Get With the Program: 2014's Shift Toward Programmatic Buying

Programmatic-Buying (4)

By Renee Brown, Media Manager

Programmatic buying is the process of executing media buys in an automated fashion through digital platforms such as: exchanges, trading desks, and demand-side platform (DSPs).  This method replaces the traditional use of manual RFPs, negotiations, and insertion orders to purchase digital media.  Programmatic buying allows you to bid on ad inventory (in real-time), to show one specific ad to one consumer, in one specific context.

 What is RTB? Programmatic buying allows you to bid on an individual ad impression, or real-time bidding (RTB).  The entire process happens within milliseconds and is typically done within a demand source such as an: exchange, DSP, etc.  RTB occurs through the following method:
  • RTB starts with a user clicking to a page on a publishers website and the opportunity to serve an ad is created
  • While the page is loading the publisher sends out a bid request for an ad to be served
  • The request includes information relating to the impressions (user IP, browser language, demographics, etc.)
  • Based on the attributes, the demand source calculates the value of the impression
  • Using internal algorithms the source decides how much to bid
  • A winner is announced and the ad is then displayed on the page
What is a DSP? A Demand Side Platform (DSP) is the tool that allows advertisers to utilize programmatic buying.  The DSP does the following:
  • Aggregates inventory from a variety of sites/exchanges/networks
    • All placements are managed within one interface allowing for convenient optimizations and reporting
  • DSP statisticians create a personalized algorithm based on targeting needs that is then used to optimize the campaign
  • Using the algorithm, the DSP does real time bidding (RTB) on each user based on how closely they “match” the ideal target prospect
    • It bids higher on users who will be influenced most by the ad
  • Based on the campaign’s Key Performance Indicators, the DSP will optimize to improve performance and cost per action
What’s the value of Programmatic Buying? Each of the following are some of the benefits of utilizing Programmatic Buying:
  • Expands reach and cost savings
    • Purchase ad inventory across multiple sources.  If two ad exchanges are selling the same inventory at a different cost, the DSP will allow you to purchase from the lowest cost exchange
  • Integration with retargeting
    • Utilize retargeting across multiple exchanges, expands the reach of your retargeting efforts
    • Utilize search, site, and Facebook exchange retargeting
  • Uses 1st and 3rd party data to reach the right user
    • First-party data can be obtained from a client’s internal marketing systems such as: website visits, website actions, email databases, loyalty programs, CRM systems, transaction systems, etc.
    • Third-party data is pulled in from DMPs (data management platform) such as: BlueKai, Exelate, etc.
      • The DMPs pull in attributes such as: psychographics, behavioral data, and demographics
  • DSP algorithm optimizes towards goals
    • Ability to set goal CPA and optimize towards any action/conversion, etc.
  • Low price and low entry cost
    • You can typically launch a campaign with a DSP for as low as $5K minimum budget
    • Set max CPM bid (typical max CPM bids are set around $4-$5)
    • Actualized CPM typically ends up being below max bid ($1-$3)
What’s the future of Programmatic Buying? We are already seeing a steady increase of advertisers and marketers increasing their programmatic buying.  Additionally programmatic buying is now moving into other channels such as video and mobile.  Additionally, it is rumored that eventually there may be a Premium Programmatic Buying offering which would allow advertisers to purchase premium ad inventory in real-time.

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