Programmatic Advertising: the online advertising revolution

Programmatic Advertising (for more details click here) is a rapidly expanding activity in the realm of digital advertising, but it still remains relatively unknown. It plays a vital role in online advertising, particularly in the bidding process of digital marketing. Many companies rely on this highly effective tool to optimize and automate their online advertising efforts. The primary objective is to deliver the most impactful message to a genuinely interested target audience at the opportune moment. Although Italy started relatively late compared to other nations, the Programmatic Advertising market is experiencing rapid growth. Investments in this sector are projected to surpass € 300 million, accounting for a market share of 25% to 30% of total display advertising. This represents an approximate 40% increase in investments compared to the previous year (source: Internet Media Observatory Politecnico di Milano). The digital advertising landscape has witnessed numerous astonishing transformations in recent years. Technological advancements continuously provide new tools to enhance not only the efficiency and effectiveness of media planning but also audience access and impression purchases. Despite this substantial expenditure growth, Italy still lags behind more mature markets. For instance, programmatic is estimated to constitute approximately 70% of total display advertising in England in 2016.
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Programmatic Advertising: what it is

Programmatic advertising refers to the automated process of buying and selling online advertising space through computer platforms. Each instance of displaying promotional content to a user is known as an impression. While programmatic advertising is commonly associated with real-time bidding (RTB) campaigns, it encompasses various campaign types that can be planned using programmatic platforms. The inception of programmatic advertising in 2009 marked a significant revolution in online marketing.

The fundamentals of Programmatic Advertising can be summarized in 3 key characteristics:

• Programmatic: All process steps occur within an automated platform.
• Real-time: Impressions are purchased as soon as they become available.
• Data-driven: The purchasing logic shifts from buying ad space to buying the audience.

Programmatic advertising is a buzzword in the advertising and marketing industry due to its continuous growth and evolution. It primarily dominates the web and mobile platforms but is also making its way into TV, radio, and Digital Out Of Home advertising. To grasp the nuances of programmatic advertising, it is essential to pause and analyze the scenario in terms of the various tools available for purchasing online advertising.

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Programmatic Advertising: the importance of Real-Time Bidding or RTB

Real-Time Bidding (RTB), an evolution in the buying and selling of online advertising space, represents the technological advancement in programmatic advertising. Utilizing media platforms, RTB enables the interception and immediate display of advertisements to a specifically targeted audience, selected based on their needs, online behavior, and habits.

Why is Real Time Bidding so important in Programmatic Advertising? Because every action of buying and selling an advertising space happens in real-time; it is not decided beforehand, in most cases, but happens at the moment when two technologies, one selling and one buying, ‘talk’ to each other. The best way to do RTB in programmatic is to target users and not a category or section of a site, where the ideal user is supposed to be. It is necessary to find the right person to present them with the right advertising message. The most correct definition of RTB in programmatic advertising is that ‘programmatic’ is any form of sourcing or selling digital advertising in an automated manner through the use of software platforms.

Programmatic Advertising: how it works

To gain a deeper comprehension, the ecosystem where automated advertising is acquired through real-time software platform interactions is commonly referred to as “Programmatic” advertising. Within the expansive domain of Programmatic Advertising, Real-Time Bidding (RTB) serves as an integral and fundamental component, complementing other essential elements.

Programmatic Advertising revolutionizes the online landscape by turning it into a dynamic auction for advertising space. With the aid of advanced software, advertisers harness the power of Demand Side Platforms (DSPs) to connect with thousands of websites, strategically selecting targets, setting budgets, and crafting compelling campaigns. On the other side, publishers offer their valuable impressions, making their advertising space readily available. During this process, advertisers place their bets using the Ad Exchange, a powerful software that evaluates and determines the “winners” among the advertisers’ offers. The Ad Exchange not only furnishes an anonymous audience profile but also provides insights into website categories. Leveraging sophisticated predictive algorithms, DSPs make astute decisions, maximizing Return on Investment (ROI) by selecting the most promising ads for each campaign. Within programmatic advertising, there exist distinct platforms for buying and selling, each playing a crucial role. These platforms seamlessly communicate with each other, with the buying platform inquiring about the availability of impressions meeting specific criteria, such as precise ad formats and ideal user profiles. In response, the selling platform eagerly confirms the existence of such impressions.

