What is Programmatic Advertising and How Does it Work?

The digital marketing landscape is evolving rapidly, with automation and artificial intelligence (AI) revolutionizing how businesses engage with customers. As companies place a larger focus on efficiency and personalization, they should incorporate programmatic advertising into the marketing mix. 

This article will answer “What is programmatic advertising” and help you understand its use case across different businesses.

Programmatic advertising is an advanced and data-driven approach to digital advertising. It relies on automated technology and algorithms to make real-time decisions. These algorithms consider the criteria defined by advertisers and publishers in addition to customer behaviors.

One of the biggest benefits of programmatic advertising is that it lets you improve your audience targeting. It optimizes ad placement based on user data, behavior, and demographics, maximizing the chances of engaging the right audience at the right moment.

Programmatic advertising fits across the marketing funnel at different stages, serving varying roles. At the top of the funnel, it helps raise awareness by reaching a wide audience. In the middle, it nurtures and converts leads with personalized messaging. Finally, at the bottom, it aids in retaining customers and building brand loyalty. Further along in the article, we will explore how all this is accomplished.

In the world of paid media, programmatic advertising’s appeal lies in its efficiency and effectiveness, making it a compelling choice for advertisers seeking optimal results. 

As a result, programmatic advertising has become a staple in the digital advertising space, with an estimated $148.83 billion allocated to programmatic digital display ad spending in the US in 2023. 

Below, we explore how programmatic advertising works and how it can help your business.

How Programmatic Advertising Works

Programmatic advertising streamlines the journey from ad space buying to ad delivery. Before we explain how programmatic advertising works, here are a few important terms to understand:

Demand Side Platform (DSP): DSPs are used by advertisers and agencies to purchase and manage digital ad inventory across multiple ad exchanges and publishers. 

Supply Side Platforms (SSPs): SSPs come into play on the publisher’s side. These platforms enable digital publishers to sell their online ad space in real-time auctions. 

Real-Time Bidding (RTB): At the heart of programmatic advertising is RTB. When a user visits a page with ad space, there is an instantaneous auction. Advertisers bid for the ad space, and the ad of the highest bidder is instantly displayed to the user. 

The flexibility of RTB enables advertisers to make adjustments to their bids, budgets and targeting parameters, optimizing campaign performance on the fly. Its transparency, cost-effectiveness, and scalability make RTB valuable for delivering relevant and engaging ads.

Data Management Platforms (DMPs): DMPs collect, analyze, and manage audience data. They provide valuable insights to advertisers, helping them craft data-driven strategies for precise audience targeting and campaign optimization.

Ad Delivery: Once the auction is won, the ad is delivered in real-time, appearing on the user’s screen while they are actively engaged with the content.

Ad Exchanges: An ad exchange is a digital marketplace that facilitates the buying and selling of ad inventory in real-time auctions. It connects advertisers with publishers, enabling them to buy and sell ad impressions. 

Now that we know the meaning of relevant phrases let us look at how programmatic advertising works. When a user visits a website or app with available ad space, the publisher’s SSP quickly identifies the available ad spots and shares the information with the Ad Exchange. The SSP sets minimum prices for each ad spot to ensure the publisher gets fair value for their space. Then, through real-time bidding, DSPs enable advertisers to use algorithms to place competitive bids for these ad spots. This automated process ensures quick decision-making and helps advertisers effectively target their ads to potential customers.

Programmatic advertising differs from conventional methods by automating the ad-buying process through real-time auctions and data-driven decision-making. This can help you to target precisely and optimize your campaign. In contrast, conventional methods often involve manual negotiations and fixed ad placements, lacking real-time precision and audience insights.

How Programmatic Advertising Can Help Your Business

Programmatic advertising allows you to show a highly relevant sponsored ad to a potential customer who is browsing for your product.

That’s the magic of programmatic advertising. It targets with precision and agility. 

Your business can leverage different aspects of programmatic advertising:

• Through automation in programmatic advertising, you can be in the right place at the right time. Automation allows algorithms to connect you to the most relevant audience and display your ads in real-time auctions, streamlining buying and selling ad space processes. 
• Real-time analytics in programmatic advertising works by continuously collecting and processing data about user behavior, geography, preferences, and ad performance as it is happening. You gain valuable real-time insights into ad performance and audience engagement, enabling you to adjust your advertising strategy on the go. 
• Scalability is another advantage, as programmatic advertising and automation can adapt to campaigns of any size. A local bakery can target a specific neighborhood with promotions during holiday seasons, while a multinational retailer can run global campaigns across multiple platforms. 
• The targeting aspect of programmatic advertising is versatile and efficient.
  • Behavioral targeting harnesses user data to understand interests and preferences. So, for example, if you run a fitness gear business, behavioral targeting allows you to display your products to users who frequently visit health and fitness websites. 
  • Persona targeting crafts ads tailored to specific customer segments, like a luxury watch brand showing elegant timepieces to high-income professionals. 
  • Geofencing narrows targeting to specific locations so that a restaurant can target an audience within a mile’s distance with an ad about its signature dish. 
  • Lastly, contextual targeting matches ads to relevant content. For example, a webpage with a blog about housing loans can display ads from real estate agents about available properties in the neighborhood. 

Challenges In Programmatic Advertising and How Businesses Can Overcome Them

While programmatic advertising has multiple benefits, there are a few challenges that can be overcome with innovation and a responsible approach. 

• Ad fraud remains a concern, where bots and fake impressions can skew performance metrics. Implementing robust verification tools and partnering with reputable ad exchanges can combat fraud. 
• Privacy concerns arise from data collection practices, necessitating transparent privacy policies and user consent mechanisms. Many states are already enforcing GDPR-inspired statutes in 2023 in this regard. 
• Data management issues include data quality and integration complexities. Employing data analytics tools and investing in data management platforms can streamline data processes, ensuring accurate and actionable insights.

For a business, it is crucial to maintain privacy and integrity so that your potential customers get a best-in-class purchase experience while your business can get maximum ROI.

Globe Runner- Your Trusted Partner for Programmatic Advertising

At Globe Runner, we run paid media and programmatic advertising, ensuring each ad campaign drives results. Our expert team generates new leads, reduces the cost per lead, and boosts your return on ad spend, maximizing the value of your advertising efforts.

Benefit from our tailored services encompassing paid searches, social media ads, remarketing, display, and conversion rate optimization. Our collaborative approach ensures a customizable paid media plan that delivers exceptional results. Book a call with us to learn more about a rewarding advertising experience.