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Paid Media 20 min read

A Marketer's Guide to Programmatic Advertising

Sarah Edwards photo

Written by Sarah Edwards

Content Writer @ Galactic Fed

Rachel Meyer photo

Expert reviewed by Rachel Meyer

Associate VP of Client Success @ Galactic Fed

Published 23 Aug 2023

In recent years, digital advertising has grown into a $129 billion industry. This development is exciting news for businesses that will get to take advantage of the increased options, lower costs, and greater flexibility that online marketing methods like programmatic advertising can bring.

Digital advertising can be highly beneficial for business owners looking to widen their reach. However, many marketers find themselves stumped when it comes to choosing which platforms to advertise on. With more options available than ever, it can easily become overwhelming to figure out what might work best for you. Fortunately, programmatic advertising can help.

This guide will define programmatic advertising, help you understand how it works, and tell you everything you need to know to get your first campaign up and running. You’ll learn how this type of advertising can benefit your business, how to avoid the pitfalls of programmatic campaigns, and best practices that will help you achieve the maximum return on your investment.

What Is Programmatic Advertising?

A person on Times Square at night looking at the billboards

Programmatic advertising involves using automation to buy and sell different forms of digital media. The term “programmatic” doesn’t refer to the type of ad you buy or sell but to the process you use to do it. 

With programmatic advertising, you simply plug in information about your target audience, budget, campaign goals, and preferred advertising format. The software then does the job of matching you with a supplier and getting your ads into their available space.

This is a far cry from the way marketers used to buy media. You no longer need to meet with a media buyer in person or over the phone to negotiate ad inventory and determine placement, scheduling, or rates. Instead, automated algorithms do all the heavy lifting on your behalf.

A Brief Rundown of the Programmatic Advertising Process

Running a programmatic advertising campaign can sound like a daunting task, but most of what you’ll be doing comes down to a few simple steps:

  1. A user clicks on a link to visit a website

  2. A website owner auctions an ad impression by sending a bid request on a supply-side platform

  3. Advertisers compete to offer bids for the impression on the demand-side platform

  4. The ad impression goes to the highest bidder

  5. The ad is served to the user on the website they clicked on in step one

  6. The user clicks on the ad and responds to your call to action

Does this process sound too long and complex to you? In the past, this process was handled manually by human media buyers. The good news is that all six of these steps can be taken in real time in a matter of milliseconds. Thanks to sophisticated software, they all — including the bidding portion — happen automatically, requiring no human intervention once the initial campaign parameters are set.

Compare this to the idea of having to sit down with someone to manually negotiate ad placement without all the data and intelligence provided to you by programmatic advertising platforms. When you consider the alternative, it begins to make sense why programmatic advertising has proven extremely effective for so many brands and marketers.

These next few sections will further break down the details of buying programmatic ads. In doing so, they will also cover the options that marketers have available to them when using this marketing method.

3 Major Components of Programmatic Media Buying

Because the programmatic advertising process runs so seamlessly, you may not realize that multiple moving parts make the whole thing work.

1. The Ad Exchange

The ad exchange is where buyers and sellers go to make deals and shake hands and where publishers list their inventory. Marketers who are looking to buy ad space for their campaigns will check out what’s available on the ad exchange and buy what suits their campaign goals. 

However, neither party ever visits the exchange directly. If you’re a publisher, you use a supply-side platform to make your offer. And if you’re a marketer, you use the demand-side platform since you’re the one in need of advertising space.

2. Demand-Side Platform (DSP)

A demand-side platform describes a piece of software marketers use to connect to an ad exchange and purchase impressions from a publisher’s website when they become available. The DSP is also where you manage your campaign. You simply enter bids for ad space, and the algorithm distributes impressions based on your bid price and audience parameters.

3. Supply-Side Platform (SSP)

Only publishers use the supply-side platform. It ensures that their ad inventory makes it to the ad exchange so that marketers can purchase it. Supply-side platforms have the ability to connect with multiple ad exchanges in real time. This gives publishers the best chance of finding a buyer for their available impressions and selling their ad space for the highest possible price.

3 Ways to Buy Programmatic Ads

Although real-time bidding is the hallmark of programmatic advertising, there are actually three major ways that marketers can purchase ad impressions.

1. Real-Time Bidding (RTB)

This purchase method is the one that most marketers who use programmatic advertising are familiar with. Real-time bidding operates just like an open auction. Any marketer can bid on a publisher’s available ad space, and the impressions will go to the one willing to spend the most. This method of buying ad space costs the least, allowing marketers to reach a larger number of people on a smaller budget.

2. Private Marketplace (PMP)

Private marketplaces are only open to select marketers by personal invitation. Some marketplaces allow them to apply for an invite, but many hand-select the marketers who are allowed to participate. 

PMPs provide premium inventory. Their limited nature makes it more likely that you will get the type of ads you want, as well as a few choices you probably can’t find on an RTB platform.

