Programmatic Advertising 101: A New Way to Ad Buying


Automation is strengthening its grip around the digital marketing industry, this time in the form of automated real-time bidding.

It’s called programmatic advertising, and it’s yet another software that turns menial tasks performed by ordinary marketers into an efficient juggernaut that’s capable of doing the work of ten in more than half the time.

It’s defined by DigiDay as:

“The use of software to purchase digital advertising, as opposed to the traditional process that involves RFPs, human negotiations and manual insertion orders. It’s using machines to buy ads, basically.”


Perhaps before we delve into programmatic advertising and its benefits and detriments, we need to discuss what it’s an offshoot of: real-time bidding.


Here’s a great video explaining how it works:



Digital media was previously bought and sold as blocks of impressions. The issue was that it was too simplistic, resulting in the same ad on a website being seen by the same person. That means an ad for, let’s say, high-end vehicles would be seen by both a wealthy 50-year-old who was more interested in vacations and a 20-year-old who was more interested in exercise.

Sure some of the people in the audience would have been interested, but you’re only diluting the exposure by showing it to people who aren’t interested. It would be like showing a beer commercial on ESPN, but also showing it on HGTV and Nickelodeon.

“Real-time bidding creates an auction where different marketers can bid to show a different ad to a specific user based on data about that user.” So instead of that ad for high-end vehicles going to two people who don’t care about high-end vehicles, they’ll instead get ads contoured to what they like.


Agencies and their wallets are beginning to take notice. “Some agencies now say they’re eager to buy as much media as possible through programmatic channels, and some major brands have even built out in-house teams to handle their programmatic ad buying as they spend more of their marketing budgets that way.”


“Brands are spending an increasing amount on programmatic advertising, with this channel now accounting for an average of 16% of digital ad spends across respondents, compared to 10% in 2014.”


Still, real-time bidding is growing faster than programmatic overall. “RTB revenue will top over $26 billion by year-end 2020, up from $8.7 billion this year.”


A recent survey by the World Federation of Advisers also revealed that “approximately $20 billion of the total $70 billion ad spend in 2016 accounted for expenditures on digital advertising, 16 percent of which is on programmatic ads.”


While the rise of digital marketing is certainly the igniter to this, efficiency is the driver of automation in the industry. It all comes down to consolidating precious hours that could be used to developing creatives, rather than using that time to fill out spreadsheets or, in this case, buying ads.


Programmatic ad buying expedites the process. Because before it came along, “digital ads were bought and sold by human ad buyers and salespeople, who can be expensive and unreliable.” Much like every new piece of technology created, as has been the case since the concept of convenience, it’s focused on efficiency and limiting the work done by humans.


“Programmatic ad tech promises to make the ad buying system more efficient, and therefore cheaper, by removing humans from the process wherever possible.” Basically, humans are fallible, while machines are programmed to perform a specific task perfectly and repeatedly.


Not all is lost for humanity, though. We still have responsibilities and control over some aspects. As noted by Lori Goldberg of, both timing and frequency are necessary components of programmatic ad buying that require adjustments from actual advertisers:


  1. Timing: “A great example of this is a recent trip I took to Santa Monica. At the time of this writing, only eight weeks have passed and now I’m being retargeted by hotels and travel deal sites that are offering packages on a return trip to Santa Monica. While I had a great time, I’m not likely to go back across the country eight weeks after I just visited..If they were to cross-reference their data with recent customers, they would know that I’ve already stayed at the hotel and would be able to serve me an ad that feels more customized. Advertisers should take the time to cross-reference their data so that they save ad dollars and don’t waste impressions.”


  1. Frequency: “Research published in DigiDay showed that ‘64% of impressions were out of frequency, and no advertisers had fewer than 60% of its impressions delivered beyond their cap. Often caps are neglected and never tested because they’re not straightforward, but not knowing what optimal frequency cap to use can give poor results. Properly evaluating data sources, tailoring the campaign to the product lifecycle, and targeting consumer buying behavior is the key to creating successful and powerful programmatic campaigns.


But it does not come without its faults (besides the obvious of there being too much automation).


For one, ad fraud by programmatic advertising is far higher than when it’s delivered through the traditional route. According to Integral Ad Science, “nearly 9% of digital ads delivered via programmatic channels are fraudulent, compared with only 2% of ads delivered through direct deals with publishers.”


“The losses to the US ad industry from ad fraud totaled $8.2 billion in 2015. Programmatic exchanges can exacerbate this by neglecting to monitor non-human traffic.”


Accurately measuring results is also a source of concern, especially after mishaps by Facebook and Twitter led to their overstating campaign metrics. “Programmatic ads are placed on a vast assortment of publisher sites, and in the process run through an array of ad tech intermediaries.” With little confidence in the accuracy and of the rest of the ecosystem, investors will be discouraged and would have to wait for reassurance from the social media networks themselves.


And we certainly can’t miss out on this report the Association of National Advertisers which discovered “that the US ad-buying industry was rife with non-transparent business practices.


Unethical rebates were a focal point of the report, wherein agencies were found to be receiving rebates from media owners — either in the form of cash payments or free inventory credits — depending on how much inventory that agency had bought from that media owner. Meanwhile, brands — whom the agencies were representing and investing money on behalf of — were not privy to these schemes.”


Can it get any worse? Surprisingly, yes. Because publishers are also being taxed in intermediary fees; about “$30-$40 for every $100 of advertisers spend.”


Advertisers want answers. “Research by the World Federation of Advertisers reveals that nearly 90 percent of advertisers it surveyed are “reviewing and resetting contracts and business models.” This equals out to about $2.9 billion worth of ad-spend under review.


There is hope, though. With any technology that’s cheap and efficient, there is always hope.


The lower-than-expected ad revenue deriving from programmatic advertising is being attributed to something understandable: A lack of experience. 24.6% of US publishers to a recent eMarketer survey claimed a “lack of sales expertise in selling programmatic” was the main factor that contributed to the price difference between direct and programmatic inventory.

Despite the reasons to give pause, however, the future of programmatic advertising is going to be bright.

After all, it’s convenient, and so long as the technology is built upon and perfected, which it will as trust in the software grows, it will become ubiquitous and a staple of every agency. Its success will lead to further adoption, which will lead to further competition, which will inevitably lead to further investment.

Plus, the main issue currently facing marketers, judging by the eMarketer survey, seems to be an overall lack of experience. This is an easily solvable issue that can be resolved with training.

Until then, agencies will continue to be wary of this new technology that still has its flaws. But its purpose is in the same vein as every other automation tool that has stepped onto the scene: Efficiency and convenience.

Is your agency using programmatic ad buying? What do you think of it? Let’s connect and talk about it!

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