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Top 20 Most Burning Questions About Programmatic Advertising

Aug 3, 2020  ·  11 min read
Kate Novatska
Kate Novatska, Marketing expert at Epom

Is Google Ads programmatic? How to start your 1st programmatic campaign? How does the COVID-19 pandemic affect the future of programmatic? Is DMP still worthy to use when 3rd-party cookies are out of the game? 20 issues relevant in 2020, crystallized.

Marketers and website owners alike are abuzz about programmatic advertising these days. If you are new on the scene, or heck, maybe even if you have some experience, you may not understand exactly what programmatic advertising is, and how it is different for other forms of advertising you may have used in the past.

If you are looking to dip your toe in the pond or optimize your campaigns we have answered the top 20 burning questions about programmatic advertising to help you broaden your knowledge.

Contents:

1. What is Programmatic Advertising in Simple Understandable Terms?

Programmatic advertising is the automated buying and selling of online ads. The automated technology means that media buyers and publishers agree upon the price per impression via an auction.

Buyers use demand-side platforms (DSPs) to put in their highest bid, in real-time, competing against other buyers and wait to see if they come out on top. Publishers use supply-side platforms to manage their placements and call for an auction. This auction algorithm is called real-time bidding (RTB), which means that all buyers place their bids simultaneously, with no priority set for each advertiser, like it happens in waterfalling or direct.

Programmatic platforms are simple for all sides to use. Publishers define the audience of their site, and set price floors for their inventory. Advertisers define their target audience, specify what settings they require for their ad creative, and enter their CPM bid. Once everyone has set their parameters, the programmatic technology connects the right supply with the right demand, with no human interaction.

2. When Did Programmatic Advertising Start?

The very first online banner ad ran way back in 1994. This was the birth of ad tech, but programmatic advertising did not come until much later. There was nothing programmatic about the first online ad. However, this first-ever 468x60 banner built the template that advertisers would use for years to come.

There is no exact date to give the birth of programmatic advertising, it came slowly over time, between 2007 and 2010. During these years, ad exchanges such as Yahoo's Right Media and Google AdEX emerged. They used software that incorporated real-time bidding and kick-started a more efficient process of media buying.

A quick timeline of key dates in the history of programmatic advertising:

  • 1994 — First banner ad was displayed
  • 2005 — Early ad exchanges emerged
  • 2007 — First demand-side platform was built
  • 2008 — RTB protocol became an industry standard
  • 2020 — The golden age of ad tech is in full swing

3. What is the Difference Between Programmatic Advertising and Real-Time Bidding?

Programmatic advertising is a form of technology that automates media buying.

Real-time bidding is a protocol by which this technology is implemented.

The process of RTB in programmatic advertising follows the following steps:

  1. The RTB process begins when a user visits the publisher's website.
  2. This triggers an ad request from the user’s browser which is sent to the SSP.
  3. The SSP then analyzes the user information and passes it on to the ad exchange.
  4. The ad exchange passes the user information to the DSP.
  5. The DSP puts an RTB in on this user impression. The value of the bid is pre-set by the media buyer based on their target audience criteria.
  6. The highest bidder wins the impression.
  7. The highest bidders ad is presented to the user.

These steps are all taken in the blink of an eye. Before the webpage has loaded for the user the highest bidder will already have won the auction and their ad will load with the webpage.

4. What is the Connection Between Programmatic Advertising, DSP, DMP, Ad Exchange, and Ad Network?

Let's quickly run through the basic definitions of the above:

  • Programmatic advertising: is the automated buying and selling of online advertisements.
  • DSP: (demand-side platform) an advertiser’s tool for programmatic advertising.
  • DMP: (data management platform) gathers and consolidates data retrieved from all sources.
  • Ad exchange: a digital marketplace where advertisers and publishers buy and sell inventory.
  • Ad network: acts as a broker between groups of publishers and groups of advertisers.

The Connection Between DSP and DMP

A DSP is used by advertisers to launch their campaigns and buy traffic automatically. A DMP gathers and consolidates data anonymously and with an expiration date (of up to 90 days, which is the lifetime of a cookie). From this data, the DMP creates temporary user profiles without specifying names, but the connections between them remain probabilistic.

The Connection Between DSPs, Ad Exchanges and Ad Networks

Ad exchanges act as the middle link in the RTB process. Normally they are used by large ad tech firms to connect DSPs and SSPs and it is rare for publishers or advertisers to have direct access to an ad exchange.

In contrast, an ad network is an organization that manages your ad campaigns for you. They will mark up the costs for their management fee making prices of inventory higher and often publishers and advertisers do not have full control over their campaigns or the monetization of their inventory.

