity.

How to use programmatic advertising

Traditionally, ad placements consisted of the following steps

  1. Advertisers offer bids for impressions
  2. Highest bidder wins the placement
  3. The ad is placed on the chosen website
  4. The user clicks the ad and it converts

On the other hand, programmatic advertising takes these steps and condenses them to work in an instant. Competing bids are calculated by algorithms and analytics in order to determine the most cost-effective bid and placement for your ad.

Examples of programmatic advertising

National coffee brand uses programmatic advertising to serve relevant ads

A national coffee brand came to IBM Watson Advertising with the goal of using the powerful connection between emotion and weather to target customers when their local weather was colder or warmer than usual, and put in front of them relevant ads using weather-triggered advertising.

The national coffee brand leveraged IBM Watson Advertising Weather Targeting to optimize their advertising campaign to be more targeted and relevant based on local weather conditions. As a result, the campaign generated[2]

  • .08% overall CTR
  • +33% above KPI benchmarks

Industries using programmatic

A number of companies spanning industries are realizing the benefits of using programmatic advertising to optimize their campaigns. They include the following.

Pharmaceutical & healthcare

The pharmaceutical and healthcare industry can benefit from programmatic by using it to better target their customers while helping to maintain privacy compliance laws like HIPAA.[3]

Retail

As the retail sector continues to increasingly focus on providing customers a personalized experience, they are quickly finding the value in using data and AI to create optimized campaigns that may deeply resonate with their target audience.

Automotive

The automotive industry is quickly finding the value in leveraging data to optimize their campaigns and garner quick results. Programmatic advertising helps speed up the ad-buying process from end-to-end and gets your campaign in front of people ready to convert. Additionally, since the automotive sales cycle tends to be longer than other industries, programmatic can help keep your brand top of mind. Automotive ads that leverage programmatic campaigns can be an effective way to keep audiences engaged in between car purchases.

Challenges with programmatic

Ad fraud

Programmatic advertising has the potential to drive clicks and impressions that come from a bot rather than a human. This means a portion of your budget is going toward clicks and impressions that may lead to no results.

Brand perception

If not partnering with the right solution, it is possible for your programmatic ads to end up on less desirable or relevant sites. Your consumers don’t know that these ads were placed automatically and poor ad placement can affect your brand perception.

Budget

If your clicks and impressions are being driven by bots rather than a human, there is the potential to waste advertising dollars on behavior that drives no real results. However, Google is increasingly working on ways to detect this fraudulent behavior before it happens.

Getting started with programmatic advertising

Getting started with programmatic advertising is a relatively easy process that includes the following steps:

  1. Identify what your goals are
  2. Determine who your target audience is
  3. Select your DSP
  4. Set up your ad campaign
  5. Optimize your ad campaign using AI and analytics

Programmatic ad types offered through The Weather Channel

The Weather Channel has the following options available for programmatic placement

  • Integrated marquee
  • Integrated daily weather snapshot
  • Integrated forecasts
  • In-banner video
  • Vertical video
  • Video galleries
  • Swipe/gesture
  • Billboards
  • Expandable rich media
  • Dynamic weather
  • Locators

With these options, advertisers have the ability to use dynamic creative to better deliver relevant experiences to customers on any platform, whether it's The Weather Channel digital properties or another aspect of your advertising ecosystem.

Programmatic: The future of advertising

Programmatic can offer many benefits to advertisers, but it is only one component to a robust and effective AI advertising strategy. As we look toward the future of advertising, we can expect a greater use of AI advertising tools. When these tools are combined with your marketing mix, it can help brands better tailor their messaging, place ads on the right platforms and allow you to engage with your consumers more effectively.

Ready to learn more about the benefits of programmatic advertising? Contact us today.

 

1 “Attitudes to Programmatic Advertising Report”, IAB Europe, October 2021

2 The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions.1

3 Please note: Compliance applies to legal regulations (actual laws) not industry standards (although some industry standards are supported by legal regulations).