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Programmatic Advertising Tutorial: A New Wave of Efficient Buying and Selling

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Old practices sometimes get new names, and programmatic advertising is one of them.

This hot buzz word describes a process of automating the buying and selling of ads online.

What makes it so hot now is a vision of the future that takes away any decision making on the part of the marketer and places it directly in the hands of software that does real-time bidding of ad space.

Programmatic advertising growth

Programmatic advertising growth in billions of dollars. Data source: IAB. Graphic © Promise Media

Programmatic ad spending for digital will grow 137 percent in the United States this year and exceed $10 billion, according to research firm Emarketer.com. That total will make up 45 percent of the digital display advertising market in the U.S.

“We expect spending to increase another 47.9% next year and to double this year’s total by 2016, when it will reach $20.41 billion, or 63.0% of US digital display ad spending,” the firm says.

Programmatic Advertising: A Simple View

A
nyone who has bought ads on search engines or social media platforms will have experience with one form of programmatic advertising.

These platforms allow marketers to bid on keywords to sponsor in an auction-based environment. Prices ebb and flow based on supply and demand. Bidding can be done manually or automatically.

For example, Google AdWords includes these “automate” options among others:

  • Change ad group default max CPC
  • Pause ad groups when …
  • Enable ad groups when …
  • Create rule for keywords …
  • Create rule for ads

Using the rules will allow the marketer to control the cost and timing of a campaign based on numerous specifications without having to go into the AdWords software throughout the day or every day to make changes.

That works great for Google’s own Web sites and any publisher that accepts Google AdSense via AdWords. But what if an advertiser wants to buy ads directly from a site that doesn’t run the lower-paying AdSense ads?

For smaller sites, a long-term plan for programmatic advertising may involve a simple series of steps in that direction.

These steps determine the difference between two types of programmatic advertising: programmatic direct and real-time bidding.

Programmatic direct is a set, guaranteed ad buy that automates much of the normal buying process and does not use an auction. Real-time bidding does use an auction and does not provide guaranteed impression levels because bidding fluctuates depending on market conditions.

Smaller sites will find it is much easier to get started with programmatic direct.

Sales and Transaction Automation

Traditional media sales involves numerous time-consuming steps that may or may not result in a contract. When it does, the cost of that sales effort goes into the contract amount — often 30 to 40 percent of the total value.

One basic way to start automating the process is with bypassing sales staff altogether.

A potential advertiser desires to place a campaign on a site. He or she is made aware of a page on the site where that process takes place.

The advertiser logs in, fills out a form about the campaign such as start and stop date, number of impressions, targeting information, etc., and uploads a copy of the graphical or textual ad.

After clicking on submit, the advertiser is redirected to a confirmation page that includes rate information. They are invited to click on submit again to approve the purchase and are redirected to a secure payment page. That page may be on the site or on an ecommerce site such as Paypal.

Once payment has been completed, the publisher receives an email or text-message notification about the campaign, reviews the ad for quality control and approves it.

How the ad is displayed on the site for a small to mid-sized publisher depends on whether they use their content management system to display ads or a third-party system. If they use a third-party system, there will likely be limitations on how the CMS and that system integrate with each other.

Trafficking Automation

The next form of automation lies with trafficking of the ad, meaning the input of campaign details and review of the creative to make sure it complies with the site guidelines.

“But there is no escaping the fact that ads at this time must be reviewed by humans for the sake of quality control.”

Automating the details is currently done with bigger players and somewhat easy to do for the smaller players depending on the systems they are using.

But there is no escaping the fact that ads at this time must be reviewed by humans for the sake of quality control.

No site would want to see a big graphical ad of something entirely inappropriate suddenly show up on the site.

So at best, trafficking can only be partially automated for the foreseeable future.

Real-Time Bidding

A publisher that has evolved to the point of having a sophisticated and vibrant programmatic direct process may decide it is time to add real-time bidding, especially for undersold inventory.

At this time, it is unlikely for small or mid-sized publishers to be able to develop their own capabilities for real-time bidding. They are left with finding outside sources that will integrate into their ad publishing environments — either in the form of directly controlled software or participation in ad exchanges.

The Internet Advertising Bureau has formed the Real-Time Bidding (RTB) Project “to develop a new API specification for companies interested in an open protocol for the automated trading of digital media across a broader range of platforms, devices, and advertising solutions.”

Automated Decision Making

Search engines and social media platforms continue to show leadership in the development of automated sales processes.

They have reached the point where they are able to move at least some decisions from the marketer over to the machine.

Doing so reduces labor and therefore costs. A reduction in costs will reduce the rates at which a publisher can charge an advertiser and provide a competitive advantage on price.

Programmatic advertising is an inevitable trend that uses technology to make media ever more efficient.

Publishers who adopt a mindset of making their own sales processes automatic will ride a trend that will deliver long-term results.

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