In 2023, U.S. programmatic digital display ad spending is expected to reach nearly $150 billion, accounting for more than 90 percent of total digital display ad spending. And, as astounding as that figure is, that’s only a part of the picture. As fast-growing channels like connected TV and digital out-of-home are increasingly transacted programmatically, the influence (and complexity) of programmatic advertising will continue to grow.
Programmatic advertising is a vital part of the modern marketing playbook. Here you’ll gain a foundational understanding of programmatic advertising and how you can leverage it to reach and engage your audiences.
Table of Contents
- What is Programmatic Advertising?
- What Does Programmatic Advertising Look Like?
- Why Does Programmatic Advertising Matter?
- How Does Programmatic Advertising Work?
- What Are the Benefits of Programmatic Advertising?
- How Do You Get Started with Programmatic Advertising?
What Is Programmatic Advertising?
Simply put, programmatic advertising is the practice of using technology to automate the buying and selling of ad impressions on media. It uses algorithms to enable advertisers to target segmented audiences using real-time data in ways that simply can’t be accomplished manually, and to do so with accuracy and at scale.
The programmatic ad industry is rife with jargon and acronyms, but from an advertiser’s standpoint, there are just a few basics to know: Brands and agencies use a demand-side platform (DSP) to indicate which impressions they want to buy and how much they want to pay. Publishers and app developers use a supply-side platform (SSP) to deliver their available impressions to brands and agencies. DSPs and SSPs collaborate to automate the buying and selling of digital advertising inventory by integrating with ad exchanges, enabling real-time bidding, and facilitating data sharing for optimization.
There are multiple ways to buy ads programmatically. The most common methods are as follows:
- Open Auction, or Real-Time Bidding (RTB): In open auctions, hundreds of buyers can compete for inventory in real time without any restrictions or pre-negotiated deals.
- Private Marketplace (PMP): These invitation-only marketplaces are more exclusive and feature negotiated minimum prices and non-guaranteed volumes.
- Preferred Deals: These one-to-one deals feature a fixed price and non-guaranteed volumes.
- Guaranteed Deals: These one-to-one deals feature a fixed price and guaranteed volumes.
What Does Programmatic Advertising Look Like?
Programmatic advertising is especially attractive to brands and agencies because of the high degree of customization and data-driven targeting that can go into these media buys. Additionally, programmatic advertising supports a wide array of ad formats, ranging from fairly basic executions to highly dynamic ones.
What types of digital ad formats are there and what do they look like?
Need help visualizing the variety of digital ad formats you can leverage to reach your audience? Below is a breakdown of some of the most popular programmatic ad formats, such as:
Native Ads
Native ads reflect the look and feel of the environment in which they appear. They are meant to fit into its surrounding content, providing a more seamless advertising experience than other formats.
Read our full explainer on native advertisements.
Display Ads
Display ads can be static or animated, and combine imagery, text, and a URL link to drive audiences to landing pages. Display ads come in a variety of sizes, with the most common being 300×250 (Medium Rectangle), 728×90 (Leaderboard), 160×600 (Wide Skyscraper), 300×600 (Half-page ad), 320×50 (mobile leaderboard) and 300×250(medium rectangle).
Video Ads
Video ads typically appear before, after, or during streaming content. However, some might expand the definition of video ads to also include display ads that contain video within them.
Audio Ads
Audio ads are formatted as — you guessed it — audio. These are delivered via streaming platforms, like podcasts or music streaming apps like Spotify, Pandora, or iHeartRadio, for example.
Advanced TV Ads
Advanced TV ads are advertisements that are not watched through a broadcast, cable, or satellite connection. This includes advertisements viewed on connected TVs, over-the-top (OTT) devices, and linear addressable TV. Advanced TV advertising provides sophisticated targeting based on household IP addresses and device types.
Social Ads
Social ads allow advertisers to connect with prospective customers via third-party social networking platforms, in the form of display or video ads. Social Ads are commonly used to drive brand awareness and reach new audiences. Display, video story, and messenger ads are common formats in social media advertising.
Search Ads
Search advertising leverages keywords and phrases to deliver web users advertisements on search engines like Google, Yahoo, and Bing, based on their search queries. Search ads allow advertisers to drive sales by quickly engaging people who are usually in the market for a specific product or service. Common formats for search ads include text, display, video, shopping, local search, amongst others.
Retail Media Ads
These advertisements are typically videos or banner ads within a retail media network that state they are sponsored.
