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The ultimate guide to programmatic advertising in 2022

Programmatic advertising is increasingly becoming more popular with large brands and SMEs alike.

Global programmatic advertising spend has grown from $68.2 billion in 2017 to $155 billion in 2021 and is expected to grow at a similar rate in the next few years. The US spends the most on ad buying whilst China and the UK are catching up quickly.

Digital advertising growth in the last 5 years

In simple terms, programmatic advertising is a method of automatically buying available ad space and ad impressions instead of buying directly from publishers and media owners.

Programmatic ad buying is designed to replace human media buying with an automated method that uses machine learning and AI technology to optimise the process. 

This action takes place in real-time. When an internet user loads a website page, the bidding and buying of that impression is done in milliseconds; the winner of the bid gets to display their ad to the user.

The main benefit of programmatic advertising is that it increases transparency for both the publisher and the advertiser but more on that later. We have compiled the ultimate guide to address all of your programmatic advertising questions. 

  1. How did it all begin?
  2. What is programmatic advertising?
  3. How does programmatic advertising work?
  4. A real life example of programmatic advertising
  5. What are programmatic advertising platforms?
  6. Who uses programmatic advertising?
  7. Types of programmatic advertising
  8. Different types of programmatic buying
    1. Real-time bidding (RTB)
    2. Private marketplace (PMP)
    3. Programmatic direct
  9. What are the main components of programmatic?
    1. What is a DSP?
    2. What is a SSP?
    3. What is an ad exchange?
  10. Why is programmatic so successful?
  11. How to succeed with programmatic advertising
    1. Set your goals
    2. Know your target audience
    3. Human intervention
    4. Watch for ad fraud
  12. The importance of programmatic buying
  13. How to use data for effective programmatic advertising
  14. How to find the right programmatic model
  15. How to define KPIs for programmatic ads
  16. What is header bidding?
  17. What is programmatic creative?
  18. Is the Google Display Network Programmatic?

Programmatic advertising is constantly changing. In a marketing landscape that has changed more in the last decade than ever before, the number of options programmatic advertising adds to digital marketing strategies provides marketers with increased possibilities and endless opportunities.

Navigating your way through the seemingly endless technical jargon that is associated with programmatic advertising can seem like a daunting task, even for those of us who are fairly familiar with the technology.

The use of acronyms such as DSP (Demand side platform), SSP (Supply side platform), DMP (Data management platform) and API (Application programme interface) can make programmatic advertising sound perplexing but don’t be put off, it’s really not that difficult to understand.

In this complete guide to programmatic advertising, we explain, in the simplest form possible, how the entire programmatic ecosystem works. So if you’re curious to learn more about how programmatic advertising works, keep reading.


Fluid Ads - The history of programmatic advertising

1.How did it all begin?

Before the days of programmatic advertising, traditional methods of buying digital advertising space were used.

In the early years of digital marketing, ad placements were bought in the same way magazine ad placements were bought. Traders would negotiate with advertisers to place banner ads on their websites for a specific period of time.

The first ad server surfaced in the mid 90s. Ad servers made it possible for salespeople to sell ads on multiple websites. This opened up new doors for advertisers as they could now start to show ads across multiple websites.

In the beginning, the number of publishers quickly outgrew the number of advertisers. This meant that there were more websites than people wanting to advertise on them which left publishers and media owners with a large quantity of unsold ad inventory.

The solution to this came in the form of ad networks. Ad networks are platforms that combine unsold ad inventory from several publishers and media owners and make it available to advertisers at reduced rates.

Premium inventory was still traded using a manual process, usually on a case by case basis. The manual insertion order process was usually a time consuming method of the ad buying process and the programmatic targeting options were limited as advertisers had no control or way of knowing who saw their ads.

Programmatic puts the ability to measure and manage campaigns back in the hands of advertisers, whilst giving them the capability to make real-time decisions on where and when to display ads.


