Programmatic Advertising is the use of automation in buying and selling of media. Programmatic can apply to anything from display to digital out-of-home to connected television. Using Artificial Intelligence (AI) with first and third party data, computers decide which ads to buy and how much to pay for them, often in real time.
The advertiser carefully defines their target audience. Marketers can input demographics, behaviors and what they want the prospect to do. Then computers attempt to achieve those goals using data and artificial intelligence(AI). But how does it work?
What is Programmatic Advertising
In the early days of buying digital ads the advertiser defined who they wanted to reach and then made educated guesses as to where to find them. A manufacturer of weather-resistant outerwear bought advertising from the Weather Channel on weather.com. Very much a 1 to 1 relationship. And hardly a guarantee of in-market shoppers.
As the internet grew publishers such as weather.com found they had more advertising space than they could sell. They used ad networks to try and sell their excess inventory. Ad networks then created “verticals”, channels of advertising that had inventory of interest to a specific audience. Weather.com would be bundled with inventory on weather pages of radio and TV station websites. However, this fails to understand that a person who is interested in weather-resistant clothing may also be an avid cook, spending hours on Food.com.
What It Is
Enter programmatic advertising. We no longer plan our media buy on where we think our customers are. Instead, we focus on the overall marketing strategy and reach the audience we want where ever they go. Artificial intelligence technologies have algorithms that analyze a consumer’s behavior allowing for real time campaign optimizations towards an audience more likely to convert. Programmatic companies have the ability to gather this audience data and then target more precisely, whether it’s from 1st party data (their own) or from a 3rd party data provider.
One way that programmatic advertising works is with “look-alike” audiences. A retailer of refrigerators uploads all of the sales data on the last one thousand refrigerator customers in to a programmatic platform. That data is used to identify those purchasers on the web and develop a profile of their behavior. Ads are then served to other people on the web whose profiles and behaviors are similar.
As the algorithms collect data on who clicks and converts the program optimizes to whom it serves ads and the price it will pay. AI is continually working to improve performance towards the goals of the advertiser. And the advertiser no longer cares what website the ad displays on (within reason), just that the target is correct, and goals are achieved.
Programmatic is Everywhere
While programmatic advertising started as a way to liquidate excess display inventory the use has grown dramatically. Advertising can be bought programmatically on digital billboards and other outdoor screens. Streaming TV (Connected TV, OTT and digital pre-roll) are all bought using computer programs. Even streaming audio can be bought through platforms that incorporate AI.
Programmatic Advertising Benefits
Programmatic provides a number of advantages to advertisers. KPI’s are more carefully optimized. Improved performance against KPI’s increases ROI as it lowers the cost of conversions. As AI has success it can reduce bids to further save budget. Because optimizations are made towards specific goals programmatic provides improved audience insights. And of course, using AI allows easy scalability. Marketers can reach larger audiences faster.
With programmatic media buying advertisers no longer compartmentalize their marketing strategies. Instead, they can focus all efforts as an over-arching marketing plan. AI can combine multiple efforts to work simultaneously. The “machine-learning” from AI may shed new light on the advertiser’s audience and help improve marketing efforts to increase overall campaign performance, creating a more holistic marketing approach. This may seem futuristic. But, using technology advertisers decrease costs and increase Return on Investment. Now, every marketer should consider how AI can help improve their results.
