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What is programmatic advertising?

Programmatic Advertising” (PA) is increasingly being heard as the new, seminal paradigm of modern online marketing. PA is the advertising of the future, the “new operating system of advertising”, the “youngest growth driver of the advertising market”.

But what is the “programmatic” aspect of PA, how does it work and, above all, what is the concrete benefit? We dedicate a mini-series to the new method. 

Is “Programmatic Advertising” just one of the numerous buzzwords that, like so many others, is misleading the industry? Or is PA really a new paradigm, a decisive redefinition of existing advertising methods? Which challenges are waiting for the advertisers, which possibilities?

How do customers benefit? The agencies? What are the reasonable predictions that can be made in connection with PA? What role does analysis, content, and targeting play? What transformations are still ahead of the market? An approach to the phenomenon of programmatic advertising. 

Definition: “Programmatic advertising

The aim of the approach is to play out online campaigns as efficiently as possible. The underlying technology combines the advantages of target group targeting with the efficiency gains of real-time bidding (RTB). This means that although real-time bidding and programmatic advertising are connected, they are not identical. 

Programmatic advertising vs. real-time bidding

RTB is, therefore, a component of Programmatic Advertising, which is supplemented by intelligent algorithms. These algorithms ensure continuous data-supported analysis and expansion of the target groups.

This means that targeting becomes more dynamic and effective at the same time since additional information can flow into the identification of target groups and lookalike audiences via data management platforms. Paid traffic campaigns (performance marketing) could thereby gain decisive efficiency. 

Software and Algorithms

A typical feature of the PA method is that online display ads are aggregated, delivered, booked, analyzed and optimized using demand-side software and the corresponding algorithms. The buying of advertisements is done “programmatically”, but not necessarily in real-time.

The programmatic buying includes real-time bidding functions as well as different methods. “Programmatic” also implies the use of many different data sources to determine the optimal targeting and timing for the user’s purchase decision. 

Why is programmatic buying becoming increasingly important?

The decision as to where and, above all, when to buy ads is therefore made by the software. This use of the software is typical for programmatic purchasing and the placement of online advertising. In contrast to traditional processes, in which flesh and blood people negotiate and “manually” place orders. This manual process is expensive and error-prone.

Through programmatic shopping, trading with advertising contact opportunities becomes more efficient and thus more cost-effective. In short, the biggest advantage is efficiency!

Great – we “release human capital”!

It’s not that simple. Of course, people are still needed to operate these software solutions – qualified, trained people. The software only automates individual steps in the overall process.

Nevertheless, the method promises synergies, because the campaign managers again have more time to concentrate on important things such as the optimal target group selection, an improved implementation of individual advertising campaigns as well as their coordination with existing inbound campaigns.

We are already doing Programmatic Advertising – aren’t we?

Many advertisers think so! Because real-time bidding, as marketers already know it from Google or Facebook, already represents a large part of the programmatic advertising approach.

However, PA goes beyond this, as already mentioned. Real-time bidding is only one part of this. Because: the purchase of guaranteed impressions of certain publisher sites is also possible here. This is often called “Programmatic direct”. The PA approach extends the possibilities that we know from RTB platforms: Now standard display formats and more and more large-format inventories on platforms are being added to the ad portfolio.