What is Programmatic Advertising? How does it works?

The use of Artificial intelligence and machine learning to purchase the ads in real time, as a replacement of following the standard negotiations and pre-set bids.

In 2018, 80% of the advertisers have spent their advertising budget via programmatic advertising in United States. This number shows how new technology is impacting advertisers to spend their budget in order to reach their desired audience.

In short, the programmatic advertising is a way of automatically buying and optimizing the digital campaigns instead of buying directly from the publishers or agencies.

The buying process is replaced with the human negotiations with programmatic approach. The goal of replacing the human intervention is to increase the efficiency and transparency to both the advertiser and publishers. The transactions done through real time auctions when the website visitor loads a web page.

Introduction of programmatic advertising has reduced the traditional digital marketing practices that advertisers and publishers were following from a few years. It is offering the relevant publishers to the advertisers to promote their products and connecting the relevant advertisers to publisher the desired ads on the web pages to increase the user engagement.

Here’s an article to know more about What is Ad Exchange and how does it works?

About programmatic advertising

The programmatic advertising is also known as programmatic display advertising, which is automatic process of media planning, buying and selling the inventories. The ad inventory is an ad space available for the advertisers to publish the ads.

The publisher’s sales team used to contact the advertisers sell the available ad inventory by following these steps.

• Requesting for proposals: This is an initial process of procuring the ad inventory
  
  
• Bidding: It is a process of offering the certain price during the auction
  
  
• Quotation: Sharing the estimated price for displaying the ad with the advertiser.
  
  
• Human negotiation: Negotiating with the advertisers to come to an agreement of serving the ads by paying the agreed fee for the publisher.

The programmatic advertising platform is a software enabled program for purchasing the digital advertising. The programmatic allows for preparing the insertion order (IO) and ad tags using the software to publish the ads on the publisher’s websites.

The Insertion Order or IO is a written authorization to publish the ads on a website. It includes;

• Information regarding the date of displaying the ads
  
  
• Number of ads will be published during a specific period
  
  
• Ad format and Ad sizes
  
  
• Placement of ad where it is serving on the website

In a specific term, it is a purchase order of ad inventory. The IO will be issuing by an ad agency or a media representative. It was a human effort to prepare prior to programmatic advertising, However, the new system can effectively take the below tasks;

• Distribution of insertion order to the publishers
  
  
• Tracking the ad tags shared with the publishers

However, there is a human effort required on optimizing the ad campaigns to meet the set targets and plan strategies to reach the desired audience.

How Does Programmatic Advertising Works?

Here’s how the programmatic advertising works.

• Visitor visits the web page
  
  
• The ad slot calls the ad server to publish the ads based on the user the behavior
  
  
• Ad server send a call through Supply Side Platform (SSP) to the relevant advertisers to bid for the impression
  
  
• The advertiser will review the user details and bid for the ad impression available through Demand Side Platform (DSP)
  
  
• The highest bidder wins the ad impression and get a chance to serve the ads
  
  
• The ad server will serve the selected ad on the web page.

In spite of many steps involved, the entire process happens in less than a second time. The competing bids will be calculating by algorithms and ad serving platforms will automatically determine the most cost effective bid to select and allow advertiser to serve the ad.

Conclusion: The programmatic advertising a most effective way of online advertising compared to the traditional adverting. The advertisers and publishers will connect through ad exchanges and programmatically completes the transaction.