Does Programmatic Advertising Work?

As an advertiser, you’ve probably heard all about Programmatic Advertising and its value in ad buying by now. But is it all talk or are there tangible benefits to be reaped by taking a programmatic approach to your campaigns? In this article, we’ll take a look at just that by explaining Programmatic Advertising, how it works, as well as the advantages and disadvantages to be aware of when considering it.

Programmatic Advertising: How It Works

Before we get into the details of how Programmatic Advertising campaigns perform, it would be first helpful to make sure we have a clear definition and understanding of what we’re talking about.

Simple Definition

Programmatic Advertising refers to the use of software and technology in the media buying process. Instead of going the conventional route of negotiating terms and prices manually, it allows for real-time bidding on ad inventory (impressions) through an automated process.

The Four Pillars Of Programmatic Advertising

Within the greater scope of programmatic advertising are four main components , or “pillars”, that work together to make the programmatic ecosystem function. A breakdown of each and what they do are as follows.

Demand Side Platforms (DSPs)

A Demand Side Platform, or DSP, is a software that allows for the buying of ad space in an automated fashion. Advertisers use DSPs to buy ad impressions across various channels, including display, video, and mobile.

Supply Side Platforms (SSPs)

The inverse of DSPs, Supply Side Platforms are designed for selling ad inventory (ad space) in an automated fashion. SSPs provide a unified interface for publishers to manage the sale of their ad inventory across various ad exchanges.

Ad Exchanges

Ad Exchanges are platforms that act as the middlemen between DSPs and SSPs. They are essentially digital marketplaces where DSPs can bid on ad impressions being offered by SSPs. In many cases, an Ad Exchange will also be an SSP itself.

Data Management Platforms (DMPs)

Data Management Platforms are centralized software solutions that help advertisers collect and organize data for use in their programmatic advertising campaigns. DMPs help to segment audiences and target them with more relevant ads.

What The Process Looks Like

Now that we know the various moving parts of programmatic advertising, let’s take a look at how it all comes together in practice.

The programmatic ecosystem can be divided into three main stages: pre-campaign, campaign, and post-campaign.

Pre-Campaign

During the pre-campaign stage, advertisers use data collected from DMPs to segment their target audiences and determine which channels (ad exchanges) they want to buy ad space on. Based on this information, advertisers will set up their DSPs with the necessary targeting parameters.

Campaign

Once the pre-campaign stage is complete and the DSP is all set up, it’s time to launch the actual campaign. During the campaign stage, the DSP will continuously scan available ad inventory and bid on impressions that match the targeting criteria set by the advertiser.

Post-Campaign

After the campaign has ended, the advertiser will have access to a wealth of data that can be used to assess the performance of their programmatic advertising campaign. This data can then be fed back into the DMP to help fine-tune future campaigns.

The Costs Involved

Like many things in life, programmatic ads come with a price tag. However, the good thing about this price tag is that it is usually much lower than the cost of traditional, manual media buying. The following is a breakdown of the main areas of expense in programmatic advertising.

Ad Space and Spend

The first and most obvious cost associated with programmatic ads (and digital advertising in general) is the actual ad spend. This is the money that is used to buy ad impressions through the DSP. Ad spend is usually measured by CPM, or cost per thousand impressions. CPM can vary depending on the channel, targeting criteria, and other factors involved in a campaign, but usually hovers around an average of two or three dollars.

Some might be surprised to learn that only 51% of advertiser spend within the programmatic ecosystem actually goes to publishers. Beyond the aforementioned CPM rates that they pay, advertisers also divert quite a bit of money to other areas, including:

Platform And Technology Costs

DSPs, SSPs and other ad buying tools charge a technology fee. This can either be a monthly subscription fee, or a percentage of ad spend. Technology fees can range from a few hundred dollars per month to upwards of five percent of ad spend. This can ad up if you’re using more than one programmatic advertising platform or multiple ad exchanges.

Data Costs

If an advertiser wants to use data from a DMP to segment their audiences and target them more effectively, they will need to pay for that data. Data costs can range from a few cents per record to several dollars per record.

Creative Costs

Another cost to consider is the price of creating custom ad units for programmatic ads. This can be done in-house or through a creative agency. Creative costs can range from a few hundred dollars to several thousand dollars, depending on the complexity of the ad at hand.

Advantages Of Programmatic Advertising

Programmatic advertising offers a number of advantages over traditional forms of media buying. In this section, we’ll list some of the most notable and explain why they should matter to you as a marketer.

Unbeatable Reach

A large part of an advertising campaign’s success comes down to the extensity of the audiences, more specifically relevant audiences, it’s able to reach. With the traditional method of doing things, this process is both costly and time-consuming. You would need to buy ad space on various platforms, hope that your target audiences are actually frequenting these platforms, and pray that they see your ad while they’re there.

