Programmatic Advertising 101: A Beginner’s Guide

The enforcement of the General Data Protection Regulation (GDPR) last month may have caused such a whirlwind shift in Europe as it is a European Union regulation on data protection which practically touches every aspect of data but, marketers in the Asia-Pacific region are on the verge to tap into the potential of programmatic advertising and many are working on new approaches and solutions that would use the GDPR as a reference and precautions. How does the GDPR even relate to programmatic advertising? Have you even heard about programmatic advertising?

Over the years, the processes and methods of carrying out advertisements have evolved. We’ve seen improvements from the traditional advert method of billboards, newspapers, posters, to the use of TV and radio. Then to the digital & internet age we are in today — where ads are on the web and across different devices reaching about 4 billion internet users through estimated 47 billion webpages.

The pursuit of having a more effective process in digital advertising is what gave rise to programmatic advertising.

Programmatic advertising has proved itself to be a smart and intelligent option in digital ads. It has taken over 70% of the whole digital ads spending last year and it’s projected to increase drastically every year.

So, What’s Programmatic Advertising All About?

Simply put, it means automatic advertisement. It’s the automated process of getting an advert placement and optimizing the advert to the target audience via the internet. This avoids any ineffectiveness that might arise if it were done by a human. Does it mean that humans are not involved?

Well, it depends. Humans aren’t involved in the process of buying and selling the ad spaces. However, for determining the target audience and setting bids for ads, humans are the brains behind it. Suffice it to say that it doesn’t totally get rid of humans, but actually help them to further navigate and ease their digital advertising execution.

Ameet Ranadive defined programmatic advertisements with 3 important words — automation, effective targeting and personalized ads.

Automation: the process of buying and selling ad placement which is done by machines. They do the meeting and negotiation.

Effective Targeting: the data and advertisement tags of your target audience, is used to decide the right time and platforms where your audiences are efficiently engaged.

Personalized Ads: based on the data of the audience you have, you can customize your ads to fit just what they want.

In other words, programmatic advertising is all about effectiveness in doing online ads and campaigns. If data and tags are used well, your programmatic media advertisements would have the high possibility of being fool-proof.

How Does Programmatic Advertising Work?

When you click on a link to a webpage, in about 20 milliseconds, six important processes are carried out automatically before an optimized and customized ad shows up on your screen. Before elaborating on the processes, let’s define some key terms used in programmatic advertising.

A publisher is the owner of a particular website who is willing to sell a space for advertisement on his/her website.

An advertiser is a person or company that wants to show his/her product/ service or planning to build his/her brand’s awareness.

A programmatic ad agency is the middle body that helps to organize and optimize your advertisements, they are experts in gathering audience data using artificial intelligence technologies.

Ad exchange refers to the highly automated digital marketplace where ad spaces are bought and sold. They are usually auction based.

An impression is the count of times an ad appears on a website.

An ad inventory refers to the list of advertisement spaces available by a publisher on his/her website.

A Data Management Platform (DMP) manages the data of the audience. The data available is what helps to optimize the advertising to the target audience.

A Demand-Side Platform (DSP) is a software used by the advertiser to automatically purchase display, mobile, video and search ad from publishers. It automatically bids for ad spaces

A Supply-Side Platform (SSP) is a software used by publishers to sell ad spaces and impressions.

With all of these terms in place, programmatic advertising works like this;

An advertiser wants an ad to reach a particular audience, the ad is sent to a programmatic ad agency.

The ad agency uses the DSP to automatically set bids and purchase ad spaces from a publisher. For optimization, the DSP uses a DMP to effectively target a particular audience based on the data of audiences available on the DMP.

Whenever there’s a click on any webpage by a user whose data shows a particular line of interest, the publisher uses a SSP to determine which ad from an advertiser shows up in the ad space based on the auction set by different advertisers.

This is called Real-Time Bidding (RTB) which is just a type of programmatic advertising.

What Are The Types Of Programmatic Advertising?

Asides the one mentioned above, there are majorly two other types. They are:

Direct Programming: due to several fraudulent ad spaces on the ad exchange, many advertisers lose cash. To solve this, a direct method has to be used.

Instead of setting bids on an ad exchange, advertisers or ad agencies relate directly to publishers. This allows transparency and reduces the risk of being defrauded since you know the other party.

Private Auction Sale: this type of programmatic ad is controlled by the publisher. The advertisers that can auction for an ad space is only decided by the publisher.

Why Should You Invest In Programmatic Advertising?

The Boston Consulting Group (BCG) estimated that the total digital display and video ad market in the Asia Pacific will increase from $14.5 billion in 2017 to $19.0 billion in 2020 and that programmatic’s share will rise from 19% to 36% over this period.

Now, let’s look at 3 main reasons why the programmatic advertising will rise:

1. Programmatic advertising is cheaper, this is in comparison to other digital advertising methods. Since you’d only pay for ads made to those who need your service/product. You’d also have greater ROI through this digital ad method see more details