Fluid Ads - What is programmatic advertising

2. What is programmatic advertising?

Programmatic advertising is defined as the use of automation in the buying and selling of media and can apply to many forms of marketing, from programmatic display advertising to television and radio. To put it simply, programmatic advertising is buying digital ad space automatically; often in real time.

The real time aspect is only truly effective if advertisers know how to use it. Programmatic media buying uses data insights and algorithms to determine which ads to buy, how much to pay for them and when to serve ads to consumers.

There is a common misconception that all programmatic is real-time advertising, which in fact it isn’t. Real-time advertising is a subset of programmatic that utilises programmatic techniques to make immediate purchases using an auction based model.


Fluid Ads - How does programmatic work

3. How does programmatic advertising work?

When someone visits a website that has advertising space configured for programmatic ads, a request is sent to an ad exchange with information on the visitor and the website.

The information is then given to advertisers where a real time auction for the impression takes place.

There are usually several advertisers competing in the auction, and ultimately the ad impression gets sold to the highest bidder, whose ad is then displayed to the visitor when the website loads.

Due to the entire process being automated, the maximum price each advertiser is willing to pay for the impression is already programmed in, so auctions can be completed in milliseconds. 


Fluid Ads - How is programmatic used in real life

4. A real life example of programmatic advertising

A clothes retailer wants to increase online sales. They sign up to a programmatic advertising platform that has the functionality to target people using their location, demographics, interests, behaviours and device. 

The platform then uses real-time data to analyse and identify the best audience for the campaign and automatically buys the advertising space. Ads are personalised and dynamically displayed based on consumer's unique online behaviours and interests.

Intelligent decisions are automatically made, insights are created and performance is optimised for maximum results.


5. What are programmatic advertising platforms?

There are several different types of programmatic platforms, some offering half or fully-managed services whilst others offer technical platforms that allow advertisers to take full control of all of their programmatic activities.

At the foundation of every programmatic advertising platform is a machine learning algorithm that analyses user behaviour and campaign inputs so that real-time optimisations can be made so that consumers that are more likely to convert are identified and targeted.


6. Who uses programmatic advertising?

Traditionally, programmatic campaigns would only be used by media agencies and brands with larger advertising budgets, however, due to an increased availability of programmatic ad tech, companies with limited marketing budgets are using the technology to compete with their larger competitors.

Programmatic advertising is used in a variety of digital advertising channels such as digital display advertising, mobile, video and social media. It is even entering the realms of digital billboard advertising.


7. Types of programmatic advertising

When reading about programmatic ads, you’ve probably encountered the term Real-time bidding (RTB). Real-time bidding is just one type of programmatic advertising.

Static auctions for online advertising space usually involve the purchase of thousands of impressions upfront. Real-time bidding enables advertisers to bid on individual impressions, meaning they can be a lot more focused and targeted to specific audiences.

Apart from RTB, programmatic advertising also has other advanced forms of automated media buying.


8. Different types of programmatic advertising

To fully understand programmatic buying, it is important to familiarise yourself with the associated acronyms. Programmatic buying can be divided up into 3 categories:

Real-time bidding (RTB)

Real time bidding, also known as open auction, is when ad space prices are decided in an auction in real-time. Open auctions are open to advertisers and publishers and are considered to be a cost effective way of buying large audience media.

Private marketplace (PMP)

Private marketplaces are very similar to open auctions, however, they have restrictions on who can access the auctions; often operating on an invite only basis. In some cases, publishers do have an application process which allows advertisers to apply for an invitation or access.

Programmatic direct

Programmatic direct is when a publisher bypasses auctions to sell their ad space on ad exchanges at a fixed cost per thousand impressions (CPM) to advertisers. The ad space is often sold to multiple advertisers across multiple ad exchanges.


9. What are the main components of programmatic?

The programmatic advertising ecosystem has 4 main components; DSP (Demand side platform), SSP (Supply side platform), DMP (Data management platform) and an Ad exchange.

  • What is a DSP?

