What’s Behind the Buzzword of ‘Programmatic’

What’s Behind the Buzzword of ‘Programmatic’

Photo credit: wwarby via Foter.com / CC BY

Have you ever caught yourself thinking that your Instagram seems to know something about you? It must have overheard your new year resolution to switch to a healthy lifestyle, you think, and now reminds you of that by offering fresh food delivery. Meanwhile on Twitter, another promoted tweet from a sportswear brand pops up. And even when you’re jogging, that motivating Just do it billboard in the local park seems to be speaking to you.

At such a moment you get that anxious feeling of Big Brother watching you. Yet, on the other side, you don’t mind being offered something that is just right for you, because it’s actually saves your time and searching efforts.

Speaking about online searches, before you even click, Google tailors the content based on the data it gathers about you — your name, gender, location, device, and browsing history. Facebook has an algorithm that, by measuring what you click on most, tailors your feed to what it thinks you like. And it’s not only about Facebook and Google. The same is true for any web source you browse online — The Washington Post, or Amazon, or even Netflix.

These days you can hardly find content online that has not been tailored specifically for you. We’re living in the era when algorithms decide what you should see. We’re living in the digital environment that is becoming programmatic.

Love it or hate it, programmatic is everywhere. Even though overused, the buzzword from the advertising industry is still confusing for most people. But this blog post will show that programmatic is no rocket science and can be explained even to your granny.

Programmatic 1.0

Proclaimed by the media ‘the future of digital advertising’, programmatic is an algorithmic technology that automates and optimizes media buying process. It all started from buying and selling banner ads online more than 13 years ago. But by now programmatic has evolved to include desktop and mobile display ads, video, audio, TV, and even out-of-home. See? That overlooking billboard on your jogging route wasn’t an accidental thing, but a carefully measured marketing campaign with a locationally pinned down brand message.

So how does programmatic work? Let’s start with defining the ad space and its key players.

The programmatic ecosystem encompasses the following constituents:

  • Ad inventory — real estate to show ads;
  • Ad networks — groups of several like-minded publishers (media owners);
  • Ad exchanges — a ‘stock exchange’ where publishers and advertisers connect for an auction;
  • Data management platforms (DMPs) — data warehouses that collect multiple user data (cookies, search engine data, on-site data, CRM data, mobile device IDs) and create relevant audience segments;
  • Demand-side platforms (DSPs) — buying platforms (software) that help advertisers automatically purchase ad inventory;
  • Supply-side platforms (SSPs) — selling platforms used by publishers to monetize their ad inventory;
  • Trading desks — layered on top of DSPs, management platforms used by ad agencies.

This network rests on the paradigm that data is the most valuable asset and is governed by the principle of real-time bidding (RTB) — a computer run auction whereby advertisers compete against each other online over the opportunity to serve ads to a specific target audience based on the user cookies.

How does the process go? Publishers generate content — such as news, music, or other information or entertainment — to draw an audience. With money in mind, publishers sell their ad space to advertisers who want to reach that audience. When you visit a webpage, the browser connects to the publisher ad server that, guided by built-in logic, chooses what content to show.

If the ad space isn’t reserved for any specific advertiser via direct deals(previously negotiated with the sales team), the ad server considers what it knows about you to decide what advertisers on the private marketplace (a select number of invited advertisers) might be interested in the opportunity to show you their advertisements.

If there’s no demand either through direct or private deals, the publisher ad server may decide to put the opportunity out on the open ad market. To do so, it connects to a supply-side platform. The SSP, in its turn, checks whether it has seen you before, requests additional information from its data provider (DMP), and then sends the ad request to an ad exchange.

The ad exchange is a place where potential buyers — demand-side platforms (DSPs), ad networks and other exchanges — gather to make precast bids. Just like Wall Street stockbrokers, they call out that, for example, they will pay a dollar per thousand ads displayed to males aged from 18 to 35 years old living in the Pacific Northwest — the segment you fit well into.

If there are no precast bids, the exchange offers its partners to show an ad to the audience like you and asks them to come back with their bids within 10 milliseconds. The buyers respond and the exchange selects a winning bid — the one that is willing to pay the highest price.

Then the winning DSP tells the exchange to retrieve the ad, the exchange sends the request to the SSP, the SSP passes the instructions to the publisher ad server, and finally the latter tells your browser to retrieve the ad from the agency ad server — ta da! The web browser shows you the ad that most appropriately matches your preferences. The entire process happens before the web page loads and takes up about 100 milliseconds, which is three times quicker than you blink!

To put the whole story even shorter, programmatic is about marketing, data, and technology. The technology leverages big data sourced from your web surfing history and gleaned with the information you volunteered on various surveys or websites you’ve subscribed to — all for the sake of serving you an advertisement that is most relevant to you.

So, in case your granny asks about programmatic, tell her it’s a computer technology that displays a message saying that she might as well like The Game of Thrones Cookbook after she has just finished watching the latest episode of the same-name series.

Why programmatic matters

You don’t have to be a marketing guru to understand that with billions of websites it’s extremely tough for advertisers to get the right people’s attention. In the old days of online advertising, buying ads looked pretty much like playing Where’s Wally? game: advertisers couldn’t tell where their customer was and how their brand message performed.

To serve ads on a publisher’s website, advertisers had to buy ad inventory directly, so they had to contact the publisher. This involved negotiating details like ad sizes, time, and rates. What is more, the ad campaigns had to be launched and run across sites one by one, and advertisers couldn’t track performance on a single platform. It was a sluggish and pricey process dependent on human interfacing and entailing a lot of manual operations.

The advent of programmatic has transformed the industry. Today we interact with brands on different devices and via different channels. Programmatic successfully lives up to this shift in customer communication: the technology shows brand messages that are most relevant for the customer’s stage of the journey across screens.

For advertisers, programmatic is a powerful technology that enables enormous audience reach, precise targeting, and one-on-one engagement. Marketers finally get the ability to deliver a customized message to the right person at the right moment. What is more, the technology consolidates user interactions across multiple channels into a single dashboard, enabling a 360-degree view of the target audience. As a result, brands and agencies get a more complete view of the customer behaviors and preferences.

To crown it all, programmatic helps advertisers get more value for each dollar spent, while publishers get real benefits from their audience data. Advantageous for both publishers and brands, programmatic also keeps customers happily engaged with the brands that excite them. To make ad campaigns even more relevant and resonant, advertisers are exploring interactive and innovative formats like audio, video, virtual and augmented reality to engage us. Thus, programmatic turns once irrelevant, obtrusive advertising into compelling art.

Having recognized the prospects programmatic brings to the ad tech industry, forward-thinkers have already invested heavily in the technology. According to Dun & Bradstreet Report, almost 70% of the U.S. B2B marketers plan to increase programmatic ad spend in 2017. And as programmatic is becoming mainstream, the buzz around the term won’t come to rest.