The major difference between a self-serve DSP and an ad network centers around the level of control advertisers and publishers have.

Ad Network Demand-side platform
Company Software
Managed by company's reps Self-service
Clients have no access to their campaigns Clients have full access and control over their campaigns

5. Is Programmatic Advertising the Future of the Industry?

Online advertising has now become the primary form of marketing for many businesses. Currently, the total ad spend in the U.S is over $129 billion per year, with over 86.3% of this total purchased through programmatic technology. So it's not the future, but actually the present.

Still, programmatic advertising accounts for a large chunk of the industry but it does not run it entirely. Media buyers have other options available to them and there is still plenty of room for negotiating fixed deals for your online display ads.

Direct media buying gives advertisers more control over the placements of advertisements and thus you can ensure they end up on high-quality sites. Ad fraud currently accounts for $1 of every $3 spent on digital ads as advertisers lose revenue and ads are presented to bots.

There are also advantages for publishers. As a publisher that uses direct media buying, you will always know which ads will be displayed on your website.

While programmatic may be the most widely adopted method of purchasing digital ads in the industry, there is still room for direct buying and many advertisers and publishers prefer this option due to the control that it offers.

Feature Direct with Ad Server Programmatic with a DSP
Principle of Work Manual + Automatic. Automatic.
Type of Auction No auction or waterfalling RTB auction
Type of Inventory Mostly premium Standard + Remnants
Source Name Known Unknown
Bulk Sales Possible Not possible
CPM Range Medium to high Medium to high

6. How Did Header Bidding Change Programmatic Advertising?

When programmatic advertising first emerged it used waterfall auctions. What this means is that publishers pre-established priority for the ad networks they used and the advertisers why worked with.

The platform that sells ad placements on a website would determine the customers (ad networks, direct advertisers) who want to buy their placements and sell their ads.

Direct media buying through the waterfall bidding model would have a priority purchase inventory. If the impression was not bought, the right is transferred to the next participant.

The approach was highly inefficient. Then came one of the most important advancements in ad tech — the header bidding auction. Unlike waterfall, header bidding involves a simultaneous auction. Publishers display their inventory at several ad exchanges. In turn, these ad exchanges allow multiple demand partners to bid on those “lots” at the same time.

In header bidding, the highest bid wins, while in a waterfall, the winning bid is the bid with the highest priority. This allows for far more premium inventory to be available to media buyers programmatically. For publishers, higher competition has also created more revenue. Both of these aspects are important for creating a sustainable advertising system.

7. Is Google Ads Programmatic Advertising?

Technically, Google Ads can be called a programmatic platform. However, it only offers users access to Google's own ad inventory.

In comparison, white-label DSPs, such as the one offered by Epom, can connect advertisers to any SSP of the users choosing, allowing them to buy traffic from anywhere.

Google Ads does utilize programmatic advertising and RTB and is close to a self-serve DSP in its nature. In a self-serve DSP, you can launch and track your campaigns, but run into in black box when it comes to deeper analytics.

Key differences between Google Ads and programmatic advertising include:

Google Ads Programmatic
Inventory limited to Google's ad network Inventory varies
1st-party data collected by Google 1st-party data + 3rd party data derived from DMPs
May be restricted in terms of ad formats Formats depend on a DSP you choose
Reporting is delayed by hours or even one day Real-time reporting & analytics

8. How Do I, as an Ad Network, Profit From Programmatic Advertising?

Ad networks have a huge potential to increase profits from programmatic advertising. By automating your media buying and inventory management you can instantly match your advertisers and publishers using demand and supply-side platforms thanks to real-time bidding.

Ad network RTB algorithm

Especially networks can benefit from white-label platforms. White-label platforms allow you to unite all partners in one place and save up to 30% of your ad spend, as you avoid bid markups set by most self-serve platforms. Also, you can create accounts for your clients and give them access to the limited functionality of the ad platform.

9. How Can I Implement Programmatic Advertising For My Company?

The easiest way for many companies to implement programmatic is to set up an account in a self-serve DSP and proceed to launching your 1st programmatic campaign. This is a straightforward process, where you:

simple programmatic implementation process

The launch of your first campaign takes no more than 30-60 minutes, including a self-serve DSP set-up.

10. How Can Advertisers Bring Programmatic Advertising In-House?

Programmatic in-housing is on the rise. According to an ANA study, 35% of brands reduced the role of external agencies for programmatic advertising in 2017, more than doubling the 14% rate reported in 2016. Depending on the size of your company and your advertising budget you will have various options for implementing programmatic advertising for your business.

