Programmatic Advertising: What Is Programmatic Advertising?

Programmatic advertising is a type of [digital advertising](https://www.masterclass.com/articles/digital-advertising) that makes use of real-time auctions and artificial intelligence to optimize and streamline the process of buying online ad space. It enables digital marketers to specify a budget, target audience, and ad campaign goals. Then, using a complex ecosystem of algorithms and machine learning, a programmatic platform uses a set of parameters to purchase and publish ads across a wide range of apps and publishers’ websites. For example, a company selling protein shakes may want to increase its number of conversions. They choose to target fitness enthusiasts in Los Angeles. A programmatic ad campaign then uses these parameters to determine the best bids and ad platforms to help increase conversions. Websites that allow digital ads to be published to their site use one or more of these three types of programmatic ad buying. 1. __Real-time bidding (RTB)__: Real-time bidding allows advertisers to compete over advertising space as a user accesses a publisher's site in real time. Within milliseconds, a real-time auction takes place. The highest bidder wins the ad placement. 2. __Private marketplace (PMP)__: PMPs operate similarly to RTBs, except that they offer ad inventory to select advertisers in a private, invite-only setting. PMPs are largely used by large publisher websites that can afford to pay a premium for greater control over who is allowed to advertise on their website. 3. __Programmatic direct__: In some cases, a publisher may choose to bypass the auction process altogether and sell ad inventory to a marketer at a fixed cost per mile (CPM). CPM is a digital marketing model that websites use to charge their advertisers based on how many impressions an ad gets. There are three main types of programmatic advertising platforms. 1. __Demand-side platforms (DSP)__: A demand-side platform is considered ad-tech software. Essentially, it's a tool that allows advertisers to automate ad placements. 2. __Supply-side platforms (SSP)__: Supply-side platforms are pieces of programmatic technology that enable publishers to profit off of ad impressions. They can also help a company improve its digital media revenue. 3. __Ad exchange__: An ad exchange is a digital marketplace where publishers can auction off ad impressions to advertisers. Advertisers can see the impressions in real time and place their bids accordingly. There are five main ad formats available to digital marketers. 1. __Display ads__: Display advertising includes both image and text banner ads. Most websites and search engines support this type of online advertising, making them one of the most powerful programmatic marketing tools. 2. __Video ads__: Video ads can be purchased to play on video streaming websites. They can play before, during, or after the video the user intends to watch. 3. __Audio ads__: Audio ads are recorded narratives. They are commonly used on radio stations, podcasts, and streaming platforms. 4. __Native ads__: Native ads are designed to mirror the native display of the website, social media platform, or app they appear on. Native ads can include sponsored blog posts that mirror the editorial style of the publisher or display ads designed in-house and featured on the advertiser’s own website. 5. __Digital-out-of-home (DOOH)__: Digital advertising displays can be found in many public spaces from airports and bus depots to sports arenas and shopping malls. Digital billboards allow advertisers to use programmatic advertising to bid on ad placement on screens in public spaces. It is difficult to measure the number of impressions these ads receive, but this method does allow for precise retargeting using technology such as geofencing. 6. __Connected TV (CTV)__: TVs and electronic devices that support video streaming are considered connected TVs, or CTV. CTV offers programmatic advertisers the ability to place highly targeted ads on consumer devices. There are several notable benefits of programmatic advertising. 1. __Efficient__: Programmatic advertising streamlines the media buying process by handling the buying process for you. It can take a bit of leg work to get a good advertising strategy up and running, but once the design work is done and parameters are set in place, programmatic campaigns practically run themselves. 2. __Real-time adjustments__: Programmatic advertising allows you to make adjustments to audience targeting in the middle of your campaign. Once a campaign is up and running, you will instantly receive audience data that can help you better understand your key demographics and make adjustments accordingly. 3. __Clear performance metrics__: Due to the transparency of audience data and the ability to make real-time adjustments, programmatic advertising can yield a better ROI. You're less likely to waste money on ad platforms and placements that aren't performing well. 4. __More transparent__: Advertisers are able to see the price of the ad and which platform it's running on. In addition, they're able to see how many impressions, clicks, and conversions their ads receive. Before diving in head-first, consider these potential drawbacks to programmatic advertising. 1. __Fraudulent advertisers__: Since anyone can participate in an ad exchange, there's a high risk of fraudulent advertisers abusing the system. Perpetrators of ad fraud can list numerous websites on an ad exchange and then pay bots to load the web pages in order to receive revenue from ad impressions. However, the transparency of programmatic marketing campaigns does allow users the ability to monitor for this type of behavior and effectively weed it out. 2. __Privacy concerns__: Data management platforms (DMP) use third-party data cookies to track consumer behavior online. This data is useful to programmatic advertisers. However, consumers have legitimate concerns over how this data is collected and used. This backlash has led to policies that make it more difficult for data managers to collect data from cookies. 3. __Complex industry__: Programmatic advertising is not the most accessible marketing strategy. With a long index of technical jargon and acronyms, it can be a confusing world to navigate as a novice marketer. If you're considering integrating programmatic advertising into your business’s [marketing strategy](https://www.masterclass.com/articles/marketing-strategy-guide), consider taking these steps first. 1. __Set advertising goals__. Start by determining what you hope to achieve by running a programmatic marketing campaign. Raising brand awareness, boosting revenue, or acquiring new customers are all worthy goals of exploring. 2. __Make an advertising budget__. Typically, a daily budget is set at the start of a programmatic ad campaign. Once you’ve maxed out your daily ad spend, the campaign will stop running until the next day. 3. __Choose your advertising channels__. Where do you hope to reach your customers? Consider the various channels available to you (display, audio, video, social, etc.) and determine which ad format makes the most sense for your business. 4. __Choose a platform__. There are many ad-tech platforms and DSPs available for use. Each will offer its own unique set of benefits and drawbacks. Do your research to determine which platform offers you the level of control you're looking for. Learn more about advertising and creativity from Jeff Goodby & Rich Silverstein. Break rules, change minds, and create the best work of your life with the [MasterClass Annual Membership](https://www.masterclass.com). Programmatic advertising automates the buying process, potentially helping increase the effectiveness and efficiency of marketing campaigns. Learn how programmatic advertising works and tips on how to use it as part of your ad strategy.