With programmatic advertising, you can forget all of that. Thanks to the targeting capabilities of DSPs, you can reach your target audiences no matter where they are online. All you need is an understanding of who your target audiences are and what sort of online activity they’re engaged in. From there, you can let the DSP do its job and deliver your ad to them while they’re engaged in that activity.

Flexible Pricing

As we touched on earlier, programmatic advertising allows you to set your own budget for an ad campaign. You can choose how much you’re willing to spend on a daily, weekly, or monthly basis, and the DSP will make sure that your ad is shown to the right people within that budget. This is a far cry from traditional advertising, where you would need to shell out a lump sum of cash upfront in order to secure ad space.

Flexible pricing also comes in handy when you want to experiment with different ad types or placements. With programmatic advertising, you can start small, see how your ad performs, and then scale up if it’s doing well. This is a great way to test the waters with new ideas without breaking the bank.

Absolute Transparency

A lack of transparency has long been a problem in the world of advertising. Advertisers would pour money into a campaign, not really knowing where their ads were being shown or how effective they were. With programmatic advertising, that’s no longer an issue. The data collected by the DSP provides advertisers with a wealth of insights into their campaigns. They can see exactly where their ads are being shown and how they’re performing. This level of transparency is incredibly valuable and allows advertisers to make data-driven decisions that can improve the effectiveness of their campaigns.

Control Over The Buy

Another advantage of programmatic advertising is the level of control it gives you over your media buy. With traditional methods, you’re at the mercy of the media outlet you’re buying space from. You have to hope that they deliver on their promises in terms of ad placement, frequency, and so on.

With programmatic advertising, you’re in the driver’s seat. You have complete control over where your ads are placed, how often they’re shown, and what sort of people see them. You’re also able to make changes on the fly if you feel like a certain aspect of the campaign isn’t working.

Increased Efficiency

Programmatic advertising is also much more efficient than traditional methods. With traditional advertising, a lot of time and effort goes into negotiating prices, planning placements, and so on. This is all done manually, which can be quite time-consuming.

With programmatic advertising, most of this work is automated. DSPs make it easy to find the right ad placements and to negotiate prices. This frees up a lot of time that can be better spent on other tasks, such as developing creative assets or analyzing data.

Improved ROI

Programmatic advertising also tends to have a better ROI than traditional methods. This is because it’s more efficient and because it allows you to target your audience more effectively. When done right, programmatic advertising can help you to get more bang for your buck.

Disadvantages Of Programmatic Advertising

There isn’t necessarily anything ‘wrong’ with programmatic advertising – like we’ve already covered, it does offer numerous benefits . However, there are a few potential downsides that you should be aware of. Let’s take a look at three of the most common ones.

The Learning Curve

One of the potential disadvantages of programmatic advertising is that it can be tricky to get started. There is a bit of a learning curve involved in understanding how the system works and in setting up campaigns that are effective.

The Tech Can Be Overwhelming

Another potential downside of programmatic advertising is that the technology involved can be quite overwhelming. DSPs are complex pieces of software, and there are a lot of different options out there.

If you’re not particularly tech-savvy, it can be tough to figure out which DSP is right for you and to set up campaigns that are effective.

You Still Need Good Creative

Finally, it’s important to keep in mind that programmatic advertising is just a tool. It’s not a magic bullet that will guarantee success. You still need to create good ads that are relevant to your target audience.

If you don’t have strong creative, your programmatic campaigns aren’t going to perform well – no matter how well you target them.

Deciding If Programmatic Advertising Is Right For Your Business

Programmatic advertising offers a lot of advantages, but it’s not right for every business. It’s important to take the time to assess your needs and to make sure that programmatic advertising is a good fit for you.

Here are a few things to keep in mind as you decide if programmatic advertising is right for your business:

Consider Your Goals

First and foremost, you need to think about your goals. What are you hoping to achieve with your programmatic ad buying?

Programmatic advertising is most effective when used to achieve specific goals, such as increasing brand awareness or generating leads. If you’re not sure what you want to achieve with your programmatic advertising campaigns, you can’t expect to get tangible results.

Assess Your Resources

Next, you need to assess your resources. Do you have the staff and the budget necessary to get started with programmatic advertising?

Programmatic advertising can be quite resource-intensive. You need to have someone on your team who is familiar with the technology and who can manage your campaigns effectively.

You also need to have a decent budget to get started. Programmatic advertising can be quite expensive, especially if you’re working with a good DSP.

Consider Your Target Audience

Another important thing to keep in mind is your target audience. Do you have a good understanding of who your target users are and what they want?

If you don’t know who you’re trying to reach, you won’t be able to create effective campaigns. Programmatic advertising is all about targeted marketing, so you need to have a good understanding of your target audience before you get started.

Programmatic marketing is a complex, but essential part of the digital advertising mix. By understanding the various moving parts involved in a campaign, you can make an informed decision about whether or not programmatic advertising will work for your business.

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