What is Programmatic Advertising?
Programmatic advertising is a major buzz term in the industry – and rightfully so, according to Melissa Lopez, CEO of Katana, who recently spoke at the LeadsCon Conference in New York. Programmatic is quickly growing. Over 98% of publishers offer their inventory via programmatic buying, and programmatic ads were nearly half of purchased U.S. display inventory in 2014.
Lopez believes that marketers can benefit from gaining some deeper insights into how programmatic works and how they can maximize what they’re currently doing, including expanding into new channels with a more controlled approach.
The Programmatic Ecosystem: DSPs
The first portion of Lopez’s presentation focused on the programmatic ecosystem. In order to setup for success, marketers need to understand that each Demand Site Platform (DSP) does not necessarily have access to or the same privileges with the same publisher ad inventories. This means that each DSP can have different privileges in regards to:
- Which ad units it can offer
- How quickly it can offer a particular ad unit over another
- How much access they have to specialized inventories like radio and video
This means that marketers will be more successful if they use multiple DSPs. That being said, marketers should check themselves, or with their programmatic partner, to determine what capabilities multi-DSP platforms have.
The Programmatic Ecosystem: DMPs
Lopez continued the LeadsCon presentation by mentioning the importance of the Data Management Platform (DMP), which is the central data warehouse for all campaign data.
“The overarching purpose of the DMP is to provide your programmatic campaigns with finite audience analysis and targeting abilities. A DMP has the ability to normalize data and cross-reference it for necessary audience needs,” said Lopez.
Marketers should add both first-party (“your own data”) and third-party data (data licensed from third-party data providers) into the DMP. The purpose of this data is the ability to target users across any and all programmatic inventory channels. The type of data that is accessible to advertisers include:
- Purchasing data
- Interest data
- Behavioral data
- Social graph data
Marketers need to be cautious about data. Lopez recommends that marketers should have a strong methodology when it comes to using third-party data. They should only use current data and data that can be found across two or more sources.
Addressing Programmatic Skepticism
Lopez explained that a major barrier to using programmatic is that marketers new to the platform fear fraudulent ad spend. Fraud exists across all types of ad serving platforms, but Lopez acknowledges that some of the fraud findings in programmatic is above average.
That being said, Lopez explained: “Programmatic has– compared to any other buying methodology– the most sophisticated technologies to identify, monitor and exclude fraud from campaigns.” Additionally, the fraud that does exist can be greatly diminished by, “properly monitoring and optimizing against unprofitable ad placements.”
Why You Should Consider Programmatic
Lopez laid out the four core reasons why programmatic is highly attractive as an ad buying method:
- Ability to utilize a high level of audience data for targeting
- Ability to optimize better and more than ever across ad channels
- Automated and efficient of purchasing programmatic inventory has decreased ad costs significantly for marketers
- Ability for making turns, starts and stops, and having complete control over ad inventories
Programmatic is making the ad exchange world more transparent. No longer can providers arbitrarily markup ad inventory. Still marketers need to be vigilant. Lopez recommends the following to provide an edge:
- Ask for an access point to inventory
- Ask the hard margin question about how much is added to bid-clearing price (the price paid in the auction)
- Establish an average CPM ceiling (price where the average of all traded CPMs will not surpass a certain ceiling) with upside (the provider will pass on any savings to the marketer when the average falls below the ceiling)
To summarize her presentation at LeadsCon, Lopez laid out the following points:
- The atmosphere is ripe to move beyond paid search and affiliate practices.
- Programmatic reduces dependency, and it allows for scalable campaigns.
- While programmatic is automated, it still requires daily optimization, and data and audience modeling to truly take advantage of its potential.
- Bottom of the funnel, direct response advertisers can benefit from the quick fixes allowed by programmatic.
- Most lead generation marketers have not fully tapped into the available reach scale since they’re still ignoring the “system-wide impact” of programmatic and the possibility of multi-touch conversions.