My goal with this blog is to take you from knowing nothing about programmatic to having a good general understanding of it, as well as some of the terminology that goes along with it. So, let’s start with the most obvious question.
What Is Programmatic?
Programmatic marketing is a blanket term that describes ad campaigns that satisfy each of the following:
- The ad space is purchased via real-time bidding (RTB) in an auction
- An automated system places the bids using data to make bidding decisions geared towards ensuring that your ad is showing up for the right people
There is no specific ad format in programmatic. It could be an online video or image, a native ad on a news site, or a television commercial. Even print ads have begun to be sold in programmatic exchanges. It’s all about how the ad is served, not what type of ad is served.
To fully understand, we first have to look at real-time bidding (RTB). RTB is nothing new. Think about Google Search ads. Whenever someone searches “spine surgeon,” for example, the ad space at the top of the Google Search page goes to auction, all in real time. Depending on who is targeting that keyword (spine surgeon), who has the highest bid, and a number of factors that I’ve recently discussed, an ad is then served. Now, while this auction is in real time, for the most part, the bids are pretty static. An advertiser already decided a while ago how much they wanted to bid for “spine surgeon.” Basically, Google is the auctioneer, who determines the highest bid. Although the auction is happening in real time, the bidding is not. NOTE: This is an oversimplification for educational purposes; there’s more advanced bidding techniques that you can employ for Google Search ads that truly do involve RTB.
RTB takes this to the next level by actually changing your bids for advertising space based on various data. Let’s again look at an example, but this time, instead of a Google Search ad, let’s look at a programmatic display ad. Someone browsing the Internet begins to load a page that has ad space on it. In a matter of milliseconds, all sorts of data about that user is passed to advertisers: where he/she is, what device he/she is on, what website is he/she on, what his/her interests are, what his/her purchasing patterns are, even down to what the weather is like where he/she is. Based on all of this data, the advertiser’s bid is adjusted. If this users bid is the winning bid, his/her advertisement is placed. Keep in mind, all of this has happened during the time in which the web page is loaded.
The Anatomy of Programmatic
To better understand how it all works, let’s follow an ad from start to finish. Brace yourself, we are going to have to learn some vocabulary for this:
- It all starts with the publisher. The publisher is whoever actually shows the ad (e.g., a website with an ad banner at the top. This ad banner is one type of inventory. Ad space = Inventory)
- Publishers make their inventory available on ad exchanges by putting the inventory on a supply side platform (SSP)
- Advertisers are then able to purchase this inventory through a demand side platform (DSP). The ad exchange is where the SSP and DSP intersect and where the actual transactions take place
Where does data fit into this picture? Here comes a little more vocabulary:
- 1st party data – This is any data that an advertiser already possesses. Think about how Amazon recommends products for you. They capture data about your purchasing, your browsing behavior, the keywords that you search on their site, etc. This is their first party data and they use it to make these tailored recommendations
- 2nd party data – This is simply someone else’s first party data. For example, a company like Pampers might try to purchase data from a blog for expectant mothers so that it can market to them
- 3rd party data – There are companies known as data aggregators or data management platforms (DMPs). As you might have guessed, these companies aggregate massive amounts of data about people browsing the Internet. They make this data available for purchase to advertisers. Sticking with our baby diapers example, if you are trying to sell baby diapers, you can use lists of expectant mothers from a DMP
Advertisers using DSPs can add first- and second-party data to their DSP, or they can purchase data from a DMP, usually right through the DSP. This way, advertisers can use the data right within their DSP to drive bidding decisions.
As you can imagine, the applications for this sort of technology are almost limitless, to the point of almost hurting your brain. But, really, all it boils down to is one main point, and that is optimization. The goal of any marketing campaign is to accomplish your objective at the lowest possible cost. Programmatic is a breakthrough technology when you consider how many more ways you can optimize your campaigns.
Programmatic really lowers the barrier of entry for businesses looking to get into different mediums of advertising. Because you can be so surgical in your precision, you no longer have to take a shotgun approach with your ads. Instead of spending large budgets to put your ads in front of massive audiences hoping that there are a few people within that audience that could benefit from your product or service, you can use programmatic to target just those few people and get your ads in front of them.