Making the most of your marketing efforts takes trial and error. Your ad campaigns must reach the right people at the right time in the right place. In traditional ad buying, this process is manual, with marketers bidding on the placements where they want their ads to appear—online or offline. This process, however, can take time and effort. Thankfully, programmatic advertising has changed the game.
Programmatic advertising allows marketers to automatically serve ads to specific segments of your target audience across the internet—all within seconds. Instead of buying ads on websites individually, you can buy ads wherever the data shows your customers visit. It’s no wonder programmatic advertising is projected to make up nearly 85% of the digital ad spend worldwide by 2029.
Learn how programmatic advertising works and how to leverage it for your next ad campaign.
What is programmatic advertising?
Programmatic advertising, or programmatic media buying, is a method of buying ad space on websites via programmatic advertising platforms. There are many places where ads can appear online, including websites, search engines, and social media. Typically, programmatic advertising refers to ads placed in online publications through display networks such as Google Display Network (GDN). But the practice of programmatic advertising can apply anywhere on the Internet. Put simply, it’s the practice of automating how and when marketers show their ads online.
Traditionally, media buying involved marketers manually adjusting ad placements and bids. They would choose particular websites, set bids, and adjust them based on performance. With programmatic advertising, marketers instead set top-level parameters like budget, target audience, and campaign goals, then let the programmatic platform’s algorithm do the rest.
Components of programmatic advertising
Programmatic advertising has three components:
Ad exchanges
Ad exchanges facilitate transactions between SSPs and DSPs by selling ad inventory to the highest bidder. This is done through an automated process called real-time bidding (RTB).
The ad exchange matches the bidder’s parameters to available placements, matching the right inventory (supply) with the right advertiser (demand). This process happens within milliseconds, making it faster and more accurate than manual bidding. Essentially, ad exchanges are the facilitator between supply (publications) and demand (advertisers).
Some examples of ad exchanges include:
- Google Ad Exchange
- Amazon
- Xander (Microsoft)
Supply-side platforms
A supply-side platform (SSP) helps websites manage and sell ad spaces by connecting them with multiple ad exchanges. SSPs give publishers a central location to set bidding ranges for their ad inventory and control the types of paid ads displayed on their websites.
Some examples of SSPs include:
- Google Ad Manager
- Amazon Publisher Services
- StackAdapt
Demand-side platforms
A demand-side platform (DSP) is where a marketer goes to create their programmatic ad campaigns. It allows marketers to automate the ad-buying process. In a DSP, marketers set up ad campaigns with specific parameters like audience targeting, exclusions, and budget. Marketers bid on and purchase ad inventory across multiple ad exchanges in real-time. The DSP uses algorithms to place ads on relevant websites with the highest impact.
Some examples of DSPs include:
- Google Display & Video 360
- Amazon Advertising
- Adobe Advertising Cloud
A complete ad network, such as Google, includes all three elements: Google Ad Exchange, Google Ad Manager (SSP), Google Display and Video 360 (DSP).
Tips for successful programmatic advertising
- Set clear targeting parameters
- Optimize for the right conversion
- Avoid fraud
- Avoid placement on junk sites
- Leverage customer data
Consider these best practices when developing a programmatic advertising process for your business:
Set clear targeting parameters
Unlike traditional advertising, where marketers choose to advertise on specific websites, programmatic advertising allows you to choose your ideal audiences and then finds them. You simply instruct the platform: “I want people who fit this profile—find more of them.”
DSPs allow you to set audience parameters, including:
- Demographics, including age, gender, income, education level, etc.
- Interest profiles like fitness enthusiasts, tech pros, or travelers
- Behaviors like browsing and purchasing history
- Geographic location from broad to hyper-local areas
- Devices used like desktop or mobile
Parameters can be layered, resulting in hyper-specific personas. Making use of these advanced targeting capabilities ensures your programmatic ads are placed where your audience is most active and engaged. That way you don’t waste ad spend on reaching irrelevant users.
Optimize for the right conversion
Your conversion goal determines how the algorithm will allocate your budget. Optimizing for the right conversion allows the algorithm to make more informed decisions about which users to target and which ads to bid on. If you choose the wrong goal, your ad may drive the wrong traffic to your website.
Conversion goals can include:
- Increase purchases
- Increase leads
- Increase engagement actions (such as collection page visits)
Align your goals with business objectives. For example, if your goal is brand awareness, your conversion might be video views or click-throughs. If revenue is your north star, optimize for purchases.
Avoid fraud
While programmatic advertising gives you a high level of control over the types of people to target, you don’t have control over which websites your ad is placed on. This means there’s potential for inflated bot clicks or click fraud, which mimic human interactions and drive the ad costs up without real interactions.
Programmatic advertising platforms help marketers try to prevent fraud, but they aren’t perfect. A good way to avoid fraud is by using a fraud detection tool like ClickCease or Fraud Blocker. These tools integrate with programmatic ad platforms like Google Ads and identify suspicious activity, like repeated clicks from the same IP address. They also block invalid traffic and IP addresses that may be linked to fraud or malicious competitor activity.
Avoid placement on junk sites
Since you can’t choose the websites on which your ads are placed, there’s some risk of ending up on a site that doesn’t align with your brand values. Most programmatic advertising platforms offer category exclusions, which avoid placing your ad on websites with sensitive content (like gambling or politics).
You can also choose specific domain exclusions by uploading a list of URLs to your DSP to prevent your ads from being served on them. You can also do keyword exclusions to avoid ad placements on pages containing specific controversial content.
Leverage customer data
DSPs allow you to upload customer data lists, then find more users with similar traits—similar to lookalike audiences on platforms like Facebook Ads. If you’re a Shopify merchant, you can also use Shopify Audiences to generate lists of potential customers likely to buy your product. Shopify Audiences is available for businesses on Shopify Plus.
“We help merchants run their existing campaigns on existing channels better,” Andrius Baranauskas, Shopify’s director of product, says on an episode of the Shopify Masters podcast.
Andrius recounts the success that bath and body care company Happy Hippo found.
“They reached 70% lower cost to acquire new customers and [nearly] five times return on ad spend by leveraging the Shopify Audience product,” said Andrius.
Happy Hippo also saw an 86% gain in new customers, a 200% increase in conversion rate, and a 51% lower cost per thousand advertising impressions (CPM) for its ad campaigns.
Programmatic advertising FAQ
What are some drawbacks of programmatic advertising?
One of the main drawbacks to programmatic advertising is the limited control your business has over individual ad placements, as algorithms do that work for you. Other drawbacks can include data privacy and potential ad fraud concerns.
Is Google Ads programmatic?
While Google Ads has programmatic elements (like automated and smart bidding), it is not considered a programmatic platform. Google Display Network (facilitated by Google Ad Exchange) is Google’s programmatic platform. This is where marketers can access various demand-side platforms (DSPs) to buy ad inventory.
What is the difference between digital advertising and programmatic advertising?
Digital advertising is the broadest definition—it refers to any online advertising on websites, social media, or search engines. Programmatic advertising is a more specific subset of digital advertising, which involves buying ad space using software like ad exchanges, server-side platforms (SSPs), demand-side platforms (DSPs), and algorithms for real-time bidding.
