The Beginner’s Guide to Programmatic Advertising and How It Works

Have you heard of programmatic advertising? It’s become an increasingly popular way for business owners to attract customers. A report published by eMarketer, in fact, estimates that 88 percent of all online advertising performed in 2021 will be programmatic. Like with other forms of online advertising, it allows you to target users with digital ads. Programmatic advertising, however, features a unique system that makes it a superior choice in many ways.

What Is Programmatic Advertising?

Also known as open auction advertising, programmatic advertising is a form of online advertising that’s characterized by the use of real-time bidding software. It’s used for both buying and selling ad inventory.

Publishers can use programmatic advertising to sell ad inventory on their websites, whereas advertisers can use it to buy this ad inventory. These transactions are performed automatically by the network’s real-time bidding software.

How Programmatic Advertising Works

Programmatic advertising works by using software to automate the process of buying and selling ad inventory. There are several advertising networks that specialize in programmatic advertising. They offer software-powered platforms that publishers and advertisers can use to buy and sell ad inventory, respectively.

There are two types of programmatic advertising platforms: supply-side platforms (SSPs) and demand-side platforms (DSPs). The former type is intended for publishers who want to sell inventory, whereas the latter is intended for advertisers who want to buy ad inventory. Many programmatic advertising networks offer both SSPs and DSPs. These platforms connect to traditional ad networks, as well as other websites with available ad inventory, to facilitate ad transactions.

Programmatic advertising uses bids to determine which ads are displayed. Advertisers must bid on a given piece of ad inventory. The advertiser with the highest bid will secure the inventory. Programmatic advertising, though, involves real-time bidding. You can raise or lower your maximum bids. The programmatic advertising network will immediately update your bid. If you’re the highest bidder, your ad will be displayed.

Some of the most common programmatic advertising networks include:

• Xandr
• SmartyAds
• MediaMath
• PubMatic
• AdSlot

Benefits of Programmatic Advertising

Programmatic advertising is cost-effective. With its real-time bidding software, you can rest assured knowing that you won’t overpay for ad inventory. The software will automatically adjust your bids so that they just under the next-highest bids. If you bid 50 cents per click and the next-highest bid is 40 cents per click, for example, you’ll typically only pay 41 cents per click.

Other forms of online advertising can prove more costly. If you buy ad inventory directly from a website, you may end up overpaying for it. Publishers can set any price for their ad inventory when selling it directly. Therefore, you may or may not get a good deal on it. Programmatic advertising ensures that you get the best deal possible by using an automated bidding process.

Another benefit of programmatic advertising is protection from ad fraud. According to Statista, over $40 billion worth of ad impressions and clicks annually are fraudulent. Fortunately, networks have solutions in place to filter fraudulent impressions and clicks. They use artificial intelligence (AI) software to identify signs of ad fraud. If an impression or click is flagged as fraudulent, the AI software will filter it, meaning you won’t be charged for it.

Programmatic advertising is easy because it eliminates the need for communications with publishers. In other words, you won’t have to communicate with the publishers from whom you buy ad inventory. There are no back-and-forth emails with programmatic advertising. You can buy ad inventory through the network’s DSP without communicating with publishers.

You’ll have access to a large inventory of ads when using programmatic advertising. According to Google, the Google Ads Display Network reaches over 90 percent of all internet users. With programmatic advertising, you can target users on the Google Ads Display Network as well as other places. Programmatic advertising networks provide access to Google’s massive ad inventory.

The targeting options for programmatic advertising are superior to those of other forms of online advertising. You aren’t limited to targeting users by keyword. Depending on which programmatic advertising network you use, you may be able to target them by age, gender, geographic location, household income, marital status, occupation, device, interest and other criteria.

Programmatic advertising offers real-time analytics. While logged in to the programmatic advertising network, you can see how many times your ads have been viewed or clicked. And if you set up conversion tracking, you can also see their conversion rates. All of this data is processed in real time. By digging into this data, you can further optimize your ads to improve their performance.

How to Get Started With Programmatic Advertising

To get started with this alternative form of online advertising, you’ll need to sign up for an advertiser account at a programmatic advertising network. There’s usually no cost for signing up. Rather, you’ll only be charged for verified impressions or clicks of your ads.

Different programmatic advertising networks require different steps to use. As an advertiser, you’ll usually have to create or upload your ad, set your targeting options and place a bid. You can create text ads, image ads or video ads. Most advertisers prefer image ads or video ads because they drive stronger engagement than text ads. At the same time, there’s usually a larger inventory available for image and video ads.

You’ll typically need to specify a budget when creating a programmatic advertising campaign. A budget is the maximum amount of money you are willing to pay for a campaign during a specific timeframe. If you specify a monthly budget of $5,000, for instance, you won’t be charged more than $5,000 per month. After incurring $5,000 of advertising charges, the network will stop serving your ads until the following month.

Programmatic advertising is taking the online advertising industry by storm. This alternative form of online advertising uses real-time bidding software to automate the process of buying and selling ad inventory. When compared to traditional forms of online advertising, programmatic advertising is more cost-effective, easier to perform, offers access to a larger inventory of ads, provides superior targeting options and more.