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If you have anything to do with the marketing industry you’ve probably been hearing a lot about programmatic advertising and marketing for the past few years. And as technology and tactics improve you’re only going to hear about it even more.
But if you’re anything like me when I started looking into programmatic marketing, you’ve probably found yourself looking at all the promises of faster, more accurate bids, which in turn lead to more business and thought – “O.K.., but what the heck does this really mean and how does it work?”
An Explanation of Programmatic Advertising
Of course, since this whole programmatic thing is based around crazy-smart algorithms and computer thinking way over my head if you try to actually nail down a simple explanation you probably end up finding something like this:
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“Programmatic media buying, marketing and advertising is the algorithmic purchase and sale of advertising space in real time. During this process, software is used to automate the buying, placement, and optimization of media inventory via a bidding system. Automating the process means that it can be done in real time and doesn’t rely on the human touch, manual insertions and manual trading.”
– Stateofdigital.com
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Got it? Maybe it’s just me and the way my mind works, but I always try to break things down to their simplest form. It just seems to help me grasp things a little bit better. So, for the sake of all those in the audience whose eyes glazed over at the very technical and official sounding explanation, let me do my best to break it down to what I consider programmatic to be at its most basic.
A super-smart computer program buys ad space for you in online auctions based on information you provide such as the audience you want to target, overall budget, and the maximum you want to bid for an ad per online auction. That’s programmatic in a nutshell. Simple right?
Programmatic opens up many possibilities and is changing marketing teams’ online approach. But now that we have an understanding (at least a very basic one) of programmatic let’s jump into why you’re here. Let’s take a look at three ways that programmatic marketing is changing the game.
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1. Programmatic Marketing Uses Real-Time Bidding
For every location online that offers ad space, there is a way to purchase that space. This is where all the auction talk comes in. Marketers compete and try to outbid one another to win the right to place their messaging in front of the desired audience. We all know this basic premise and it has operated like this for quite some time.
The reason programmatic is shaking the system up, is that it removes the human element for the most part, from the entire bidding and auction process. Utilizing the information you’ve provided and operating within the parameters you set the programmatic process analyzes, bids, and places ads (if the auction is won) within a fraction of a second. And all of this happens in real-time as a prospect is surfing the web.
The speed of this is the real key. All of the information processed, the back and forth of bidding, and the completed auction all happen almost instantaneously. Something that is just impossible when you inject a human being into the mix. We simply can’t keep up. The ability to take advantage of real-time bidding (RTB) and the friction it removes from bidding for online ad space is a major factor in the rise and popularity of programmatic marketing.
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2. The Rise of Programmatic Marketing Highlights the Need for Efficiency
One thing you may have noticed when I was talking about the auction process is just how much more efficient the process becomes when you remove the human element. And in my opinion this increased efficiency is the secret sauce to all the success we keep hearing about with programmatic marketing.
It has allowed marketers to get more of their messaging in front of the right people at the right time than they could ever hope to if they were unable to harness the power of the algorithmic real-time bidding process.
According to the Magna Global Programmatic Intelligence Report, by the end of 2019 the global spend on programmatic could reach $37 billion, and the global penetration of programmatic is estimated to reach 50%.
That’s a huge amount of new money being poured into programmatic. Most of this surge seems to come down to the efficiency and effectiveness of RTB. One thing, however, that seems to be less talked about is what’s required to make that auction efficiency possible. After all, winning online auctions and serving ads in an instant doesn’t really make much of a difference if they’re not being served to the right people.
This highlights the need for companies to be as focused and targeted as possible when taking part in programmatic. Knowing your audience and where and how to reach them has always been important, but with the speed and frequency of these online auctions it has become crucial.
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3. Programmatic Marketing Makes Data More Important than Ever
Programmatic buying is only as good as the information you feed into it. We often refer to computers and algorithms as “smart”, but the reality is they are simply following a set of rules or parameters that are programmed into them. This means the effectiveness of your programmatic bidding essentially comes down to the guidelines you set and variables you supply.
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There are a number of data points available for you to use with programmatic marketing. Both the publishers themselves as well as the data exchanges used in the programmatic process can provide data that can refine the bidding process. An important note to remember, however, is that the more data points you add, the more the CPM will increase. Meaning, while programmatic can be extremely useful, it can also become more expensive as you become hyper-targeted.
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Even as new advancements shake things up, it only seems to reinforce the need and advantages of something as fundamental as data. In short…everything comes down to data. I hope I’ve managed to shed a little light on the subject and hopefully my efforts to simplify programmatic has helped. But if you take nothing else away from this whole discussion please take this. The data you provide is the fuel that runs the engine of programmatic.
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