Brands, digital advertising platforms and digital marketing agencies use a demand side platform (DSP) to decide which impressions to buy and how much they are willing to pay for them. A demand side platform (DSP) is essentially software that allows publishers and media owners to sell mobile, video and display ad impressions to buyers in real-time. This includes ad exchanges, networks and demand side platforms (DSP) which give publishers better control over their CPM’s and inventory.

  • What is a SSP?

Publishers use a supply side platform (SSP) to sell advertising space to brands and marketing agencies. The two platforms are then harmonised in real-time. A supply side platform (SSP) is essentially software that enables cross platform programmatic ad buying.

  • What is an ad exchange?

Ad exchanges are how the SSP feeds ad inventory into ad exchanges. The DSP connects to the ad network to facilitate ad buying, enabling agencies, advertisers, networks, publishers and media owners to buy and sell ad space. Ad space prices are then agreed in the bidding process.

The use of programmatic channels allows advertisers to buy per impression, allowing them to only buy impressions of their target market or particular audience segment. As this process is fully automated, programmatic guarantees efficiencies that cannot be replicated using traditional media buying methods.


10. Why is programmatic so successful?

Programmatic advertising is so successful because it’s a scalable, efficient and targeted way of optimising an ad campaign. It is so popular among advertisers because it allows them to efficiently use time and resources and helps them make data driven decisions by removing the guesswork when ad buying. 

Instead of buying ad space using traditional methods, all advertisers need to do is feed their programmatic solution information about the target audience, campaign and KPI’s and the algorithm will do the majority of the work. 

If you are looking to increase ad spend efficiency and increase ROI, programmatic advertising has the potential to help you prosper.


11. How to succeed with programmatic advertising

To take advantage of the many benefits that programmatic marketing can bring to a business, let’s explore what it takes to run truly successful programmatic advertising campaigns.

Set goals

As with any area of digital marketing, it is important to set goals from the get go. By establishing what exactly it is you hope to achieve from a marketing campaign, you can constantly make adjustments to ensure the campaign stays on track and meets your targets.

Know your target audience

Start with research, and lots of it. Really get to know your target market; where are they? What are their interests? Where do they live? What are the online behaviour patterns? By a thorough examination of the target audience, informed decisions can be made and accurate data can be entered into the programmatic feed.

Human intervention

Just because programmatic advertising uses machines and algorithms to do the majority of heavy lifting doesn’t mean you can leave it alone for weeks on end. Allocating a skilled digital marketer to plan, monitor, control and optimise the ad buying is a very effective way of ensuring maximum efficiency.

Watch for Ad fraud

According to a report by eMarketer, ad fraud costs digital marketers anywhere between $6 billion and $19 billion every year.

So how do you minimise exposure to fraud? Marketers can tend to be too captivated by reach when it comes to programmatic advertising, which can be open to abuse through bot traffic.  Traffic quality is just as important as quantity so if a deal looks too good to be true, it probably is.


12. The importance of programmatic buying

Traditional media buying methods involve hours of manual work which usually come in the form of multiple ad request proposals (RFP), manual mediation, and insertion of orders (IOs) which all contribute to the slowness and inefficiencies of manual media buying methods. Furthermore, ads are purchased in bulk leaving advertisers minimal control over placement and inventory.

One benefit of using programmatic is assured impressions and efficient ad placement. The price of impressions is agreed by the buyer and seller before the impressions go live. If a brand or marketing agency wishes to expand a message to wider audience segments, programmatic allows them to bid for real-time impressions and allows the use of contextual targeting for the best ad placement.

Using demographic and behavioural data which is based on consumer internet consumption habits, advertisers can make data driven decisions on which audience to reach, at what scale, on which day and on which device.

Programmatic has made it capable for advertisers to transition from a single transaction with a publisher to making transactions on an impression by impression basis.

For example, instead of buying one million impressions from a publisher or media owner, advertisers can buy one million impressions divided up among several publishers and media owners, all targeted at specific audience segments.