The sale process within Programmatic Advertising operates through a dynamic bidding mechanism. The buying platform initiates the interaction by indicating its willingness to pay, say, $ 1 per impression to the selling platform. In response, the selling platform reveals that the typical price for that impression is $ 1.20. The buying platform assesses the offer and confirms its acceptance if it has room to accommodate the proposed rate. Simultaneously, another request arrives, this time offering $ 1.40 for the same impression. However, the buying platform already knows beforehand whether the initial bid can be increased or not. This process resembles an American-style auction, distinguishing it from the Pay per Click (PPC) model used in Google AdWords. Instead,

Programmatic Advertising operates on a Pay per Thousand Impressions (CPM) basis. The purchase of online advertising space occurs through Programmatic platforms that serve as intermediaries, aggregating supply and demand. This streamlined approach enables publishers to offer their inventory for sale while allowing advertisers to efficiently acquire the desired impressions, fostering a harmonious connection between the two parties.
Programmatic advertising is effectively promoted across various channels, including display, social media, mobile, and video campaigns. The process of matching supply and demand occurs through different methods, which include:

• Direct purchase from the publisher: This approach is widely utilized as it enables loyalty or sponsorship programs, ensures complete cost transparency, and provides full control over media placement. It allows advertisers to maintain their brand image within the desired context.
• Ad exchange marketplaces: Prominent platforms such as DoubleClick, Facebook Exchange, Right Media, ADECN, and OpenX simplify the buying and selling process between publishers and networks. These marketplaces facilitate real-time auction-based purchasing of impressions, rather than advertising space. This approach resembles the Pay Per Click model and offers greater efficiency and flexibility.
• Ad Networks: Acting as intermediaries, Ad Networks play a crucial role in connecting buyers and sellers. They acquire inventory from publishers and subsequently resell it to advertisers. Prominent examples include Google, Yahoo, Microsoft, and AOL, which provide extensive reach and facilitate efficient transactions between the parties involved.

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Programmatic advertising: how the transaction takes place

The advertiser engages with the DSP to precisely define parameters concerning their target users, establish a budget, and upload creative materials and banners for display in advertising spaces. When a user visits a website, a real-time auction takes place within milliseconds. This auction determines which advertiser, among those interested in that particular user’s profile, will secure the impression by offering the best price. This automated exchange mechanism between demand (DSP) and supply (SSP) is known as Real Time Bidding (RTB). Alternatively, Automated Guaranteed offers another mode of exchange, wherein advertisers and publishers establish a direct agreement, enabling the purchase of a predetermined number of impressions at a fixed price, ensuring guaranteed publication.

Now, let’s explore how we target this pre-defined group of users. The key lies in utilizing the browsing data of consumers. Each time a user goes online, their visited websites, filled online forms, and conducted searches contribute to the formation of a profile containing their habits and interests. This data, completely anonymized, is then compared by the software during the auction phase with the profiles selected by the advertiser during the preliminary stage. If a match is found, the advertiser is deemed suitable to participate in the auction and engage with the targeted audience.

Programmatic advertising: campaign types and benefits

Programmatic campaigns can be categorized into four types, each with its own characteristics:

1. Guaranteed Automatic or Programmatic Direct: In this type, the agreement is established directly between the publisher and advertiser. The price is fixed, and the inventory is reserved. While the sales and purchasing processes resemble traditional methods, they are automated in this case.
2. Private Marketplace: Unlike the previous type, the agreement in a private marketplace is not confidential but publicly known. The price is predetermined and agreed upon beforehand, offering a level of transparency.
3. Invitation-Only Auction or Closed Auction: Publishers have the option to limit the bidding process to a select number of participants. By doing so, they can enhance the value of their inventory by adding additional information to attract potential buyers.
4. Public Auction: In a public auction, publishers make their inventory available to all potential advertisers without establishing a direct relationship between the buyer and seller. This open marketplace allows for broad participation and competition among advertisers.

