Programmatic advertising: what is it and what are its benefits?

The world of online advertising has radically changed in recent years thanks to technology and the use of big data ; there are endless methods to reach target audiences.

The question is no longer whether to advertise on the internet or not; the question is how to do it. One of the most used methods is through programmatic advertising. In this article we will analyze the main differences between programmatic advertising and real time bidding (RTB) , as well as the benefits of investing resources in these techniques.

According to the definition proposed by the Interactive Advertising Bureau (IAB Spain) association, programmatic advertising is “the execution of the purchase of online media through bids or stable offers through methodologies based on algorithms that define the terms of demand and they are capable of executing the most appropriate purchase for the campaign objectives, defined in terms of profiles, price, value or any other parameter set by the buyer and whose execution is carried out in real time ”.

This concept is no longer alien to marketing professionals , especially now that substantial increases are expected in advertising markets. In the United States, according to eMarketer , it is estimated that 81% of the digital advertising budget in 2018 will be invested in this ecosystem. Likewise, in Spain it is very probable that the purchase of programmatic advertising will present a growth of more than 35% .

The main reason for these growths is a paradigm shift: it is not only about hiring display spaces for our advertising, but about generating and activating audiences . Based on our own or third-party data, we can address target audiences with a greater affinity to our brand or with a greater probability of purchasing the products and services we offer.

Differences between programmatic advertising and ‘real time bidding’ (RTB)

Before continuing to explore the benefits of programmatic advertising in depth, it is important to clarify concepts. You’ve probably heard of real time bidding or RTB, and may have doubts regarding its link to programmatic advertising.

Broadly speaking, we could say that RTB is a type of programmatic advertising. As we said at the beginning of the article, programmatic advertising refers to the purchase of advertising space on the internet in a fully automated way. This is done thanks to the combination of technology, data and algorithms that set prices in an auction.

Types of programmatic advertising

There are mainly four types of programmatic advertising: preferred deals , private auction, the traditional automated method or RTB, the most used.

‘Real time bidding’ or RTB: real time bidding

RTB is the type of programmatic advertising that is most used today and the one that is most based on the typical auction concept. Automatically and in real time, the RTB is capable of displaying segmented and personalized advertising to the target audience or the buyer persona of the contracting company, all in a totally open and automatic way.

‘Private marketplace’ or PMP: private auction

PMPs also function as an auction, but the main difference from RTB is that PMPs are private: an invitation is required to participate. One of the advantages of this method is that the advertiser is able to know exactly where their ads are running .

‘Programmatic direct’: the traditional automated method

The ‘programmatic direct’ is the most common programmatic advertising modality. In this case, the typical advertising arrangements are used in which both the advertising space and the price are fixed in advance .

‘Preferred deals’: unreserved space at a fixed price

The ‘preferred deals’ is a type of programmatic advertising halfway between the RTB and the ‘programmatic direct’. Although there is a fixed price, that is, there is no auction, the purchase is not guaranteed. The publishers propose a price to advertisers before selling their spaces through the RTB.

The benefits and impact of programmatic advertising on the business

Through the use of different technologies that include machine learning , the automation of the purchase of advertising reduces management times, improves contracting processes, and provides transparency and the possibility of comparing market prices.

This sounds great, but the most interesting benefit for advertisers is the increase in traffic indicators and campaign conversion, that is, the improvement of marketing ROI . At this point, the most important key is the ability to use data that allows us to make a match between the target audience, the advertising medium and the context.

Market studies of digital advertising in the United States, such as Enders Analysis, have found significant improvements, especially when purchasing programmatic advertising is combined with native advertising . The visibility of these ads exceeds that of the traditional banner by more than 50% and they have a CTR three times higher on mobile devices.

In addition to optimizing results and improving the affinity of the campaign to the target, programmatic advertising provides greater control of analytics , which facilitates learning and continuous improvement.

Data activation in programmatic advertising

Data is essential for the purchase of programmatic advertising and is classified into three groups: first party data, second party data and third party data .

The first party data is the set of data that the company collects directly in its digital assets and in its interaction with customers and users. We are talking about high quality data, but not always with the necessary volume to feed a campaign plan in digital media.

The second party data are the first party data a company can sell to another. The purchasing company obtains the data directly from the source, without intermediaries, and agreements are established in which the quality and the specific use that can be made of the data are controlled.

Finally, third party data is the data that can be injected to audiences of programmatic advertising campaigns and that is generally collected and segmented by an aggregator. In this case, the source is generally unknown and it is large volumes of data categorized according to the standards of each industry and by attributes that can include behavior, interests, age, gender, etc.

Some usage examples

Among the sectors with the highest activity in programmatic advertising, we find the tourism sector, the retail sector and the financial sector. They are undoubtedly sectors that have made greater progress in their digital transformation processes , but they are also aware of the importance of using data to better segment their audiences and to offer increasingly personalized and timely advertising. In these areas, there is great potential for the establishment of agreements, always within the GDPR regulations, that allow advertising campaigns to be made more efficient.

There are synergies, for example, between the digital assets of a hotel chain, a travel agency or comparator and an airline. The knowledge of the cookies of people who have visited the airline’s website several times and who are interested in a trip to Menorca, can be used by the hotel chain by purchasing programmatic advertising in a digital advertising campaign with offers of accommodation in Menorca.

Companies in the financial sector, whether banking or insurance, are also already working with this type of advertising. Take, for example, improving the conversion of a mortgage campaign. Through programmatic buying, we can direct the campaign to people who are looking for houses on a specialized website and further refine the audience, including people who have used the mortgage simulator or those who are already clients of the financial institution that launches the campaign. . Each additional piece of information has the potential to increase conversion.

In conclusion, programmatic advertising offers us a way to optimize the results of digital advertising campaigns. By automating and activating own and third party data; We can go from buying media to buying audiences, achieving higher rates of visibility and conversion.