After bringing your programmatic in-house, you will stop relying on any ad tech provider, have more control over campaigns and insights from your analytics, and literally be your own boss in every way. A great option for many businesses is to consider purchasing a white-label DSP.

This solution is completely customizable and allows you to control each aspect of your programmatic advertising. The setup of a white-label DSP takes less than a couple of hours if you already have your own SSP connections.

Benefits of in-house programmatic with a white-label DSP include:

  • Media buying in a single account
  • Zero investment into development
  • Zero fees to middlemen
  • Real-time analytics
  • Bidstream data integration

11. What are the Best Tools for Programmatic Advertising?

To implement programmatic for your brand, you will need some software. The main tool you will need is a DSP, which you will use to run, manage, and optimize programmatic campaigns.

DSPs come in both self-serve and white-label forms. The former means that you use some SaaS solution from the ad tech provider. These solutions are usually free, but charge you bid markups on top of your ad spend. Traffic sources are pre-defined by a provider as well.

A white-label DSP is a totally different story. With this, purchase the ownership of a platform and customize a DSP to meet your needs. This cuts out the middlemen and saves you up to 50% of your ad spend by removing bid markups. On top of that, you have full control of all traffic sources, as you are the one who manages SSP connections.

Self-Serve DSP White-Label DSP
3rd-party SaaS solution Full platform ownership
Free but with marked-up bids Technology fee, no markups
Pre-defined traffic sources Custom traffic sources

12. What Minimum Ad Spend is Recommended to Start with Programmatic Advertising?

Your minimum ad spend will differ depending on your business goals. If you are simply testing a new platform to gauge how well it may work for your business, you can start with a range of around a couple of thousand dollars.

However, if you are looking to get serious results, a good ROI and quality conversion, your ad spend may start at around $10,000.

If your business has a high budget, starting at around $20,000 or more, it makes sense to consider choosing a white-label DSP instead of a self-serve one for your programmatic advertisements.

A good rule of thumb to stick to is:

Min ad spend for programmatic

13. How to Set Up Your First Programmatic Campaign?

Despite the fact that you need a formidable budget to get all your programmatic activities up and running, setting up the first campaign is not rocket science.

This is a 3-step process that contains preparation, launch, and optimization.

1. Preparation 2. Launch 3. Optimization
Set campaign goals Set CPM and budget Analyze reports
Choose campaign type Define targeting options Adjust campaign settings
Sign up for a DSP Upload & adjust creative Utilize auto-optimization

During preparation, you set your advertising campaign goals. Those can be increasing brand awareness, obtaining more control over your CPMs, or getting more installs on your apps. Next, you choose the type of campaign depending on the creative you have. It can be banners, videos, native, or even rich media. Then, you sign up for a DSP and adjust the basic settings of your account.

During the launch stage, you set CPM and budget for your advertising campaign, define basic targeting options like language, geo, device, browser, etc. After this is done, you proceed to creative upload and adjustments, where you also set up banners targeting and frequency capping options. Lastly, you press launch.

But it's not over here. Next, you monitor your analytics and adjust your campaign settings accordingly. To maximize ad performance, I also recommend you to utilize auto-optimization tools, usually present in advanced DSPs and try running a retargeting campaign based on gathered data.

14. How to Bid on Traffic in a Programmatic Platform Properly?

Before launching a campaign itself, you have to make sure the RTB auction dynamics work properly from start to finish. You have to set up the SSP endpoint properly. Make sure you receive their bid request with all data required.

Next, you have to align targeting options to SSPs traffic and test CPMs to determine which price is enough to win impressions. Look to see if your impression beacon reports impressions, and how this data correlated with your supply partner's data.

The basic four-step process for setting up proper bidding on a programmatic ad platform is:

  1. Set up SSP Endpoint
  2. Align Targeting Options
  3. Test Bid Price
  4. Check the Impression Beacon.

Read more on how to bid on traffic properly in a white-label DSP.

15. What is the Most Common Purchase Model in Programmatic Advertising, CPM, CPC, or CPA?

The quick answer: It is surely the CPM pricing model.

RTB auction is tailored to CPM exclusively, and any other model will still be converted into CPM unless you use API to implement your programmatic advertising.

