Programmatic buying has revolutionized digital advertising over the past decade. What started as a niche technology has grown into a multi-billion dollar industry that accounts for over 80% of display advertising spending in some markets. This seismic shift towards automation has unleashed levels of efficiency unimaginable in the days of manual media buying.
What Exactly Is Programmatic Buying?
Put simply, it is using software and algorithms to purchase digital advertising inventory. Instead of human media buyers negotiating prices and placements, the technology handles it in an automated fashion.
Bids for impressions are made in real time based on parameters like audience data, performance metrics, and budgets. This enables advertisers to optimize campaigns and ad spending on the fly based on concrete data points.
The Rise of Programmatic
Programmatic’s meteoric rise has been driven by two key factors – the widespread adoption of real-time bidding (RTB) and the explosion of audience targeting data. RTB turned inventory buying into a dynamic auction-based model rather than rigid price negotiations between media buyers and sellers.
Instead of selling campaigns in bundles or by impression counts, publishers could sell inventory on an impression-by-impression basis to the highest bidder. This granular approach also appeals to advertisers wishing to hone in on certain audiences in a more precise way. This demand combined with the glut of audience data collection from cookies, mobile IDs, and other sources meant laser-targeted marketing at scale was now viable.
Now an auto brand could serve an ad to a 32-year-old suburban mom looking to purchase a family SUV rather than pay for a broad campaign targeting all women 18-49. Doing this manually would have been impossible. As a result, spending on programmatic ads has soared, gaining rapid adoption along the way. The level of precision and automation programmatic offers fundamentally changed expectations around digital campaigns.
Benefits of Programmatic Buying
The promise of programmatic lies in its efficiency. When software makes thousands of decisions a second based on campaign parameters, it inherently drives significant performance gains. No human could ever optimize at that speed, precision, or scale. There are a multitude of ways programmatic improves campaign efficiency:
RTB intrinsically drives prices down through open auctions. Advertisers pay less to reach their target audience while publishers earn more from inventory that may have gone unsold. This dynamic marketplace results in cost efficiencies of around 20-30%.
The data-driven nature of programmatic campaigns allows for optimization around the strongest-performing placements, ad sizes, audiences, and other attributes. Results in terms of click-through rates and conversion rates often improve significantly through programmatic optimization.
Taking people out of transactional ad ops workflows makes things run considerably smoother. Campaigns can launch quickly, change on a dime based on data, and provide robust performance reports. The operational overhead is slashed.
Scarce Resource Efficiency
Having robust bidding algorithms means advertisers can make the most of high-value opportunities that are extremely limited like above-the-fold homepage placements and ads shown to users in the purchase funnel. These impressions require split-second auctions so they’re ideal for programmatic buying.
Programmatic allows creativity to adapt instantly. Dynamic creative optimization (DCO) technology lets display ads change elements in real-time based on parameters like location, time, browsing history, and more to drive better resonance and response from consumers.
Taking the guesswork and approximations out of digital advertising is at the core of what makes programmatic so disruptive. Unleashing efficiency at this scale changes the whole value proposition.
Getting Over Ad Tech Growing Pains
That said, programmatic advertising’s ascendance has not been without its growing pains. Any new technology that threatens long-standing business models is sure to ruffle some feathers. Issues around transparency, viewability, brand safety, and more left some skeptical enterprises slow to adopt programmatically. But concerted industry initiatives have since brought vital improvements on these fronts.
Viewability ensures legit impressions. Ads were being served and billed in unseen placements giving programmatic an early issue, but many brands have crafted tools to mitigate this challenge. Brand safety tools prevent ads from showing up next to objectionable content. What programmatic gained in scale and efficiency initially lacked in control. Improvements in technology have enabled proper brand safety guards.
Private marketplace deals offer programmatic results with reserved media transparency and pricing. For those not ready to embrace total automation, private deals let publishers offer programmatic on-demand to select advertisers.
Partnership accountability has also improved the trust equation. Both ad tech vendors and agencies have invested in more transparent operating practices and educated clients on everything that goes on behind the scenes. Marketers now have full visibility into the programmatic supply chain.
Maturing first-party data capabilities counter the over-reliance on cookies. User rejection of third-party cookies and Apple’s ATT policy limiting IDFA data have put targeting models under stress. But publishers and advertisers aggregating robust first-party data provides a permission-based path forward.
As with any fast-growing technology, building the infrastructure to support scale and instill trust across a multi-layered value chain takes work. Programmatic players have put in the necessary effort to smooth the growing pains through open communication, investment, and common standards. The market is watching closely, but so far rising programmatic spending trends show building confidence.
So What Lies Ahead?
Already accounting for over 80% of digital display budgets, programmatic shows no signs of slowing its penetration. If anything, it is expanding its reach across advertising channels like CTV, digital out-of-home, audio, and across mediums into traditional TV as well (hence “programmatic TV”). But where might programmatically go from here?
Further personalization should connect custom creative to custom audiences automatically. Dynamic creative optimization will evolve from basic swaps to full-on personalized video and display ads tailored uniquely to the individual.
Next-generation machine learning algorithms will optimize decisions beyond specified rules and guide pricing patterns. Advertisers will set campaign objectives and let AI determine the optimal strategies and media buys. Increased automation across the customer journey as programmatic integration into omnichannel execution. Programmatic platforms already tie campaigns together across domains like search, social, and display. As the customer journey continually fragments across surfaces, automating messaging coherence is paramount.
CTV promises better targeting and metrics for the biggest screen in the household. Connected TV programmatic spending is forecast to grow nearly 50% annually driven by audience shifting from linear TV, better addressability/attribution, and preference signaling data from streamers.
Audio gets more addressable and shopable through programmatic channels. Streaming music and podcasts offer rich new programmatic inventory quality for more accurate targeting via contextual and first-party data.
Further back-end workflow automation will also boost productivity. Programmatic’s real-time flow of data between DSPs and SSPs will integrate deeper into campaign management, performance analytics, billing, and invoicing systems replacing additional manual processes.
Whatever shape programmatic evolution takes, the driving force remains to unleash ever greater marketing efficiency through automation, algorithms, and data at the campaign execution layer.
Programmatic advertising has deservedly taken over the digital media ecosystem in short order. What started as a niche concept is now the dominant method for executing and optimizing digital campaigns. Streamlining branding and performance marketing using software automation has simply proven vastly more efficient than manual efforts.
This power to unleash productivity at scale will only expand further as programmatic leverages more future advancements in data, machine learning, and measurement capabilities across channels.
Of course, the industry must remain vigilant around transparency, controls, quality, and trust. But programmatic’s immense efficiency gains are too compelling for advertisers to ignore. With software unlocking this much latent value, there is no putting the genie back in the bottle now. The future is automated as programmatic continues unleashing efficiency.