The ability to personalise and automate the media buying process for digital ad space is a fundamental aspect of programmatic advertising.

Whilst programmatic advertising has many benefits for companies all over the world, there are some instances where traditional media buying methods are not suitable.

There will always be niche brands such as Gucci and Lamborghini who don’t want any risk at all and want to have hand tailored creatives placed in unique positions and can’t rely on algorithms to make these decisions.


13. How to use data for effective programmatic advertising

The first step to creating an effective programmatic strategy is to have a thorough understanding of the behavioural traits of your target market or audience segment. It is really important to understand exactly who they are, what they are interested in, where they live and what they do.

There is vast amounts of data available which can be broken down into 3 tiers:

  1. First party data is the advertisers own data, usually collected from previous transactions, email sign up forms or social media.
  2. Second-party data is data collected by someone other than advertisers.
  3. Third-party data is data readily available data that often comes with a cost.

14. How to find the right programmatic model

The most common way to buy ad space using programmatic is through a media agency using a DSP to run the programmatic activity.

The agency model is the most common in the UK with over 90% of companies adopting this approach, however, a shift is starting to emerge. Advertisers are transitioning from managed buying to running programmatic in-house over concerns about ad fraud and transparency.

Some companies are starting to bring programmatic in-house, however, this may not be an option for many businesses as they would have to create a team that has the necessary knowledge, programmatic technology and resources to effectively manage every aspect of programmatic ads. The lack of people available who truly understand people is one of the most common obstacles for companies who wish to bring programmatic in-house.

In theory, digital marketers could start buying programmatic themselves with a credit card and access to a DSP platform, but there is a lot to consider both in relation to the campaign’s objectives and logistically.

A one-size fits all approach to programmatic advertising isn’t the most effective way to run programmatic as the ability to adapt promptly and control ad spend are the most effective ways to maximise advertising budgets.

Programmatic ad buying frees up companies and agencies so they can focus their time thinking about their consumers, display advertising, creatives and other digital marketing activities.


15. How to define KPIs for programmatic ads

Marketers can track the success of their investment and optimise in real-time thanks to programmatic advertising. It is recommended to let programmatic campaigns run for a week or two before trying to optimise performance in relation to KPI’s. While the main benefit of programmatic advertising is the increased level of control for advertisers, it is important to always be clear about what the desired objectives are and whether the programmatic advertising cost is achieving a satisfactory ROI.


16. What is header bidding?

Header bidding is where a publisher or website media owner places a line of java script or ad tags in the header of a website. When the website loads, the script reaches out to an ad exchange or SSPs to invite bids for the impression. Header bidding allows for instant bidding and is focused on all available ad impressions.


17. What is programmatic creative?

Programmatic creatives is the automated process of creating ads, publishing and optimising the display advertising campaigns for success. It is a term that can be applied to a variety of digital marketing strategies, all of which have the main objective of adding scale, speed, relevance and increased performance to display campaigns.


18. Is the Google Display Network programmatic?

The Google Display Network (GDN) is Google’s own display network, which contains a small proportion of available ad space which is limited to Google’s Ad network. Google ad exchange is one place to buy digital advertising whereas programmatic advertising consists of more than 20 ad exchanges. Other Top Ad exchanges include:

Google AdWords, now known as Google Ads is a platform which allows advertisers to display text ads to internet users.


Conclusion

In this article we covered everything there is to know about programmatic advertising, discussed some pros and cons and explained the role publishers and companies play in it.

Programmatic Advertising is a rising trend and the future looks bright. More and more companies are bringing their programmatic in-house due to concerns over transparency and the desire to have more control. 

Global programmatic spend has increased year on year since 2017 and there are no signs it will slow down anytime soon. 

Accessibility has never been easier, particularly for smaller companies and hopefully this article has given you all the information you need about the subject.

If you’re considering adding a programmatic display advertising to your marketing mix, Fluid Ads is a great place to start.

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