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What is Programmatic Advertising? - How Marketers are now targeting users through what they search

Updated: Oct 24, 2023

Back in the day, to purchase a web banner and other digital spaces, one would go through RFPs, human negotiations, and manual insertion orders. Programmatic advertising is the smart automation of the process, where the software will be able to determine the intended customer search and behavior, to match buyer and seller.

Two main types of programmatic advertising

1. Programmatic direct

  • using algorithms to recommend where is best for the advertiser to spend their attention and ad spend for the best ROI.

2. Real Time Bidding Programmatic

  • where a consumer that expresses intent, is then presented to advertisers.

  • Catch the video below by Genius Monkey to get an idea.

So, instead of businesses communicating with Digital Advertising Buying agencies and their teams who match user profiles to those that match your customers and present them to you, the network through smart algorithms gets to sniff your leads out for you and present them directly in an automated fashion.

Matching and pairing up of Advertisers and Publishers
Matching and pairing up of Advertisers and Publishers

If you look at the diagram above, you can see that through an exchange of knowledge of needs, there can be intelligence built through the process to do the matching and pairing up of Advertisers and Publishers.

Traditional means would have Digital Advertising teams propose certain websites and channels based on user profiles they develop and pitch, but Programmatic Advertising is essentially the automation of this process, in a much more efficient way where the advertising processing intelligence hardware and software do the work.

Programmatic advertising is an automated, data-driven method of buying and optimizing digital advertising in real-time. It leverages technology and algorithms to purchase and display ads to a specific audience, at the right time, and in the most cost-effective manner. Here are the key elements of programmatic advertising:

  1. Real-Time Bidding (RTB): RTB is a core component of programmatic advertising. Advertisers bid on individual ad impressions, and the highest bidder's ad is shown to the user in real-time as the webpage loads.

  2. Data-Driven Targeting: Programmatic advertising relies on user data to target the most relevant audience. This data includes demographics, browsing behavior, location, and more. Advertisers can target specific segments of users to increase relevance.

  3. Automation: The process is highly automated, reducing the need for manual ad placement. Algorithms and machine learning are used to make split-second decisions about which ad to show to a user.

  4. Optimization: Programmatic advertising continuously optimizes campaigns. It can adjust bid amounts, ad creatives, and targeting parameters to maximize campaign performance.

  5. Cross-Channel Advertising: It extends beyond display advertising to include various ad formats, such as video, mobile, social media, and even TV advertising. Advertisers can manage all of these through a unified platform.

  6. Cost Efficiency: By targeting the right audience and optimizing bids, programmatic advertising often results in cost savings. Advertisers get more value for their ad spend.

  7. Transparency: Programmatic advertising platforms often provide transparency into where ads are displayed and the performance of individual ad placements. This transparency helps advertisers make informed decisions.

  8. Private Marketplaces (PMPs): PMPs allow advertisers to buy ad inventory in a more controlled and secure environment. Advertisers and publishers can negotiate terms directly and have more control over which ads are displayed on their platforms.

  9. Dynamic Creatives: Programmatic advertising can deliver personalized, dynamically generated ad creatives to individual users based on their preferences, behavior, and demographic information.

  10. Frequency Capping: Advertisers can control how often the same ad is shown to a user, preventing ad fatigue and improving the user experience.

  11. Auction Models: Different auction models, such as the first-price auction and second-price auction, determine how advertisers pay for ad impressions in programmatic advertising.

Programmatic advertising has revolutionized the way digital ads are bought and sold, offering efficiency, targeting precision, and real-time optimization. It's a powerful tool for advertisers to reach their desired audience effectively and maximize their return on investment. However, it also presents challenges related to ad fraud, viewability, and privacy, which need to be managed to ensure the integrity of digital advertising.

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