3. Programmatic Direct

This arrangement mimics the manual media buying methods of times past. With programmatic direct, there are no ad exchanges or auctions involved. Marketers purchase ad space directly from publishers. This is the most expensive option, but it also means that you’ll get the inventory you want without worrying about competing for it.

Understanding the Available Programmatic Advertising Formats

Programmatic ads come in many formats to suit each marketer’s needs. This variety allows marketers to build extensive campaigns that effectively reach their target audience.

Display Ads

Display ads are easily recognizable across the internet because they are among the oldest forms of online advertising. These ads are placed in the headers, footers, and sidebars of websites and can work well for those who advertise with visual content. However, it’s vital to avoid “banner blindness” and to use interesting colors, video content, and personalization to make your display ads stand out.

Native Ads

Native ads earned their name because they feel right at home with the content on the page. These ads blend in and include formats like sponsored or promoted content and in-article ads. Many readers see native advertising as both trustworthy and highly relevant and are more likely to read them for those reasons.

Email Ads

Email remains one of the most effective forms of marketing available today. Combining email with the power of programmatic advertising can be a powerful way to reach and cultivate new audiences by earning their long-term trust. Your ads will appear as links in relevant email newsletters. In some cases, you won’t pay until someone buys from you.

If you use real-time bidding or a private marketplace, make sure your ad exchange and demand-side platform offer newsletter ads before you sign up.

Paid Social Ads

Nearly half of social media users have bought something from an ad they saw on the platform. It’s such an effective form of advertising that it makes up 20% of the marketing budget for many brands.

Social media programmatic ads are the premier choice for marketers looking to diversify their ad types. These ads can come in a variety of formats, from video advertising and carousels to shoppable images. They integrate right into your target audience’s social media feeds, which virtually guarantees you’ll get a good number of impressions.

Audio Ads

What comes to mind when you think of audio ads? If it’s the radio, it may be time to update your view of what programmatic audio advertising can do. Audio streaming services like Spotify prominently feature audio ads, requiring listeners to hear the whole thing before they can move on to the next song. You can even pair your ad with an image to further drive home the message. 

These features make audio ads highly effective. They are the reason why audio ad spending is set to increase to $7.89 billion by 2025.

Video Ads

Programmatic video advertising is so versatile because it can be used just about anywhere. You can have your ads inserted into a YouTube video, use out-stream video ads within banner displays, incorporate them into paid social media, or have them used as native video ads.

You can even use video ads with Connected TV (any TV set that is connected to the internet and used for streaming content). Connected TV allows marketers to use data to gain insight into their target audience’s entertainment habits and then use that data to market relevant products and services. This process provides the benefit of television advertising without the hefty expense or outdated manual media buying methods.

Different Ways to Target Your Programmatic Ads

A laptop with an open Facebook profile page

The success of your programmatic advertising depends on your ability to understand and target your audience. There are multiple ways to hone in on the right audience:

  • Audience targeting: Target customers based on their demographic information
  • Geotargeting: Serving ads based on a specific location, such as a zip code
  • Contextual targeting: Advertising based on the publisher’s content
  • Behavioral targeting: Marketing based on recent online activities
  • Retargeting: Targets customers who have previously interacted with your ads

Retargeting in particular can be highly effective since retargeted visitors are three times more likely to click on your ads. 

As you get into programmatic advertising, you should keep in mind that targeted ads perform much better overall. As such, you should take the time to nail down your target audience before you create and launch your campaign.

6 Steps to Execute Your First Programmatic Advertising Campaign 

Some marketers worry that programmatic advertising will be challenging for them to grasp. While it can take a bit of effort and time to get a handle on, launching your campaign doesn’t have to be complex. Here are six steps you can take to get your programmatic advertising campaign off the ground and start flying high:

1. Determine Your Goals and Metrics

Before you start a programmatic advertising campaign, you need to know what you want your campaign to accomplish. Are you looking to increase brand awareness? Do you want to get more sales? Are you aiming for better reach with mobile advertising? These goals can help determine the DSP, audience, and ad types you choose, as well as influence the key performance indicators you use to measure success. 

Speaking of KPIs, you’ll want to make sure that each one you select is aligned with the goals you have for your campaign. For example, tracking impressions makes sense if the goal is brand awareness, whereas tracking conversions is better if your goal is increased sales.

2. Select Your Preferred Demand-Side Platform

Take your time when selecting your DSP. The one you choose should give you access to the features you prefer and the ad types you want to include in your campaign. Also check to see that your DSP gives you access to real-time performance data, as you will need this for the last step in the process.

3. Set Up Your Campaign Parameters

Programmatic advertising thrives on parameters because these settings tell your platform how to execute your campaign without you having to manually manipulate each aspect. In this step, you will choose your ad types, set your budget, and determine your cost-per-mile (CPM) and frequency cap. 

Your CPM represents how much you can afford to pay to win impressions. It can also determine how successful you are in the bidding process.

