The world of internet advertising is quickly approaching its 30th anniversary, and today’s digital marketing landscape ensures it does so in an unsurpassed style. Why? There are now more ad types than ever before, with more customization, more audience targeting fine-tunes, more analytics, and more bid options than ever before to drive them. However, one critical marketing tool unites nearly all of them; in fact, programmatic advertising is the most prolific ad purchasing option utilized in the US today, encompassing 83.5% of all ad spend.
What is programmatic advertising? Why are so many brands choosing to utilize this tactic? Perhaps most importantly, why should you consider programmatic advertising as a part of your digital marketing toolkit?
The answers to these questions are much more meaningful once you’ve gained a bit of insight into what makes programmatic so revolutionary. That, in turn, isn’t apparent without a little history on what paid ads used to be and how far digital advertising has come as we continue the 21st century of pay-per-click.
A Brief History of Paid Ads
Nearly three decades ago, the world’s very first clickable online advertisement—a small banner ad betting internet users that they would someday “click your mouse right here”—was posted atop the homepage of the digital magazine HotWired. It was October of 1994, and while the concept of generating ad revenue on the internet wasn’t new, the modality behind this approach truly was. This AT&T ad was the first in a supremely long line of banner and display ads that would follow on its heels.
Interestingly, the first banner ad occupied space in much the same way as HotWired’s physical counterpart—Wired Magazine—sells its ad space to this day. Advertisers could pay an upfront price for a piece of page real estate and then place their desired ad for a designated time. In this case, AT&T paid a cool $30,000 for HotWired to feature its banner ad for three months, sending users who clicked to a positively primordial landing page designed to highlight AT&T’s early view of the internet.
In short, HotWired was able to sell page space to pay its writers, and AT&T was able to display a curiously worded call to action that was featured prominently and served to provide a bit of creative content after the click. However, it’s critical to keep in mind that this ad appeared for every single one of HotWired’s readers regardless of their persuasion—all day, every day, for 90 days.
We’ve come a long way, friends.
From Static to Programmatic
Make no mistake about it—from the moment the very first banner ad appeared, digital marketers began searching for a way to make them more effective. As a result, throughout the late nineties, digital marketers creating banner ads and other types of digital ads began researching the online habits of key demographics that were most likely to utilize their brands’ products and services. This way, ads could be placed on websites that regularly drew relevant audiences and filled with content specifically designed to appeal to that targeted audience.
At the time, however, ads still operated on a pay-for-placement basis, with relatively little in-campaign tracking involved—in most cases, the ad a marketer paid for was the ad a marketer was forced to stand behind until the placement contract ended. In the early 2000s, with the advent of GoTo and other early pay-per-click models, marketers could track ad performance and bid on each click provided by their most lucrative ad types. By the time Google’s AdWords added the necessary quality and relevance control necessary to keep user experiences positive, the focus had shifted from buying as much ad space and gathering as many views as possible to enhanced targeting of high-quality, relevant ads targeting the audience most likely to become paying customers
By this time, pay-per-click advertising had mostly assumed the format we recognize today—with ad platforms gathering potential ad space from several different publishers into one place and facilitating bids from digital marketers. However, while bids for pay-for-placement and more simplistic pay-per-click ads bought ad space to show to an entire group of viewers on a page thought to be relevant, the advent of real-time bidding allowed more in-the-moment focused targeting. Advertisers could bid for space as it became available, allowing plenty of opportunities to garner clicks and conversions from users as diverse as:
- Users who had previously viewed brand content
- Users visiting websites with relevant content
- Users in a particular demographic or locale
- Users that are on a specific list uploaded by the advertiser
- Users with interests that are identified by the advertiser
What Is Programmatic Advertising?
While real-time bidding marked the first phase of programmatic advertising as we know it today, there was still much work to be done. Traditional real-time bidding forced marketers wanting to buy ad space on a particular website to log on to a computer to complete the bidding process and final transaction and stay vigilant as desirable ad space became available. The result was a complex system that required dedicated attention on a nearly constant basis to generate the best results, without the comprehensive data necessary to calculate the ROI of each ad accurately.
By contrast, true programmatic advertising simplifies the process in several ways—the most important of which is the automation of the buying and selling process. The development of artificial intelligence has enabled digital marketers to utilize an algorithm to purchase ad space across various locations, ensuring that their brand doesn’t miss a single opportunity to bid on the most lucrative ad spaces across the internet. Since programmatic advertising uses analytics effectively, ads can be precision-targeted to appeal to the ideal audience and thoroughly analyzed for efficacy throughout the campaign.
How Does Programmatic Advertising Work?
As mentioned, programmatic advertising allows brands to purchase ad space available across a certain network via a demand-side platform—a type of software or another tool that facilitates ad transactions for the brand. Programmatic ads utilize AI collected on a data management platform (DMP) to conduct extensive evaluations of its users on a number of different criteria, including user demographics, user behavior, cookies, and other data points. Then, it evaluates each of the ad types provided by a brand and kept in its inventory.
