Future of Advertising: Unleashing the Power of Programmatic Advertising for Your Business
Have you ever wondered how some ads seem to know exactly what topics you’re interested in and what you might be in the market for? It isn’t magic, even if it might seem that way. It’s a type of marketing called programmatic advertising, and if you’re a marketer or business owner, you need to know how to put it to work for you.
Programmatic advertising is a smarter way of buying and placing ad space online, using algorithms and machine learning to match the right ads with the right audience. This method can help you reach more customers, measure your ad results better, and make your advertising dollar work harder.
So, if you’re not sure how to harness this essential tool, read on. We’re going to show you how programmatic advertising works, what it does, and how you can get started with more effective advertising today.
Understanding Programmatic Advertising
At its most basic, programmatic advertising simply means using software to purchase digital ad space on platforms like websites, apps, podcasts, and videos. You might also see it referred to as programmatic marketing or programmatic media.
Key Components of Programmatic Advertising
To understand how programmatic advertising works, you need to understand the basic building blocks. Those are:
- Ad inventory – This is the amount of ad space available on a platform, app, or website, which the site owner or publisher sells to advertisers.
- Ad exchange – Programmatic advertising relies on an online marketplace known as an ad exchange that allows advertisers to buy ad inventory directly from publishers in real time.
- Demand-side platform (DSP) – This is the software system that allows advertisers to access the ad exchange on the buyer side. Using the DSP, media buyers bid on ad space and manage their campaigns.
- Supply-side platform (SSP) – This is the other side of the ad exchange that allows publishers and website owners to auction off their ad inventory and manage their ad revenue.
- Data management platform (DMP) – Programmatic advertising works because it quickly and accurately matches ads with appropriate ad spaces. This is accomplished with a data management platform, or DMP. DMPs collect and analyze customer data from many sources, allowing advertisers to target highly specific audience segments.
Programmatic platforms make digital advertising work better for both parties. Publishers sell ad inventory that might otherwise be unused, and advertisers get the best price possible.
How Does Programmatic Advertising Work?
Programmatic advertising uses an auction-based system that empowers advertisers by allowing them to:
- Bid on ad space while staying within a set campaign budget
- Place ads instantly when they have the winning bid
- Only pay per impression so ad dollars go further
Before programmatic advertising, placing digital ads was often a drawn-out process involving marketers and publishers negotiating price, agreeing on terms, and manually inserting the desired ad into the display space. Ad exchanges automate this process so it happens in milliseconds, letting ads appear in real time as users browse sites.
As an advertiser, you’ll set the parameters for your campaign, choosing options like:
- Your maximum spend
- Ad format
- Demographics and interests of your desired audience
- Geographic location
Then, automation takes over. Using machine learning, the programmatic platform analyzes user data to match your ad with the best location possible for the best price within your spending limit.
The Growing Shift to Programmatic Advertising
Programmatic advertising has been exploding over the past decade, and the trend is expected to continue. In 2021, global spending on programmatic advertising had reached a high of $418 billion. That figure is projected to nearly double by 2026, to a new peak of $725 billion worldwide.
What’s behind this dramatic growth? It’s all about the proven effectiveness of programmatic advertising.
The Benefits of Programmatic Advertising
Clearly, programmatic advertising makes the process of buying and selling ad space simpler for both publishers and marketers.
But does it work? Simply put: Absolutely.
Programmatic advertising maximizes the effectiveness of ad spends in several ways:
- Enhanced targeting capabilities – Programmatic advertising uses machine learning to leverage massive amounts of consumer data in seconds, including cookies, device IDs, location, demographics, interests, and behavior. This allows hyper-specific segmenting so you can precisely target niche audiences.
- Real-time optimization – Programmatic platforms use AI to analyze ad performance on the fly to optimize your ad campaigns faster and more efficiently than you ever could with traditional advertising methods. Instead of waiting for data on how your ad performed after the campaign is finished, programmatic ads are tested and adjusted in real time.
- Cost efficiency and ROI – The machine intelligence at work behind the scenes lets advertisers dramatically increase their ROI on every ad campaign. Ad exchanges allow you to pay only for impressions that meet your criteria. Plus, automating the ad buying process frees up your marketing team to put their time into strategy instead of manually choosing ad spaces, placing ads, and checking analytics.
- Access to diverse inventory – Programmatic platforms give you access to a range of ad inventory across a nearly endless array of channels and devices. The ad exchange will connect you with publishers offering different ad formats and locations—display, native, videos, in-app, etc. This lets you easily test different strategies and iterations to find your audience wherever they are.
Programmatic Advertising: The Future of Marketing
Programmatic is already dominating the digital ad market, and that’s not changing anytime soon. In 2021, this type of advertising was projected to account for 86.5% of digital ad spending in the US. And it’s predicted to hold steady in 2024, even as overall ad spending falls.
Why are 9 out of 10 digital ad dollars spent on programmatic advertising? In large part, it’s because programmatic is perfectly aligned with the challenges of the current digital landscape:
- It’s highly personalized – Consumers are bombarded with demands for their time and attention. It’s more challenging than ever to make advertising stand out. Data-driven, personalized marketing that presents consumers with relevant and engaging ads is the only way to cut through the noise.
- It’s cost-effective – In the current economy, many companies are tightening their marketing budgets. This leaves marketers scrambling to stretch ad dollars further than ever. Programmatic advertising solves both problems: Precisely targeted ads that use the power of AI to save time and money.
Potential Advancements in Programmatic Technology
Programmatic marketing is a dynamic and evolving set of tools that constantly adapts to changing market trends, consumer preferences, and technological innovations.
In the near future, expect to see advancements in programmatic advertising related to:
- Tracking without cookies – Consumers are concerned with online privacy, and legislation like the European Union’s General Data Protection Regulation (GDPR) and the California Privacy Act of 2018 have made data collection via cookies more difficult. Major players like Google, Apple, and Firefox are phasing out support for third-party cookies. It’s not the end of collecting user data, but programmatic platforms will have to find new ways to balance data collection with privacy protection.
- Digital out-of-home advertising (DOOH) – Out-of-home ads are digital ads displayed on screens in places like bus stops, kiosks, billboards, grocery stores, taxis, and more. DOOH took a hit during COVID, but it’s recovering quickly. The number of outdoor screens is only going to rise, so programmatic ad buys that include DOOH could get in on the ground floor of a growing market.
- Contextual advertising – It’s a simple idea: Place ads where they make sense in context, and it’s more likely to reach the right consumer. For example, if your banner ad for flea shampoo shows up on a hair care blog, that’s not necessarily a great match. In an article about dog grooming? Much better. Contextual marketing has been somewhat overlooked since advertisers have focused on tracking user behavior. With cookies on the wane, contextual is set for a comeback. Programmatic tools will be able to make contextual ads smarter and more specific than ever before.
We love programmatic advertising here at Liberty Interactive Marketing, get in touch with us today so learn how your business can benefit.