Programmatic advertising has become one of the most commonly-used forms of media buying simply because it is the most efficient method available. Instead of relying on human salespeople to bid and negotiate for inventory, agencies and brands can now utilize programmatic software instead.
"Programmatic is a $15 billion market and it's only getting bigger every year because it allows brands to deliver ads that are relevant." - Joshua Spainer, Google's marketing director for global media
What is Programmatic Advertising?
All ad space bought programmatically go through an auction; either a first-party auction or a second-party auction.
First Price Auction
With the first price auction model, the maximum amount that you bid will be what you pay if you win. If you bid $4, and your competitor bids $3, you win! But you’ll have to pay the $4 you bid. This works best for publishers because this allows them to maximize their revenue.
Second Price Auction
A second price auction is when the second highest bidder determines the final price of the winning impression. For example, if you bid $4 for an auction, and your competitor bids $2.50, the highest you’ll have to pay is $2.50 rather than the highest amount you were willing to pay. This form of ad buying has slowly become the most-preferred method due to its efficient nature. Now you can rely on software to efficiently bid for this inventory on most channels including display, mobile, native or while saving time and money.
Elements of Programmatic Advertising
While programmatic advertising is fairly straightforward in theory, it gets much more complex when you dive deeper.
Real Time Bidding (RTB) is an imperative part of programmatic advertising. RTB can be defined as using real-time auctions to buy and sell online ad impressions within the time it takes for a web page to load. By using real-time bidding, advertisers can serve specific ads to a relevant audience based on the data about this audience, all within the time that a webpage loads.
Supply side platforms (SSP’s) and ad exchanges are most commonly used to monitor these auctions so that each advertiser gets a fair shot at each bid. SSP’s are mostly used by publishers to manage their inventory.
Deeper Insight on DMP and DSP
One thing you’ll notice almost instantly when talking about programmatic advertising or just adtech in general is the overuse of acronyms. Let’s break down the difference between these two and what role they play in the bigger picture of programmatic advertising.
Data Management Platform (DMP)
A DMP is essentially an online storage unit for data. This software obtains data and sorts it out for storage, allowing publishers and advertisers to leverage that information to their advantage. The DMP’s relevance to programmatic advertising is that it can be used to manage cookie IDs and create audience segments, which are then used to serve ads to targeted users. BlueKai, MediaMath, and AppNexus are all names to think of when considering DMP’s.
Demand Side Platform (DSP)
A DSP is software that allows advertisers and agencies to manage their media buying, using one platform. Using data from a DMP, demand side platforms actually do the buying. Some commonly used DSP’s in the industry today are TheTradeDesk, Amazon Advertising Platform, and Google’s Display & Video 360; formerly known as DoubleClick Bid Manager. The difference is that DSPs are used to literally purchase advertising based on information from DMPs, which are meant to store data for analysis.
Metrics of a Successful Programmatic Advertising Campaign
The key performance indicators you use for your programmatic advertising campaign simply comes down to the goals you have set prior to building the campaign shell.
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Win Rate
The win rate is the number of impressions won over the number of impressions bid, in percentage form. This programmatic advertising-exclusive metric is imperative to your campaign, as it indicates either a lack of competition or a high bid on your end.
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Bid Rate
Bid rate, on the other hand, is the highest amount that the advertiser is willing to bid in an auction. This is usually predetermined in the planning stages of a campaign, and can be optimized depending on how the win rate is doing.
With ad spend going into the billions by 2020, programmatic advertising is the ad serving method of here and now, as well as the future that has yet to come, spilling into connected television.
References
https://digiday.com/wp-content/uploads/2017/02/wtf-bible-by-OpenX.pdf
https://www.monetizemore.com/blog/programmatic-advertising-explained/
https://www.marketingweek.com/2017/03/27/programmatic-advertising/
https://www.digilant.com/digilant_university/programmatic-buying-101-digital-marketing-kpis/
https://goodwaygroup.com/blog/first-price-vs-second-price-auction
