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2. Programmatic advertising

When you see ads on websites promoting products and services that are unrelated to the website itself, you are most likely looking at display ads. Display advertising allows advertisers to buy ad placements on third-party websites.

Programmatic advertising refers to online advertising where determining which ad to show to which consumer in which context is determined in real-time.

Example

The next time you browse products in an online store, don’t be surprised if you see ads for those products on other websites you visit. The store, in this case, is the advertiser, as they want to remind you about products you viewed but did not buy.

The websites that show ads from other sites are known as publishers. Publishers get money for renting ad space to advertisers.

After searching for concert tickets online, display ads about ticket websites start showing up on the CNN website

To determine which ads are shown to visitors is the end result of a mechanism known as programmatic advertising. “Programmatic” means that the process of buying, placing, and optimizing the media inventory of ads is automated through a real-time bidding (RTB) system.

When the visitor visits the web page, information about the page and the user is sent to an ad exchange. This exchange then auctions the advertising opportunity to the advertiser willing to pay the highest price – it’s thus somewhat similar to how the bid auction mechanism of search advertising works.

The winning ad is then almost instantly displayed to the user.

Programmatic advertising frequently relies on cross-site audiences, meaning that the more the ad exchange knows about the visitor’s browsing history, the better they can target them with ads.

This reliance on cross-site tracking is one of the reasons programmatic advertising has been in flux over the last years, as web browsers have been removing cross-site tracking capabilities to help preserve user privacy and hide their browsing history from the ad networks.

Types of display ads

The days of just boring, rectangular banner ads are long since over.

The web is a multimedia playground, so it makes sense that the advertising industry has adapted to different ways of populating content with a diverse media inventory.

Online advertising can be delivered in many different formats, and here are some of the most popular ones.

Banner ads are horizontal or vertical rectangles that contain graphics and text. They are the prototypical display ad, and you can still find them on websites, usually populating the top, bottom, or sides of a web page. 

Banner ad on the CNN website

Interstitial ads are more invasive. They are usually full-page ads, or at least they take up the majority of the visible area of the page, often blurring the background to make it clear the ad wants your attention. They usually have a timer or a close button that clears them and lets you get back to the content below the ad. They are more common in apps, but sometimes they spoil your web browsing experience, too.

An interstitial ad blocks access to the content until the ad is dealt with

Rich media ads can be delivered in banner or interstitial format, and they often include animations, video, audio, or other elements that engage the visitor. They are more captivating but also more distracting than a plain, static banner ad.

Video ads are short video clips that autoplay or start with user interaction. A common method of delivering a video ad is as a pre-roll video that plays before you can watch the actual video you wanted to see.

Pre-roll ad on YouTube

Because display ads are shown on publisher sites, it’s possible that the reaction to the ad can generate negative sentiment towards the publisher site itself.

Example

If you are advertising cheap flights, it would be awkward if that ad was shown next to a news article about the negative climate impact of air travel. When a publisher chooses to work with an ad exchange, the risk of negative association is always there.

Note that there are ways to mitigate this. As an advertiser, you have tools available to establish contextual parameters for your campaigns. For example, you can use these tools to exclude placements, contexts, and topics that are negative to your brand.

Similarly, you can also work with publishers that have a track record of brand safety protection. These publishers have the means to prevent ad placement on pages with sensitive content, such as a news report on a tragedy.

Don’t miss this fact!

Sometimes lack of adequate contextual information can lead to publisher sites showing ads in unfavorable placements. This can lead to negative brand sentiment, as those who saw the ad might now associate the advertised brand with the unfortunate context its ads showed up in. It is important to proactively protect your brand by using tools to avoid negative placements and by working with publishers that take brand safety seriously.

Programmatic advertising

Programmatic advertising, in general, refers to the automated process of displaying online ads on publisher sites.

Advertisers buy impressions rather than clicks, and the cost of displaying an ad is usually calculated by views (or thousands of views). However, even though the advertiser is buying impressions, optimization is still done with cost-per-click, cost-per-acquisition, and cost-per-view metrics. Budgets and limits are set similar to how you’d do it with search ads.

For each impression of an ad, the ad exchange needs to make a lightning-fast decision about which ad to display in near-real-time based on things like the user’s browsing behavior, which site they’re on, what time of day it is, what the user’s device is, and so on. 

The number of data points about the user and the visit correlates with the accuracy of the targeting mechanism for these ads. The more targeted the ads are, the more likely they are to be relevant to the user and thus lead to an eventual conversion.

Deep Dive

Real-time bidding

Real-time decision-making is known as real-time bidding (RTB). The highest bidder gets their ad displayed to the user.

Here’s an overview of the process:

  1. The user visits the web page that has spaces allocated for ads.
  2. An ad opportunity is identified when the page loads. Information about the visitor and the context of the site they’re on is collected and sent to the ad exchange.
  3. An auction begins as the ad exchange packages the information they received and sends it to potential advertisers. The exchange informs advertisers that there’s an ad impression available and initiates the auction.
  4. Advertisers evaluate the data from the ad exchange to decide whether to bid on the impression opportunity. If they find the opportunity lucrative, they’ll decide next how much to bid on it. They need to consider the value of the impression vs. the potential gains from displaying their ad.
  5. Bidding begins when advertisers who are interested place their bids. The bid represents the maximum price they’re willing to pay for the impression.
  6. The winner is determined by evaluating the highest bid at the end of the auction. The bidder wins the right to display their ad.
  7. The ad is delivered instantaneously onto the web page in the ad space reserved for the impression.

All of the above, from the visitor’s viewpoint, happens in milliseconds and is completely automated.

Ready for a quick break?

It’s time to take a short, rejuvenating break (SRB), drink a glass of water (GOW), and then review what you’ve learned about RTB, DMPs, DSPs to maximize your ROI from this Handbook.

Inventory control with DSPs and SSPs

Advertisers can control their ad inventory and the ad exchanges they participate in using specialized demand-side platforms (DSPs). A company that wants their ads to show up on relevant sites would create their ads and campaigns in a DSP, and the DSP would then manage all the ad exchanges and auctions for the brand.

Both advertisers and publishers can use data management platforms (DMPs) to create visitor segments for the ad exchange. Advertisers, in particular, can use these segments for ensuring the ads are only shown to specific audience segments based on known interest categories, for example.

On the other side of the fence, publishers use supply-side platforms (SSPs) to manage, optimize, and sell their ad spaces for potential advertisers. They can also make use of data purchased from specialized data brokers to improve the quality of the exchange by increasing the number of variables and values available when choosing the target audience and the placement context for any given ad.

An advertiser that wants to sell a pair of shoes would use a DSP to create the campaign. They can upload additional data from their data management platform to make sure that the ads are only shown to new customers and those who haven’t already bought a pair.

A publisher would similarly use an SSP to inform ad exchanges that they have some excellent ad placements available. The exchange then uses real-time bidding (RTB) mechanisms to join the ad with a suitable placement.

Yes, ad tech loves its acronyms.

RTB is fascinating technology. In the space of milliseconds, an ad exchange can browse through countless potential ads and placements to find a match that should yield the best results for the consumer.

The entire RTB process is based on automation. Both the advertiser and the publisher sets appropriate budgets and limits for bidding, and the automation takes care of the rest.

As a technical marketer, you’ll run into many of these acronyms while working on marketing campaigns. While you don’t necessarily need to understand the internal mechanisms of RTB, because that’s handled by ad networks, publishers, and ad exchanges, having a grasp of the terminology and the nuts and bolts does help you prepare for one important aspect of digital advertising that we’ll discuss in the next Topic.

Key takeaway #1: Advertisers bid to get their ads on publisher sites

An advertiser is someone who has a product to sell. They create the ad copy, choose the keywords and target audiences, and then bid on ad opportunities to get their ad to display to the visitor. They key currency is “impressions”, so typically advertisers pay for views of the ads rather than clicks. Publishers are sites and digital properties that have placements and spots available to show ads. They offer these placements to the ad auction, which then determines which ad is the best for that particular placement.

Key takeaway #2: Real-time bidding is the heart of programmatic advertising

Real-time bidding is the automated system that associates publishers’ ad placement opportunities with the advertisers’ ads. The RTB process happens within milliseconds, during which the ad placement is bid on by willing advertisers with hopes of winning the bid and getting the ad to display to the user.

Key takeaway #3: Acronyms for inventory control

Demand-side platforms (DSP) operate on behalf of the advertiser. They manage the advertiser’s participation in ad exchanges and ad auctions, and the advertiser can also use a data management platform (DMP) to add additional information about target audiences for the ads. Supply-side platforms (SSP) help the publisher manage ad placements and ad opportunities for ad auctions.

Quiz: Programmatic Advertising

Ready to test what you've learned? Dive into the quiz below!

1. What is a DSP?

2. Which of the following is NOT a part of the real-time bidding (RTB) process?

3. Why are interstitial ads considered invasive?

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