The use of Programmatic platforms makes it possible to automate and speed up the buying and selling process, effectively opening up new avenues and opportunities. Let us now analyze the main advantages of using a Programmatic platform on both the publisher and advertiser side. In practice, the advertiser (or advertiser) buys (from the publisher) the audience and is no longer the location. This mechanism becomes even more interesting if one considers the growing amount of information available to the publisher platforms (Big Data), which allows one to segment with extreme precision the user (gender, age, geolocation, interests, etc.) who is currently viewing a certain page of a site. Obviously in compliance with privacy regulations. Allowing your ad to be ‘in the right place at the right time’. It is not very difficult to understand why program advertising is revolutionizing the online advertising market.

Benefits for advertisers and publishers

For advertisers, there are a number of advantages of doing Programmatic:

• Facilitates impression purchases based on the target audience’s preferences, amplifying advertising impact.
• Offers precise identification of advertisement recipients, surpassing other methods in clarity and accuracy.
• Enables real-time campaign monitoring and intervention, ensuring timely adjustments for optimal performance.
• Explores new customer acquisition while delivering personalized cross-sell and up-sell proposals to existing customers.

For advertisers, knowing the profiles of those who will see the ads means being able to make an informed decision: to focus on a certain impression or to allocate the budget to spaces and profiles more suited to their business. Programmatic advertising enables advertisers to lower campaign management costs, increase transparency, and simplify campaign management. It also represents a new way of intercepting a specific target group that cannot be identified through manual campaign management. For publishers, programmatic advertising represents a new supply channel, a new reservoir through which to dispose of unsold inventory, and the possibility of enhancing inventory by enriching the offer with more information.

Benefits for large and small enterprises

Programmatic Advertising benefits companies of all sizes, allowing them to establish budgets, and strategies, and access immediate performance reports. The software utilized is highly sophisticated, employing real-time data processing algorithms to optimize functions effectively. Implementing Programmatic Marketing offers numerous advantages. Firstly, it eliminates the need for human intermediaries, streamlining operations and ensuring each platform retains the revenue generated through Programmatic Advertising. Additionally, it maximizes advertising results by enabling precise targeting of the desired audience with tailored communication, all at the most cost-effective price.

What you buy in Programmematic is exactly the possibility of avoiding compiling media plans by hand, in large Excel documents, and over several weeks of work. This means that what you buy in programmatic is time. Time saved in buying, selling, and getting exactly the kind of advertising you want. The time taken away from useless steps in favor of more profitable ones to be done in Rtbso is therefore of enormous value. If one of the components that are replaced by the algorithm is the human one, we must also say that it is not completely replaced. The result is certainly to eliminate wasted time, but above all to reduce human error. Imagine Ad Operations employees in agencies or dealerships; these operators compile Excel, upload formats, make calls to servers, then program other machines, all by hand. With all that, this entails (time and errors).

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Traditional media and programmatic advertising: the differences

In traditional media practices, the following steps were commonly involved:

• Phone the dealership to discuss advertising options.
• Send an email to the dealership to initiate the advertising process.
• Collaborate with the dealership to create a media plan.
• Engage in bargaining negotiations for advertising placements.

Now with Rtb in programmatic buying, you set up everything directly in the machine and deliver your message where and how you prefer.