The DSP’s publisher or ad seller-facing counterpart—known as a supply-side platform, or SSP—supplies the ad inventory available from each brand and evaluates the bids supplied. Together—powered by information from the DMP, with buying facilitated by the DSP, and supplying the most relevant ad with a winning bid ultimately selected by the SSP—the various working parts of programmatic advertising operate behind the scenes to match the best ad type to each user. In this way, programmatic can serve optimal ads depending on the bids supplied by the DSP and deliver according to the programmatic deal chosen by the brand—usually via real-time bidding or a private marketplace supplied by the ad vendor.
Best of all, the entire process—as experienced by the user—feels completely seamless. Programmatic occurs lightning-quick and in a few simple steps:
- The user visits a website that features ads.
- The above process takes place, in which the DSP and SSP work to review user behavior, find relevant ads, submit a bid, and choose a winner.
- The SSP loads the correct ad on the website within seconds, ready for user consumption.
Why Are Brands Turning to Programmatic Advertising?
Programmatic advertising is dominant. It is set to capture up to 86.5% of the projected $79.75 billion in ad spending expected by the end of 2020. Why are so many marketing departments relying so heavily on programmatic?
A better question may be, “What are the primary advantages of programmatic advertising for the modern digital marketer?” Perhaps even more importantly, how can you take advantage of each? Below are the top seven reasons everyone in the marketing field should consider turning to programmatic:
1. Programmatic Is Trackable and Measurable
Programmatic ads are a far more effective version of the original AT&T banner ad that lived atop HotWired’s homepage for three straight months, and a primary reason is your capability to track how your campaigns are faring as they unfold. You can view results in real-time and ascertain which ads lead to the most clicks and conversions, as well as which channels are the most useful for each ad type. From there, proper analysis of the data returned helps you make better decisions while your campaign is in progress and in the future.
2. Programmatic Offers Better ROI
Programmatic’s potential for mid-campaign optimization allows you to focus your budget on the most effective ads and channels while reducing spending on what’s not working. Better yet, you’ll have a wealth of information regarding the most cost-effective ways to spend your marketing budget. Better decisions, both mid-marketing stream and in the future, promote cost-effectiveness and improved ROI compared to other advertising ventures.
3. Programmatic Advertising Extends Your Reach
What began with a simple banner ad now exists across numerous ad placements, spread across multiple display networks. This extends your brand’s reach to more areas of the internet than ever, increasing the number of targeted users who see your content. In addition, ads can now reach users on many different devices, including mobile devices, desktops, and other key devices within the internet of things.
4. Programmatic Ads Exist in Numerous Formats
Spreading your brand over several different ad formats allows your audience to experience your messaging in numerous, rich ways. Ad formats served by programmatic advertising are diverse, including the following popular types:
- Display ads, placed within the headers, footers, and sidebars of a page
- Video ads, which accounted for as much as $27 million in US ad spend, and can be found in these primary places:
- In-stream, within a video player before, during, or after the desired video
- Out-stream, either as a pop-up or within the page content of a non-video landing page
- In-display, within a search engine results page (SERP) or as a suggested video on YouTube
- Social ads within each of the top platforms, accounting for as much as $102 billion in ad spend in 2020
5. Programmatic Advertising Offers Superior Targeting
We’ve touched on this feature previously, but programmatic advertising allows a level of targeting previously unheard of with the old pay-for-placement display ads. You can select criteria such as user location, demographic, the online content the user has consumed, and more, which allows you to be extremely specific regarding the audience you need your ads to reach. More targeted ads boost the likelihood that you’ll engage your audience enough to promote clicks on your ads.
6. Programmatic Ads Generate Extensive Customer Insight
A crucial benefit of each of the above features of programmatic ads is that together, they result in mountains of data. You’ll learn valuable insights regarding your chosen audiences, including the social media platforms they prefer, which eCommerce pages or other channels they utilize, and more. This user data, particularly related to how likely your audience is to interact with your ad—and go on to convert into paying clients—helps you fine-tune your targeting, ad types, and your in-campaign optimization.
7. Programmatic Diversifies Your Revenue Stream
Perhaps the most beneficial aspect of programmatic advertising is its sheer diversity. With a widened reach across several device types, programmatic DSPs, and ad formats, you can leverage multiple revenue streams and safeguard your investment without inhibiting your opportunity for capitalizing on newly trending innovations. As an added benefit, diversification is relatively simple, as programmatic advertising is typically handled within an all-encompassing DSP or even via a partnership with a digital marketing agency.
Consider Utilizing Programmatic Advertising to Drive Your Ad Revenue
Digital advertising has come an astoundingly long way since the very first banner ad of the mid-1990s. These highly targeted, diversified, high-ROI ads you can optimize to fit your needs and scale as your business grows are a positive addition to any digital marketing strategy. With this potential to drive revenue, it’s not surprising that digital marketing teams worldwide choose to invest in programmatic.
While AI and its associated algorithms have made programmatic advertising simple, many businesses lack the software resources and or in-house team necessary to properly address the strategy. For that reason, hiring an external digital marketing firm is a solid business decision many choose to make to capitalize on the experience, insights, and specialized software offered. If you’d like to join thousands of businesses worldwide in developing highly effective, engaging campaigns that target your best audience and drive revenue, pursuing a programmatic advertising strategy may be just the ticket.
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