Programmatic advertising in action:
Here are just a few real-world examples of the powerful results programmatic ad buys can deliver across industries:
- Higher Education: A prestigious university tapped into programmatic advertising to drive interest in specific undergraduate and graduate programs. The organization leveraged a combination of data-driven tactics to target its desired audiences and encourage them to fill out a “request for information” form. The resulting programmatic campaign drove more than 47 million impressions, more than 74,000 clicks (a click-through rate well above industry standards), and 108 conversions.
- Enterprise Software: A B2B enterprise software company operating in a category with very little differentiation leveraged programmatic advertising to drive brand awareness and audience engagement. Fueling its campaign with B2B data segments and behavioral data segments, along with its own CRM and search data, the company launched a targeted campaign that achieved an impressive 0.44 percent CTR, exceeding its goal by more than 210 percent.
- Automotive: A top-10 auto brand turned to programmatic advertising to drive traffic to specific landing pages intended to encourage conversions like nearest location finder, learning about offers, and submitting an inquiry for a specific vehicle. By monitoring the programmatic campaign’s real-time results, the brand was able to home in on specific audience segments and implement strategic retargeting that took into account hourly trends. This approach drove more than 6,000 actions on the client’s landing pages and helped to inform the auto brand’s fall savings event campaign.
Why Does Programmatic Advertising Matter?
As the examples above illustrate, programmatic advertising is a great way to drive both awareness and conversion for brands across all industries, both B2C and B2B. Over the decades that programmatic advertising has existed, its technology and tactics have become increasingly more transparent, sophisticated, effective, and measurable.
In 2022, digital advertising accounted for nearly 72 percent of U.S. media ad spend, and eMarketer expects that percentage to grow to 81 percent by 2026. Given the targeted, data-driven capabilities that underpin digital advertising, this isn’t surprising. But that doesn’t mean your life as a marketer is getting simpler.
The complexity of the digital ecosystem, and the ad opportunities within it, continues to grow, with new channels, platforms, and technology emerging all the time. Compared to the traditional advertising world, dominated by a known list of top networks and publications, the online world is a vastly fragmented and constantly changing landscape.
In other words, it’s not humanly impossible for advertisers to keep track of the many digital destinations vying for (and deserving of) their media dollars. But with programmatic advertising, and the tech behind it, you can.
Programmatic advertising is absolutely essential when it comes to meaningfully leveraging digital advertising. If you’re not leveraging the power of programmatic advertising, you can bet your competitors are—and it won’t take long for your brand to see its own share of voice and relevance dwindle.
The importance of programmatic advertising will only continue to grow. Need proof? Consider the following:
- By 2024, U.S. programmatic digital display ad spending will reach $168 billion.
- Programmatic digital video advertising spending in the U.S. will reach $75 billion in 2023, up from $63 billion in 2022.
- Programmatic radio advertising spend in the U.S. crossed the $1 billion mark in 2022.
- Programmatic DOOH ad spending increased by nearly 500 percent between 2019 and 2022.
More and more media is being transacted programmatically every year. If advertisers haven’t embraced this space yet, they’re going to increasingly find themselves left behind, even in channels where traditional media buying was once the norm.
How Does Programmatic Advertising Work?
OK, so what does a programmatic media buy look like? While there is a great deal of nuance behind the technology that powers programmatic advertising, as well as the types of auctions cited earlier, a basic programmatic buy looks like this:
- A person visits a page on a website.
- The owner of that website, through its SSP, puts the ad impressions on that page up for auction.
- Advertisers, through their DSPs, automatically bid on those impressions.
- The highest bidder wins the ad impression.
- The winning advertiser’s ad creative is served to the website visitor.
Once the creative is served, the website visitor sees the ad and potentially clicks and converts. Regardless of their action (or inaction), the result is captured and communicated back to the advertiser.
All of the above steps happen in about a tenth of a second—and this process happens billions upon billions of times per day across the digital ecosystem.
The 4 Components of Programmatic Advertising
We’ve mentioned that the behind-the-scenes technology of programmatic advertising is complicated, and that’s true. But ultimately, there are four components that advertisers need to understand.
Demand-Side Platforms (DSPs)
As mentioned, DSPs are used by media buyers at agencies and brands to manage and purchase digital ad impressions across multiple ad networks and exchanges through one interface. They can target their ads based on a variety of data parameters, including demographics, psychographics, behavior, and contextual relevance. Importantly, advertisers don’t have to worry about picking the right destinations for their campaigns; the DSP does that work for them.
Supply-Side Platforms (SSPs)
On the other side of the transaction, SSPs enable publishers and app developers to offer their available ad impressions to a wide variety of exchanges and DSPs. By opening up their inventory to as many potential buyers as possible, SSPs help publishers maximize their revenue.
