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Media Buying 101: What Is Programmatic Buying?

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This is the first article in an exclusive series that explores the complex world of Programmatic Media Buying. If you’d like to suggest a topic, please email us.

An Introduction to Programmatic Buying

I’m sure you hear this word thrown around quite a bit. Programmatic Media Buying – it’s ‘the future of online advertising’ – a means to completely remove all manual processes in digital advertising.

It’s an important buzzword that many people know of and use. But let’s be honest, there’s a lot of confusion surrounding this term and few actually know what it means.

Programmatic In a Nutshell

In short, programmatic media or ad buying is the use of technology to automate and optimize the ad buying process in real-time.

A simplified example of programmatic is the use of ad networks like AdWords, which is powered by algorithms, to serve highly targeted ads at viewers.

But programmatic has evolved to be much more complex than this. Once exclusive to search and display ads, programmatic now includes many more mediums, like video, and can be done across multiple channels (desktop and mobile).

Generally, it is a catch-all term that encompasses the leveraging of big data and technology including ad networks, ad exchanges, trading desks, demand-side platforms (DSPs), supply-side platforms (SSPs), exchange-based buying of ad inventory, real-time bidding (RTB), and ad networks to serve targeted and relevant experiences to consumers across channels. On the back end of things, algorithms filter ad impressions derived from consumer behavioral data, which allows advertisers to define budgets, goals, attribution, and optimize for reduced risk while increasing ROI with ease.

That’s a lot of jargon. Confused? Me too.

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Before we even begin to understand the many intricacies of programmatic media buying, we need to know why it came into demand, and define the many elements that programmatic encompasses.

So let’s break this down, and take it one step at a time.

Conventional Online Advertising

Historically, when an advertiser wanted to serve ads on a publisher they would need to contact the publisher to buy ad inventory directly. This used to involve an insertion order, a formal printed order to run an ad campaign that included information like the website or ad network to receive the order, what ads to run, when to run them, and for how long. Ad sizes, rates, and a myriad of other details would also be included.

Tracking results was a major problem too as data was scattered across sites individually, and you couldn’t analyze all your campaigns on a consolidated platform. It was a manual process entailing a great deal of human interfacing that was often slow and costly. It was particularly if you were trying to execute on hundreds of thousands of orders at a time.

Isn’t Programmatic Just RTB?

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No. Programmatic includes real-time bidding (RTB), but that’s not all. Allie Kline, CMO of AOL Networks has noted that RTB is definitely not the same as programmatic. In an article by AdWeek, Kline stated, “‘I think we do a massive disservice when we define RTB as programmatic—that it’s all bidding and exchanges.’”

She adds, “‘If you only allow it to happen on least valuable inventory it’s not helping the cause. If you think about programmatic as using data, tech and software for getting more for every dollar spent, that really elevates our clients’ thinking.’”

Indeed, while the term Programmatic Media Buying generally refers to the automation of all online advertising as a whole, Programmatic Direct and Programmatic RTB are subsets of the umbrella term.

Programmatic Direct, also known as “programmatic guaranteed” or “programmatic premium”, is an automated buying process of assured ad inventory that isn’t auction based – very much a direct buying process.

Programmatic RTB is auction-based advertising that involves multiple parties including a demand side platform (DSP), publisher, advertiser, and ad exchange. Basically, the DSP automates the online advertising purchase process for advertisers who use DSPs to monitor their campaigns. The publisher offers ad inventory (real estate to show ads). RTB started out as a solution to help publishers sell “remnant inventory” but is now increasingly used for “premium” inventory as well (If you don’t know what these terms mean, don’t worry. Stay tuned for our upcoming Media Buying 101 articles for more information).

Basically, the DSP automates the online advertising purchase process for advertisers who use DSPs to monitor their campaigns. The publisher offers ad inventory (real estate to show ads). RTB started out as a solution to help publishers sell “remnant inventory” but is now increasingly used for “premium” inventory as well (If you don’t know what these terms mean, don’t worry. Stay tuned for our upcoming Media Buying 101 articles for more information).

Finally the ad exchange, which is like the floor of a stock exchange, connects publishers and advertisers to facilitate the auction.

All of this happens in real-time – in the milliseconds just before a web page loads – and a viewer is then served the ad with the winning bid. Kind of amazing, right?

Why Programmatic Matters

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It’s efficient, more transparent, and cost effective. Remember, in the days of old it took advertisers and agencies lots of research to determine which publishers they should work with, and what the perfect space for their ads were. Numerous steps had to occur including negotiations and re-negotiations before any ad was served – a slow and tedious process.

Not to mention the fact that the use of multiple technological solutions produced a great deal of fragmented data which had to be cross-compared and individually monitored.

As Philip Smolin, SVP of Market Solutions at Turn has said, “‘in the digital advertising world today, marketers are faced with an overwhelming level of inventory and audience fragmentation. Each customer interaction happens on a different device, different media channel, and at a different time during the lifecycle of brand engagement. Data is generated throughout.’”

So how do you keep track of all this?

Smolin further explains, “‘Programmatic Buying helps bring order to this fragmentation. It enables marketers to consolidate customer interactions across multiple channels into a single dashboard, and then use that dashboard to develop a single, overarching strategy about how to best engage…with those audiences.’”

Programmatic technology has not only helped to establish a fairer and more transparent marketplace for media buyers as far as pricing models go, but it’s also helped to consolidate your analytical processes. And, by reducing the amount of human labour required in the ad buying process, cost is further reduced.

Is Programmatic Buying The Future of All Digital Advertising?

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Source: www.eMarketer.com

Yes, it is definitely the future of most, but probably not all, digital advertising. According to a survey of 153 marketers by the Association of National Advertisers discussed in an article by AdAge, only about 26% of respondents “said they knew what programmatic buying is and have actually used it.”

There’s plenty of learning left to do among veteran and new advertisers alike when it comes to programmatic.

But programmatic ad spend is forecasted to grow exponentially. According to eMarketer, global display ad spending will reach nearly $22 billion this year and is projected to hit $32.6 billion in 2017 with real-time bidding being a major contributor to growth.

So there you have it. Programmatic buying is and is not (just) RTB, it’s automated, and it’s still confusing, even after all the explanations. What are all the other elements of programmatic, what metrics should you use, and what about fraud concerns? We’ll tell you all about it. Stay tuned to this series as we continue to guide you through the world of Programmatic Media Buying.

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2 thoughts on “Media Buying 101: What Is Programmatic Buying?

  1. Pingback: Media Buying 101: Ad Networks & Ad Exchanges

  2. Pingback: What Is Programmatic Buying? | E-commerce &...

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