What does programmatic advertising do now that traditional media planning did not do ten years ago? First of all:

• Programmatic Buying is automated: so the buying, as well as the selling of spaces, is automatic. On the other side, we have a long queue of negotiations for buying the spaces, negotiation for the CPM of the delivery, and finally all the loading of the campaign.
• In Programmatic, a unique frequency cap can be set per campaign. The frequency cap is the limit of how many times in a given time period a user must be exposed to a message. In the other mode, you have a frequency cap for each individual dealer. Of the latter concept, let us give an example: when we make a traditional media plan, each dealership can be instructed that the same user must not be exposed more than 3 times generally per day to the same message. The individual dealership answers yes. In this plan, we see in the picture (purple lines in the picture above) we have mentioned the dealership 6 times. It is more than obvious that each user can end up on more than one site of the same dealership; the fact that the frequency cap of the individual dealership is set at 3, therefore, does not in reality guarantee that after 3 exposures to the message the user will not see it again. Hence a problem of reliability and accuracy arises. It would mean: if all dealerships are given the same instruction, being exposed to 18 messages of the same type on the same day.
• Programmatic also means in-house retargeting, i.e. we can do our own brand awareness in a very precise and reliable manner on all fronts. On the other hand, we have retargeting outsourced to third-party media companies of poor precision. To give an example: we visited a travel site and bought a ticket. We are harassed post-purchase by the same site and travel offers for several weeks on dozens of sites. In intelligent retargeting, you usually set it up so that you only retarget all users who have visited page X and not Y, or only those who have actually purchased. In this case, one entrusts what to do to third parties who have to maximize their own earnings, delivering often unreliable campaigns with obvious consequences because the messages are not on target and are very annoying. Those who do retarget as a management service do so with profit in mind, which is achieved by duplicating/tripling the deliveries to the detriment of the ‘right message – right user – right time’ rule. Obviously, this has a negative effect on the reputation of the brand. Smarter management would have been, for example, to exploit the information gathered from the purchasing process to propose associated products in a relevant manner. For example, if I buy a flight on Expedia, the system could propose a hotel in the area, car rental, and other related services.
• Programmatic is done by means of cookie planning, whereas in the traditional way, one can only set up media planning. You can say no more about planning on sites: by doing so you do not waste your budget and you only hit the users who are really interested. Basically, assumptions about a site’s target audience are not enough, but a scientific approach is needed to determine who is really in front of that message at that moment.

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How is programmatic advertising structured?

Simplifying, the program ecosystem is constituted in this way. At the end of this path, we have the human factors:

• Trading desk: this is the agency that takes on the task of buying advertising;
• DSP: Demand Side Platform, the platform that presides over the purchase of space in programmatic;
• DMP: Data Management Platform, is a software; platform within which millions of user data are carefully stored, organized in clusters, and re-entered externally; data is rendered anonymous in order to be able to manage them without problems, with a nomenclature of this type: age group, gender, interests, type of telephone contract, type of car owned, tastes such as travel, holidays, etc. Usually, the degree of accuracy of these data quantities is closely related to the quality of data acquisition;
• SSP: Supply Side Platform, is the platform that presides over the sale of space;
• Publishers: those who sell the available space

Trading Desk

It is a media agency specializing in program buying. Its resources are called buyers or traders. They are people who physically program the machine to do this activity.

Known trading desks are:

• Accuen
• Accordant Media (acquired company)
• Affiperf
• Amnet
• Cadreon
• Impaqt (acquired company)
• Run (acquired company)
• Varick Media Management
• Vivaki
• Xaxis

Known agencies related to these trading desks are:

• Dentsu (Amnet and Accordant Media)
• Havas (Affiperf)
• Ipg (Cadreon)
• MDC Partners (Varick Media Management)
• Merkle (Impaqt)
• Omnicomgroup (Accuen)
• Publicis Groupe (Vivaki and Run)
• Wpp (Xaxis)

DSP – Demand Side Platform

It is the software through which the buyer makes the demand for advertising space. Through the DSP, the buyer can:

• Managing the budget and campaign period
• Enter the max. bid (max. CPM bid in $ that we are willing to pay)
• Select advertising inventory to buy on
• Manage campaign targeting options

DSP notes are:

• AdBuyer (acquired company)
• Acquity
• Adform
• Brandscreen (acquired company)
• Chango (acquired company)
• Choozle
• Ctrl/Shift
• Digilant
• Invite Media (acquired company)
• Efficient Frontier (acquired company)
• Media Math
• Simpli.fi
• Sitescout (acquired company)
• The Trade Desk
• Turn Data XU