4. Use Data to Define Your Target Audience

Take some time to paint a mental picture of your ideal customer. Then, choose targeting strategies that align with your ideal customers. Many DSPs allow for advanced targeting tactics, so don’t be afraid to experiment with your audiences to see which ones respond best to your offer.

5. Prepare to Launch Your First Campaign

In this step, you’ll choose the places where you want your ads to appear and then upload your creatives to the platform. Check to make sure your creatives match the ad types you have selected so that they will display correctly and leave a good impression on your audience.

6. Optimize as You Go Along

Your work does not end after your campaign goes live. If your DSP provides access to real-time data, you need to spend time checking your performance statistics. Use this information to tweak existing campaigns, try out new ad creatives, and test cross-channel advertising with existing ads.

7 Benefits of Programmatic Advertising 

There’s a reason why 90% of all digital display ad dollars are now transacting programmatically. Programmatic advertising brings tangible benefits to marketers. 

1. Increased Reach

Marketers can now work with multiple ad exchanges and use a variety of media buying methods. This means that you now have access to a wider audience than ever before. 

Programmatic marketing easily facilitates cross-channel advertising, helping you to instantly and automatically reach millions of people across hundreds of thousands of websites. Even better is that you can do all this without increasing work output or significantly raising your budget.

2. Real-Time Insights

Automated platforms that facilitate programmatic advertising can update you in real time about the performance of your ad placements. In turn, this allows you to test, track, and tweak campaigns quickly, resulting in better campaign outcomes in much less time. What other marketing method allows for this level of productivity?

3. Maintain Relevance

Programmatic advertising opens your business to massive amounts of diverse inventory. It gives you access to everything from email ads and streaming radio spots to social media and native advertising. 

With so many options, you are sure to find one where your message will resonate with readers or listeners. As a result, you can curate and target audiences with relevant ads that deliver the right message at the right time.

4. Leverage Advanced Technology

Programmatic advertising leverages automation tools like artificial intelligence and machine learning. And these tools are getting smarter and faster every day. 

You can take full advantage of this rapid development to increase the quality of your campaigns and play around with new ideas, such as voice search advertising and mobile advertising. You’ll make quick work of finding a formula that works for you, allowing you to grow your advertising as technology continues to advance.

5. Advertise Efficiently

Decades ago, buying media spots meant having to meet in person with a media buyer. Together, you’d need to go over available inventory and make decisions about advertising spend based on outdated data and small sample sizes. 

Programmatic advertising saves you a great deal of time by streamlining and automating this process, making you much more efficient at your job. Who knows what innovative ideas you can generate with all that extra time on your hands?

6. Drive True Engagement

Programmatic advertising allows for granular insights and advanced targeting tactics. This means that the audiences you reach are of much higher quality and are truly interested in your messaging and product. 

Because these targeted audiences will appreciate relevant marketing messages that align with their needs and desires, they are much more welcoming, engaged, and happy to interact with your brand.

7. Enjoy Higher ROI

All of this increased reach, relevancy, engagement, and efficiency point to one thing: a higher return on your investment. If you want to make your advertising dollars count, programmatic advertising is the way to go. 

This method allows you to target audiences with precision and make changes based on immediate, data-based feedback. As a result, you’ll spend less money to get better results, increasing your ROI.

Programmatic Advertising Best Practices to Follow

Succeeding with programmatic advertising means knowing and following several best practices. These include:

  • Understanding marketing issues such as the need for better viewability standards
  • Analyzing your audience in-depth by segmenting them based on shared traits 
  • Catering your ad messaging and creatives to each segment 
  • Using both first and third-party data for greater accuracy
  • Capping the frequency of your ads so that users don’t see them too often
  • Making sure your ad creatives are relevant, simple, and contain a call to action 
  • Checking for errors, voice search advertising optimization, and load speed issues
  • Keeping your focus on what all marketing is truly about — helping people

When you commit to following these best practices for programmatic advertising, you can increase the likelihood that you’ll find success with your campaign.

Lean Into the Future of Digital Marketing by Leveraging Programmatic Advertising

Programmatic advertising uses artificial intelligence and real-time bidding to help automate and streamline the ad-buying process. This method of digital advertising puts you in the driver’s seat. 

In particular, programmatic advertising allows you to specify your target audience, budget, and goals for your campaign. And once your campaign is configured, an automated process will place your ads in your preferred formats in locations where your audience segments are likely to be.

There’s no doubt that this method is the future of advertising. While it’s not a perfect process, programmatic advertising is highly efficient. It is also known for producing excellent ROI. 

As artificial intelligence and machine learning continue to evolve, automation will likely become the norm in a great many industries, including marketing. Learning how to use programmatic advertising to your advantage is one way you can ensure that you stay ahead of the curve and are ready for whatever the future might bring.

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Sarah Edwards photo

Sarah Edwards

Content Writer @ Galactic Fed