The long answer: DSPs use RTB protocol, so their algorithms calculate an estimated CPM If you set up CPC instead of a CPM. This algorithm is different in each DSP, but it roughly relies on the following formula:

CPM = CTR x CPC x 1000

Example:


Set CPC = $0.5
Predicted CTR = 0.01%
CPM = 0.5 x 0.01 x 1000 = $5

16. What Does a Programmatic Advertising Technology Company Do?

Ad tech companies, like Epom, create and sell tools that can be implemented to improve the process of setting up programmatic advertising campaigns. These tools can range from software such as demand- and supply-side platforms and ad servers to data management platforms.

In addition, ad tech companies often deliver their expertise to ad agencies and ad networks through consulting services. Many also sell their software to clients as white-label solutions.

In simple terms, the main roles that ad tech companies take on are:

  • Developing and maintaining programmatic technology
  • Delivering ad tech tools to boost performance
  • Offering agency and ad network services
  • Selling their technology as a white-label solutions
  • Supporting and consulting on the ad tech issues

17. How Does the COVID-19 Pandemic Affect the Future of Programmatic

The COVID-19 pandemic has hit many industries hard, across the globe. Many of you may already be feeling the immediate effects of the pandemic. Some verticals are rising, others are falling and CPMs have seen a big drop. A lot of advertisers have cut their ad spend, with 24% pausing campaigns indefinitely. Publishers are then feeling the hit on their bottom line as there has been a 40% decrease in revenue since the beginning of the pandemic. Not to mention, the evolution of the industry has ground to a halt.

Looking to the long term, advertisers are changing their targeting approaches. The platforms they are using and ad formats have to be adapted to the times. For example, as many states implement lockdown orders and people are staying at home, there has been a large rise in the number of viewers for Connected TV. Programmatic TV ad spend grew by 40% in April and May of 2020. But this is a trend that looks like it is here to stay, even as many lockdown orders are easing as we enter July and August, CTV viewing has remained the same, although linear TV viewing has dropped.

Connected TV survey

18. Is DMP Still Relevant in 2020 When Third-Party Cookies are Blocked by Browsers?

The use of DMPs is declining right now, as advertisers shift to Customer Data Platforms and other tools that allow them to utilize 1st-party data. But I'm sure that DMPs will evolve and re-architect their algorithms to collect consented, PII data and transfer it to programmatic platforms without the need to define anonymous segments. There are projects like IAB Project Rearc that are currently working on defining technical guidelines for the 1st-party era.

One of the ways to collect PII data proposed by Google is a so-called Federated Learning of Cohorts. Cohort solutions are focused on local data processing and use machine learning algorithms that run on the device to group people into audience segments based on behavior such as browser history. The idea is to improve privacy by letting advertiser target groups of users based on common interests, rather than using a pseudonymous identifier for each individual user.

19. Will the GDPR Force Programmatic Advertising to Evolve in the Following Years?

GDPR was adopted in Europe on April 16th, 2016. Since then it has aroused some challenges for advertisers and meant many have had to rethink how they collect data with consent.

In pursuit of PII, consented data advertisers will:

  • Have fewer targets, but more relevant ones. Consent will likely mean that advertisers will have fewer profiles but the ones they get will be richer in data and allow them to make highly targeted campaigns.
  • Use advanced approaches to personalization. Only those visitors with intent to buy or who view the site as users are likely to accept cookies. Ads will become hyper-personalized and bring leads of a much better quality than before.
  • Utilize omnichannel programmatic. This means that planning can be driven by the relevant audiences, rather than being led by channels, therefore more effective campaigns can be measured and delivered.

20. What are Some of the Best Sources to Learn About Programmatic Advertising?

There are a ton of great resources out there if you are looking to learn more about programmatic advertising. The first we would recommend is the Epom blog. There are hundreds of articles covering all kinds of topics relevant to ad tech and programmatic advertising. The blog posts are highly detailed and easy to digest, where we break down each ad tech concept to the smallest detail and make programmatic understandable even for starters.

For those who're more interested in the tech side of programmatic, the next stop is Clearcode's blog. It's a technology insider into the world of digital advertising, one of their greatest achievements is a long-form ad tech book consisting of 15 chapters.

Most advanced industry professionals will delight from reading AdExchanger. Here you'll find relevant industry news, leader opinions, and programmatic advertising trends.

To Sum Up

With over 80% of digital display marketing in the US done by programmatic advertising, most marketers are turning to programmatic for their ad campaigns and the future is bright for the industry. If you are excited to try programmatic advertising, it's important to go into it with a clear understanding. The above questions give you a quick intro to every burning issue you could have about programmatic and help you get the most out of your ad campaigns.

Want to go even further than just knowing all about programmatic in 2020? Feel the full potential of the technology with a white-label DSP! First 14 days free.

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