Ad Exchanges
An ad exchange is a marketplace for ad impressions that sits in between DSPs and SSPs. It’s essentially a trading floor where the respective platforms go to access the inventory for sale. Advertisers use an ad exchange to buy ad impressions, and publishers make their ad impressions available via exchanges.
Data Management Platforms (DMPs)
DMPs are unifying platforms that are used to collect and organize all of the data generated by and used to power programmatic advertising. They allow publishers and advertisers to analyze data from all available platforms in order to glean insights and segment audiences.
What Are the Benefits of Programmatic Advertising?
Programmatic advertising is an essential tool within the modern marketing playbook—and for multiple reasons. The data-driven automation of digital ad buying unlocks plenty of benefits for advertisers and publishers alike.
Programmatic advertising is built on the following pillars — all of which are designed to help advertisers do their jobs better. With programmatic advertising, advertisers can drive:
Improved ROI
Programmatic advertising’s advanced targeting and measurement capabilities help brands eliminate wasted ad spend. Advertisers can quickly identify their best-performing audiences, tactics, and channels while a campaign is in-flight and can double-down in the areas that drive the highest ROI.
Campaign Optimization based on Real-Time Feedback
Unlike traditional advertising channels, programmatic advertising enables real-time campaign optimization based on performance data and insights while campaigns are in flight, sometimes with the help of predictive AI models.
Greater Scale
With programmatic advertising, brands and agencies can scale their audiences as needed to hit desired reach and conversion goals. One of the key ways that advertisers can grow their audiences for programmatic campaigns is through lookalike modeling, which finds new audiences based on what advertisers know about their existing customers and prospects. This can be done at the start of a campaign or any point during its execution.
Improved Relevance
The granular targeting that’s possible with programmatic advertising, coupled with the ability to deliver personalized creative, lets advertisers deliver campaigns that are actually relevant to their audiences. Advertisers can target their ads based on thousands of data points, including demographics, interests, context, sentiment, behavior, IP address, purchase intent, CRM data, and more.
Transparency
Programmatic platforms provide advertisers with transparency and control over their campaigns. Advertisers can monitor the performance of their ads, track impressions, clicks, conversions, and other metrics in real-time. They can also set budget caps, bid strategies, and targeting parameters, giving them control over their ad spend and campaign outcomes. Additionally, they can block sites or only run across a specific set of sites
Opportunities to Test and Learn
In addition to being able to funnel spend toward the highest-performing audiences, channels, and tactics, programmatic advertising also allows advertisers to test new marketing messaging and creative and see how they perform in real time. These insights can be used not only to help the existing campaign, but can also be put to work in broader messaging initiatives and future campaigns.
Programmatic advertising is not without its challenges, but its benefits far outweigh the potential hurdles. The key is to partner smartly to avoid potential obstacles and move forward confidently.
How Do You Get Started with Programmatic Advertising?
Advertisers looking to get started in programmatic media can choose to handle the function in-house or to work with a programmatic advertising partner. In many cases, marketers find that in-house management of programmatic advertising can quickly drain internal resources, as successful programs demand significant time, dedicated expertise, constant training, and ongoing education. For these reasons, programmatic advertising partners represent a valuable alternative.
How to Choose a Programmatic Advertising Partner
Contrary to how some people speak about the automation of programmatic advertising, successful campaigns are not a “set it and forget it” endeavor. The human touch remains vital to achieving the greatest ROI with programmatic campaigns, which is why bringing in a partner that specializes in the technology and strategies that drive programmatic can be more than worth the cost.
In selecting a partner, look for one that understands the level of nurturing that goes into a strong programmatic campaign and is willing to monitor and optimize results on an ongoing basis while delivering transparent results and insights. Your programmatic advertising partner should be steeped in digital expertise and demonstrate a proactive, agile style of working—and be readily available to answer your questions and provide feedback.
Digilant: A Trusted Programmatic Advertising Partner
At Digilant, we live and breathe programmatic media. We recognize that this dynamic, fast-evolving space requires dedicated resources with experience in monitoring, interpreting, and optimizing campaign performance every step of the way. We’re data experts and technology enthusiasts. We’re passionate about programmatic advertising and get genuinely excited about the opportunity to uncover new audience insights that can be put to use in current and future campaigns. The proof is in our partnerships and perspectives.
Are you ready to unlock the full power of programmatic advertising for your brand? We’re here to help. Let’s talk about what Digilant can do for you.