Programmatic advertising is a method of purchasing ad space on websites through programmatic ad platforms that automatically match advertisers with available inventory.
Maximizing your marketing efforts often involves trial and error. Your ad campaigns must reach the right audience at the right time and place. In traditional ad buying, this process is manual, with marketers bidding on placements where they want their ads to appear, whether online or offline. However, this can be time-consuming and resource-intensive. Fortunately, programmatic advertising has revolutionized the process.
Programmatic advertising allows marketers to automatically deliver ads to specific segments of their target audience across the internet, often in real time. Instead of manually selecting individual websites, you can place ads where your customers are most likely to be. It’s no surprise that programmatic advertising is projected to account for nearly 85% of global digital ad spend by 2029.
Discover how programmatic advertising works and how to leverage it for your upcoming ad campaign.
What is Programmatic Advertising?
Programmatic advertising, or programmatic media buying, refers to purchasing ad space on websites through programmatic advertising platforms. Ads can appear in a variety of online locations, including websites, search engines, and social media. Typically, programmatic advertising focuses on ads placed on websites via display networks such as Google Display Network (GDN), but the practice extends across the entire internet. In essence, it automates the process of how and when marketers show ads online.
Traditionally, media buying required marketers to manually adjust placements and bids. They would select websites, set bids, and modify them based on performance. With programmatic advertising, marketers simply define parameters like budget, audience, and campaign objectives, then let the platform’s algorithm handle the rest.
Components of Programmatic Advertising
Programmatic advertising has three key components:
- Ad Exchanges
- Supply-Side Platforms (SSPs)
- Demand-Side Platforms (DSPs)
Ad Exchanges
Ad exchanges facilitate transactions between SSPs and DSPs by selling ad inventory to the highest bidder through real-time bidding (RTB).
The ad exchange matches the bidder’s parameters to available inventory, ensuring the right ad (demand) is displayed in the right placement (supply). This process occurs in milliseconds, making it faster and more accurate than manual bidding. Essentially, ad exchanges act as intermediaries between publishers (supply) and advertisers (demand).
Examples of ad exchanges include:
- Google Ad Exchange
- Amazon
- Xander (Microsoft)
Supply-Side Platforms (SSPs)
SSPs help publishers manage and sell their ad spaces by connecting with multiple ad exchanges. SSPs provide a centralized platform for publishers to set bidding ranges and control the types of paid ads that appear on their sites.
Examples of SSPs include:
- Google Ad Manager
- Amazon Publisher Services
- StackAdapt
Demand-Side Platforms (DSPs)
A DSP is where marketers create programmatic ad campaigns. These platforms automate the ad-buying process, allowing marketers to define campaign parameters like targeting, exclusions, and budget. DSPs place ads across multiple ad exchanges in real-time based on the campaign goals and audience targeting.
Examples of DSPs include:
- Google Display & Video 360
- Amazon Advertising
- Adobe Advertising Cloud
A comprehensive ad network like Google includes all three elements: Google Ad Exchange, Google Ad Manager (SSP), and Google Display & Video 360 (DSP).
Tips for Successful Programmatic Advertising
- Set Clear Targeting Parameters
- Optimize for the Right Conversion
- Avoid Fraud
- Avoid Placement on Low-Quality Sites
- Leverage Customer Data
Set Clear Targeting Parameters
Unlike traditional advertising, where marketers choose specific websites, programmatic advertising allows you to choose your ideal audience and let the platform find them. You can set targeting parameters such as:
- Demographics (age, gender, income, education, etc.)
- Interest profiles (fitness, tech, travel, etc.)
- Behaviors (browsing history, purchasing patterns)
- Geographic locations (broad or hyper-local)
- Devices (mobile, desktop, etc.)
Using these advanced targeting options ensures your programmatic ads are seen by the most relevant audience, reducing wasted spend.
Optimize for the Right Conversion
Your conversion goal influences how the algorithm allocates your budget. Choosing the right conversion goal allows the platform to make informed decisions about which users to target and which ads to bid on. Wrong choices can lead to traffic misalignment.
Conversion goals may include:
- Increasing purchases
- Generating leads
- Driving engagement actions (e.g., visits to specific pages)
Align your conversion goals with your business objectives. For example, for brand awareness, you may prioritize video views or clicks. For direct revenue, focus on purchase conversions.
Avoid Fraud
While programmatic advertising offers control over targeting, you don’t always have control over ad placements. This opens the door for fraudulent activities like bot clicks, which can drive up costs without generating real engagement.
Platforms provide tools to combat fraud, but integrating additional fraud detection tools, like ClickCease or Fraud Blocker, can help identify suspicious activities such as repetitive clicks from the same IP.
Avoid Placement on Low-Quality Sites
Since you don’t always choose where your ads appear, there is a risk of placements on irrelevant or harmful websites. Most programmatic platforms offer exclusions for certain categories, ensuring your ads don’t appear on sites with sensitive content (gambling, politics, etc.).
You can also upload domain exclusions to avoid specific URLs or use keyword exclusions to block certain types of content.
Leverage Customer Data
DSPs allow you to upload customer data and Target lookalike audiences. For example, Shopify merchants can use Shopify Audiences to create lists of potential customers who are likely to purchase their products.
Shopify’s product director Andrius Baranauskas shared a case where the bath and body care company Happy Hippo reduced acquisition costs by 70% and achieved a 200% increase in conversion rates by using Shopify Audiences.
Programmatic Advertising FAQ
What are the Drawbacks of Programmatic Advertising?
Programmatic advertising provides greater control over targeting but limits your control over individual ad placements. Other concerns include data privacy and the risk of ad fraud.
Is Google Ads Programmatic?
While Google Ads has automated elements (like smart bidding), it is not considered a programmatic platform. Google Display Network (via Google Ad Exchange) is the platform where programmatic ads are purchased.
What’s the Difference Between Digital Advertising and Programmatic Advertising?
Digital advertising encompasses all online ads (websites, social media, search engines). Programmatic advertising is a subset, focusing on automating ad purchases through ad exchanges, SSPs, DSPs, and real-time bidding.
