What The Fuss About Programmatic Is All About

Posted on February 04, 2016
By Tanvi Kapoor, Director - Product MarketingDirector - Product Marketing

The origin of the first digital ad can be traced back 21 years to the AT&T banner ad which appeared on HotWired.com. Since then the consumer technology ecosystem has grown leaps and bounds and the number of screens where advertisements can be displayed have grown in tandem. As consumer usage patterns evolve, digital advertising budget accountability has to be split across an even wider range of devices and screens- desktops, laptops, tablets, mobile phones, smart watches!

Traditional advertising worked through a simple formula: direct deals; a series of wining and dining sessions where IOs (Insertion Orders) exchanged hands between the advertiser and the publisher with a promise of a specified advertising spend on the publisher’s digital property. Then came ad networks - the middlemen - facilitating a larger network of publishers and advertisers to work with each other, by managing ad serving online. Two major shifts have taken place since then.

Enter Audiences and Automation

With the evolution of online media, the number of publishers has grown at an astronomical rate - anybody with content worth sharing can build an app or a website, open it up to the world and monetize it through advertisements. Consequently, advertisers have realized that news publications and journals are not the only means of reaching their desired audience segments. With millions of publisher sites now in the fray, focus has shifted from buying ad space on a specific publisher’s property to buying ad space for the desired audience segment. This has sparked the dawn of a new era, not just for advertising but for marketing as a whole.

As the number of publishers and advertisers proliferates, advertising automation has become a necessity and the only solution to an indomitable problem. This is where programmatic advertising comes in.

Programmatic advertising is a technology that allows advertisers to automatically target consumers based on metrics obtained through algorithms. In the past, if Nike wanted to advertise to potential customers who would be interested in buying their products, they might have targeted sports sites, fitness apps, etc. Now, an advertiser can target consumers on any site by using information like age, gender, what sites the consumer has visited in the past and if they have shopped for similar products already. This makes it effortless for Nike to target young adults in the age group of 18-35 yrs, who consume health related content and have fitness apps like runkeeper and engage with them on any site such as a gaming app, music app, e-commerce portal, etc.

The Value of Programmatic Advertising

Programmatic advertising enables enriching of each ad request with user information and optimizes based on the direct response of the consumer, all in an automated fashion on the fly. Once this information is available, the advertiser can buy the impression through multiple methods - Programmatic Direct (deal directly with the publisher) or Real Time Bidding (participate in an auction in real time and compete with other buyers for the impression).

So why are publishers and advertisers willing to put up with this additional complexity? Most brand advertisers prefer programmatic advertising over IOs because it lends a level of transparency that they never had before. Being in a position to know exactly who has seen their ad impression provides advertisers the confidence that their ad is being seen by the right audience. It automates the process of buying impressions with little manual intervention - no bulk buys or commitments of IOs needed. The automated nature of programmatic buying also means advertisers can launch across any device, at any time, and in any place – all in a fraction of a second, thereby enabling significant scale.

All in all, advertisers have embraced programmatic buying with open arms. Publishers comparatively have been a little skeptical about programmatic advertising. By participating in an auction, the ‘premium-ness’ of their inventory (ad space) is considered undermined. Also, losing direct touch with their most important advertisers doesn’t help soothe their nerves. However, as more and more advertisers opt for the programmatic route, publishers are seeing increased RPMs (effective revenue per impression) and revenue, access to newer, high quality advertisers and streamlined ad operations. This has helped in driving a shift to programmatic buying, globally. That being said, publishers with low quality content or brand unsafe content continue to find it difficult to ply their inventory on programmatic channels where the focus is on premium impressions, targeted audience and contextual relevance.