Before the advent of programmatic advertising, media buyers and digital advertisers negotiated directly with the website owner for ad placement if they wanted to advertise on a particular website. This was a long and arduous process involving RFPs and negotiations. It simply wasn’t possible to quickly have your ad displayed on a website to target a specific audience.
Much like a billboard, you’d run your ad on a website and hope it resonated with the people who saw it. You couldn’t precisely target the ecosystem in which your audience consumed media.
Many brilliant people in the online advertising industry thought there had to be a better way, so they developed a far more sophisticated system. This is where the story of programmatic advertising begins.
This article explains what programmatic advertising is, why digital marketers use it, and how it looks in real life.
Programmatic Advertising Explained
Programmatic advertising uses software and platforms to buy ad placements in real time. The algorithmic software eliminates the need for advertisers to negotiate directly with website owners. However, you must balance automation and human involvement to optimize success. So don’t rely on the algorithm alone for the best results.
Programmatic platforms assign ad placements using real-time auction bidding while charging advertisers on a CPM basis—every thousand impressions your ad receives. Most programmatic bidding is performed on a CPM basis. However, video advertising uses CPV or Cost Per View rates.
Programmatic advertising exists to simplify showing ads to people who most want to receive them. The process isn’t completely automated, though. You must still create the campaigns, develop the creatives and content, and set up tags and insertion orders. Once that’s done, you can focus entirely on optimizing the campaigns, which is crucial to success for all programmatic advertising.
For programmatic campaigns, you go through what’s called a DSP or Demand Side Platform. The platform lets you manage ad and data exchanges through a single interface. Set detailed parameters for the campaign through granular controls. For example, you can place a CPM bid across all marketplaces and audiences to decide how much you’d want to pay for a specific audience. You can also set a more aggressive bid for a particular marketplace.
Ads are powered by cookie placements and first-party information such as buying behavior. For example, someone who buys shoes online is placed in a highly qualified set compared to someone who just viewed them online. The DSPs sift through the data to determine the best audience and location for your campaign goals.
Benefits of Behavioral Advertising
Since tracking user browsing behavior is a must for behavioral advertising, this strategy works as essentially a highly-intelligent guess as to whether you will buy a product or not. For instance, it looks at traits like the time users spend on certain websites and the number of clicks to guess what subjects, products, and activities they like most. Advertisers then use this information for ad targeting.
Let’s look at an example of a backpack maker placing ads. If the company is looking for potential buyers, it wants ads to follow buyers based on their browsing behavior, such as website visits and term searches. For instance, if the company sells backpacks designed for bicycle riding, it will show ads to users interested in cycling backpacks and cycling gear throughout their online journey, including retargeting with repeat ad exposure days after the initial search.
Behavioral advertising also allows tracking user IP addresses and geolocations for locally relevant advertising. Personalization is possible by following actual user behaviors over extended periods. Unike contextual advertising, behavioral advertising caters to the user, not the website content.
Why Use Programmatic Advertising?
Programmatic advertising is a sophisticated method for advertisers to select targeted environments for their audiences. It’s a transparent and scalable way to deliver specific messages to a particular audience on the web. So, unlike putting your message on a billboard and hoping it works, programmatic guarantees executed with data will make a difference.
Programmatic campaigns are efficient when optimized correctly, using a mix of technology platforms and digital marketers. Algorithms help you determine how to spend your budget given your constraints (e.g., audience and targeting data). Best practices for programmatic advertising include analyzing past campaign performance data to audience demographics, parameters, past KPI, and more. Think of these signals as intelligence for an algorithm to find the right conditions for your advertising request.
You can eliminate the guesswork with programmatic compared to old-fashioned campaigns. Today’s behavioral advertising tactics allow you to feed your programmatic solution campaign, audience, and key performance indicators. Targeting options are incredibly detailed, down to even median household income, ensuring your ads are only displayed to people with an interest and a propensity to buy your product.
Once the campaign has been optimized and begins delivering a favorable return on ad spend (ROAS), you can raise the campaign budget, signaling the platform to optimize your campaign based on the current, optimal factors. What’s also great about programmatic advertising is that smaller and mid-market companies can access the same tools as major organizations, lowering the entry barrier.
Examples of Programmatic Advertising
IHG, or the Intercontinental Hotel Group, which counts many brands among its portfolio, including the Intercontinental and Holiday Inn, used programmatic advertising campaigns to compete with third-party hotel booking sites like Expedia.
Research revealed most people were using third-party booking sites to find the best price. On the other hand, they could be saving money by booking directly with IHG.
Thus, the company leveraged programmatic advertising to show users the benefits they could receive when booking hotels directly. The ads were customized to each user based on their browsing history. For example, if they were searching for hotels in Los Angeles, an ad would be shown to them about an IHG property in Los Angeles.
These ads had a high conversion rate since they provided the viewer with complete transparency about the rate and additional benefits. After clicking on the ad, potential customers learned that booking directly is cheaper and includes more benefits than going with a third-party site.
Kellogg’s used programmatic advertising to drive offline sales using digital ads. Its efforts yielded 2X to 3X improved targeting with viewability rates increasing up to 80%. It maximized the performance of the viewability and frequency KPIs for its campaigns.
Kellogg’s also worked with DoubleClick to launch hyper-targeted campaigns to achieve sustained results. This example highlighted just how helpful programmatic tends to be even when digital ads are being used to increase offline sales.
AirAsia turned to programmatic as it wanted to build customer trust and increase ticket purchases. The campaigns targeted three passengers: those who frequently flew on AirAsia, those who hadn’t flown in a while, and those who avoided flying AirAsia after one of its planes crashed in 2014.
Each group was shown a different ad with unique creativity (visuals and messaging). For example, regular flyers were shown ads with pricing to their most frequent destinations. The airline achieved a 30X ROAS with the campaign and a 17-point lift in ad recall.
How Can Marketers be Data-Driven with Programmatic?
Data-driven marketers don’t need much to set themselves up for success with programmatic advertising. The most crucial element is to have a reporting infrastructure internally, whether it’s through Google Data Studio, Tableau, or a similar platform.
We also recommended setting up a customer data platform or CDP to create a unified view of every user. This will help you to grade your programmatic efforts by seeing which ad a user was exposed to, what publishers they were using, and the time frame in which the user went from first exposure to the execution of the conversion moment.
These insights will help you make informed decisions about your advertising campaigns. For example, if a person saw five of your ads, you can cluster those versions around the user to form a model of frequency. This also ensures you no longer serve users’ ads after they convert. If you didn’t have a CDP, you wouldn’t know if you were unnecessarily serving ads to that user.
Intentional A/B testing is the secret to success for all digital marketing, which holds true for programmatic campaigns as well. Start with your landing page and change one element to test how that changed element performs. With one variable changed and everything else remaining constant, you can continue testing until you have a winner. You can then move to multi-variant testing to try and optimize multiple variants.
How can you experience success with programmatic campaigns? Here’s a tip you can use today.
Load the first-party and third-party data you collected via your marketing lead magnets into the DMPs like DV360 or the Trade Desk. But don’t combine them; they may have different benchmarks.
If you have questions about ways to improve your agency or small business advertising, talk to us about licensing the NetWise identity graph for unprecedented reach in your B2B campaigns.