SSP – Supply Side Platform

It is the software that allows publishers to sell advertising space programmatically. Through an SSP the publisher can:

• Managing the sale of individual formats automatically
• Insert floor price (starting price that can be exceeded by the auction) for individual formats/places/sites
• Managing private deals / private marketplaces
• Reporting the sale of spaces

SSP notes are:

• Adform
• Admeld (acquired company)
• Altitude Digital
• AppNexus
• Beanstock
• Doubleclick For Publishers by Google
• LiftDNA (acquired company)
• PubMatic
• ReviNet (acquired company)
• Rubicon Project
• Sonobi

DMP – Data Management Platform

It is the software that manages the clusters of first or third-party (even second sometimes) data that will be associated with our buying strategy to increase the effectiveness of the campaign.

• DMP (software) notes are:
• Adform
• Nugg.ad
• Turn
• Well-known data providers (reselling fresh data on the market) are:
• Admantix
• Prime Real Time Bidding
• Semasio
• Well-known brands that do both are:
• Exelate
• Eyeota

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Programmatic buying: from media planning to cookie planning

In the picture, we see a typical process in program buying. The user opens a page. The ad server that dispenses advertising on the page says whether there is a guaranteed impression available. That is to say, has someone done premium planning and paid for a banner to be delivered? At that point, a yes or no answer is given. In the case of yes, the guaranteed banner is dispensed. In the case of no, the SSP is called in. The SSP in turn ‘shouts’ to the Ad Exchange that you have an interested user: a man 35-54, interested in the world of telecommunications, a typical online buyer. The SSP identifies the user on the basis of the data cluster he is in and this is third-party data, i.e. different sources. The SSP with the highest bid delivers the banner. This whole cycle takes place in a few thousandths of a second and the delivery of the impression is paid 1 cent more than the second bid, according to the American auction principle.

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Programmatic Advertising: trends in the adv sector

• Advertising by big brands will start using in-app formats: 2016 proved to be the year of mobile technology, with around 71% of internet traffic coming from smartphones and tablets globally. In the future, traffic will shift from the overall concept of ‘mobile web’ to video and in-app content on mobile devices. People’s activities will show big brands where to focus their advertising investments.
• The continued acceleration of native formats, especially video: Native formats are taking off for a very simple reason. The concept of continuous promotion of advertisements within content gives higher priority to the user experience, creating one of the few advertising formats in the industry today that can avoid any kind of interruption. This approach also proves ideal for large brands due to the possibility of scaling through social networks such as Facebook. Video and native formats are a perfect match. As the prevalence of video continues to rise, native opportunities will increase in turn. Companies like Snapchat are accelerating the growth of animated and short-form videos. In 2017, many companies will use this paradigm to gain a competitive advantage and a less invasive and more innovative advertising experience for the customer.
• Ad-blocking penetration rates will decrease, especially in North America and Europe: This trend is based on micro-targeting and native advertising. All ad tech operators have to include humans in their thinking. Micro-targeting will continue to grow in terms of numbers and sophistication, allowing big brands to promote their products directly and specifically. Therefore, there will be a reduction in the number of ads distributed and at the same time an increase in the effectiveness of each one. This may sound like a convoluted concept, but it makes complete sense. We will get more revenue for less expenditure.
• Advertising expenditure will start to move away from interstitial, midroll, and pre-roll non-excludable ads: As an industry, interstitial-based ads are being abandoned in favor of more attractive and effective formats for consumers. This is a positive change for all involved. Interactive formats will continue to be the most popular with big brands due to the ability to achieve more conversions than their interruption-based counterparts.
• New standards for measuring the effectiveness of brands will emerge and grow. CPM (cost per thousand impressions) and impressions are now ineffective measurement standards in the industry that primarily targets people. As big brands shift from demographic-focused advertising models to the micro-targeting model, more and more relevant ads will be delivered to people. As audience engagement becomes personal, the real measure of effectiveness will no longer be based on impressions but on actions.

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