• Aleksander Mitrovic

What is programmatic advertising? Definition and application in B2B marketing

Programmatic advertising - the term is on everyone's lips, but few marketers really have a clear idea of ​​it. It's not that complicated at all. We have dealt with this topic, give a definition and show you the functionality and use cases of programmatic advertising in B2B marketing.

Programmatic advertising is currently the fastest growing segment in the display advertising market and is booming. Many marketers see programmatic advertising as the future of online advertising. Programmatic advertising is already playing an important role in online marketing and a large proportion of all display ads are booked through it.

Definition and areas of application of programmatic advertising

The term programmatic advertising comes from online marketing and describes the data-supported, automated and individualized purchase and sale or the auctioning of digital advertising space in order to be able to display individualized advertising to potential customers in real time.

In summary, this means: With the help of programmatic software solutions, programmatic advertising achieves optimal performance and reach of online campaigns for a lower budget. It analyzes and optimizes the ads based on the preferences of the target group and adjusts bids in real time.

Functionality and actors of programmatic advertising

The basic terms of programmatic advertising can seem confusing at first. In principle, however, the functionality is easy to explain: In programmatic advertising, there is a buyer or demand side, and a seller or supply side, the sell side. An automated pricing process takes place between the two sides.

The demand-side platform and the sell-side platform provide technical support for advertisers and agencies as well as for website owners and marketers and contribute to optimizing added value.

Programmatic advertising system

The programmatic advertising system at a glance

Let's take a closer look at the programmatic advertising ecosystem and the actors involved: Programmatic advertising takes place as part of an ad exchange, an online marketplace for automated advertising. This is where publishers and advertisers place supply and demand. The following platforms can be distinguished:

  • Demand Side Platform (DSP): The DSP is the technological basis for the automated, data-driven purchase of individual advertising contacts and the control of advertising placements on the demand side, i.e. those who want to buy advertising space. The demand-side platform checks whether the available inventories are suitable and also evaluates incoming data. The aim is to generate the best offer.

  • Sell ​​Side Platform (SSP): The Sell Side Platform is the technological basis for the supply side and makes advertising inventory available for automated ad trading, i.e. advertisers / publishers offer their advertising space there. The sell side platform also optimizes the revenue for each individual advertising contact. Defined rules help with this. Publishers offer their advertising space on the platform. These advertising placements and details of the publisher are listed on the demand-side platform via the sell-side platform.

  • The data management platform (DMP) is a platform with which data volumes can be collected, managed and made available. This can take the form of target group segments, for example. It provides important data on user profiles for the purchase decision of advertisers

  • An ad server takes over the administration, delivery and tracking of online advertising material. Instead of a direct integration of advertising material, a placeholder (so-called ad tag) is included in the appropriate places on the website. When the page is called up, it automatically sends a request to the ad server to display an ad from the pool.

What is the difference between real-time bidding and programmatic advertising?

A term that is often used synonymously with programmatic advertising is real time bidding. Strictly speaking, however, this is not correct, since real time bidding is only the auction part of programmatic advertising, which can, but does not have to be, part of programmatic advertising.

The real-time auction process works as follows:

Real-Time Advertising uses the loading times of websites to determine the highest bidder in the auction in milliseconds. Each ad impression is sold to the highest bidder advertiser and equipped with his advertising material.

If a user enters the publisher's page that contains advertising space, he triggers a "request" that this advertising space be used. The sell-side platform connected to the publisher side then sends a request to the demand-side platform. This includes information on the publisher's transaction requests, the price and the target group.

All advertisers relevant to the user can submit a bid to the sell-side platform via the demand-side platform, which is then checked for the campaign budget and the target group, for example. The one who offers the most for the advertising space wins the bid and the ad is shown on the publisher's side. These processes, i.e. the communication between DSP and SSP, take place in real time and - as the name "programmatic" suggests - automated. The sellers decide in advance which space they want to offer as an advertising environment and what minimum price they want to offer in the auction. Since the maximum price and the budget used are also determined by the buyer, cost control is guaranteed on both sides. In addition, it can also be determined which users will receive the advertisement. Targeted display is possible by reading cookies.

This video explains how programmatic advertising works:

What role does data play in programmatic advertising?

Big data is the big magic word in programmatic advertising. Since advertising in programmatic advertising should only be shown to suitable users, information about the individual visitor to a website is required. The more you know about the user, the more valuable it is for the advertiser. The user data used for this can be assigned to various sources of origin, which are referred to as 1st, 2nd or 3rd party data.

  • 1st party data: all data that the advertiser himself, ie within his own systems, collects about the customer. Examples of this are data that users leave behind when they visit websites or data that are stored in CRM tools. The data often contain information about customer behavior, interests or actions. Since the data is collected itself and is called the owner's property, it is also referred to as own data. In short: the data of the advertiser and the publisher.

  • 2nd party data: data obtained from another provider. These are often used in strategic partnerships in the online area. The data can come from the publisher or advertiser themselves, but can be collected from an external source - for example, data from external ad servers or a DMP. In short: the data from certain cooperation partners.

  • 3rd party data: data that is aggregated by many different websites and then provided by external providers. Often they are also referred to as external data and are offered for an additional evaluation of individual advertising contacts. This includes, for example, socio-demographic data such as age, level of education or gender. In short: external data that is collected and purchased from third parties

Programmatic advertising and data protection

In particular, GDPR concerns programmatic advertising, as it regulates the processing of personal data. Processing is therefore lawful if the person concerned has given their consent to the processing of their personal data. Instead of the opt-out function as before (users are only given a right of objection), the opt-in function is now increasingly taking effect, in which the user has to explicitly and actively consent to the collection of his data.

What are the advantages of programmatic advertising?

  • Cost savings: Programmatic advertising increases the chance of a purchase and reduces wastage and budgets that are "wasted" on ineffective advertising.

  • Transparency: Programmatic Advertising offers advertisers the opportunity to understand exactly which websites their advertising reaches, what costs are incurred and which customers ultimately see the advertising.

  • Time saving: Programmatic advertising spends less time completing transactions and negotiating prices. This enables faster purchases and sales.

  • Real-time control: Advertisers can see the performance of their campaigns in real time after the launch and do not have to wait until the end.

  • Targeting: Advertisers benefit from the precise adaptation of the advertising to the target group, as this reduces wastage and has a greater chance of conversion.

  • Reach: If you place advertisements in multiple advertising networks or across different channels, partners and geographical locations, potential customers all over the world can be reached.

What Makes Programmatic Advertising a Trend?

Programmatic advertising differs from previous marketing methods in the following points, such as the manual booking of banners on various platforms:

  • Standardized purchasing of digital advertising space: The entire purchasing process is automated and standardized: the buyer defines his demand, the seller defines his offer - the system takes on other tasks.

  • Auction procedure for pricing: The price is determined by the bid of the second highest bidder plus a service fee.

  • Real time: The decision as to which advertisement is shown to the user at this precise moment is made on the basis of a large amount of data in the background in "real time".

  • Appropriate addressing of the individual users: