What is programmatic advertising? A beginner’s guide

As programmatic evolves into digital out-of-home, TV and audio, it is more important than ever to get to grips with the basics in order to devise an optimised strategy.

Programmatic advertising

Programmatic advertising is constantly evolving. From online ads and video to digital out-of-home, streaming, voice and TV, the sheer number of options can make it feel like an impenetrable process to understand.

Finding your way through the jargon is the first step to understanding exactly what programmatic is. Defined by the Display Trading Council as the use of automation in buying and selling of media, programmatic can apply to anything from display to digital out-of-home and television.

“Programmatic started off as a way of using up remnant inventory,” explains IAB UK senior programmers manager, Dee Frew. “It was a way of increasing the efficiency on leftovers, but as it has evolved it’s become more sophisticated.

“There is, however, a frequent misunderstanding that all programmatic is real-time advertising. That is a subset of programmatic, a way of utilising programmatic techniques to make instant purchases. It’s a bit like having a robot shop for you on eBay. Real-time advertising is an auction-based model, whereas programmatic is the full breadth of automation.”

Put simply, brands or agencies use a demand side platform (DSP) to decide which impressions to buy and how much to pay for them, while publishers use a supply side platform (SSP) to sell ad space to brands. These two platforms are then matched up in real time.

One aspect of programmatic advertising is guaranteed impressions. A price is pre-agreed by the buyer and seller before the impressions go live on the website. When the brand needs to amplify the message, or reach a different audience beyond the continuous campaign, marketers can bid for real-time impressions.

The use of acronyms such as DSP and SSP, along with DMP (data management platform) and API (application programme interface), can make programmatic seem overcomplicated.

Programmatic is buying digital advertising space automatically, with computers using data to decide which ads to buy and how much to pay for them.

Kenneth Kulbok, LinkedIn Programmatic

“The conversation going on between the buyers and sellers has a vocabulary of its own and sometimes it is like learning a new language. But ultimately the system is buyers on one side of an equation, sellers on the other and brokers in the middle,” Frew explains.

Kenneth Kulbok, programmatic sales lead EMEA at LinkedIn Programmatic, agrees that too often programmatic is jargon heavy and surrounded in complexity.

“Put very simply, programmatic is buying digital advertising space automatically, with computers using data to decide which ads to buy and how much to pay for them, often in real time.

“Traditional ways of buying digital ad space involve the publisher running the campaign, while programmatic puts the control to manage and measure back in the hands of the advertiser.”

Harry Harcus, managing director at Group M’s programmatic agency Xaxis, defines programmatic advertising as a media buy via technology rather than a manual process.

“Programmatic boils down to the use of data and technology enabling marketers to make decisions in real time about the advert they want to deliver to the consumer,” he explains.

“We are thinking about what audience we are trying to reach, on what kind of day, at what scale and increasingly on what devices. We look at what we know about them demographically and behaviourally based on the individual’s internet consumption habits over time.”

He says programmatic has enabled marketers to move from one straightforward media buy with a publisher to conducting media transactions on an impression-by-impression basis.

So, for example, rather than buying a million impressions on The Telegraph in one go and committing to that over a period of time, a brand can buy a million impressions but split across multiple publishers or media owners, targeted at a particular audience segment.

Personalisation and the ability to automate the media buy in a relevant way for the consumer is the definition of programmatic for Sophie Dufouleur, global content and social media group manager at Nestlé Nespresso.

“For me, [programmatic] is looking at the adaption of creative versus the different target audiences, in real time.

“We really try to understand who our target audience is. What do they do, where do they live, what are they interested in? You have a lot of data points that you can look into, from search data and social media listening, to your own data.”

How to use data effectively for programmatic

Having an understanding of the behavioural insights that can be drawn from data is the first step to achieving an efficient programmatic strategy.

There are three tiers of data to consider. First-party data is the advertiser’s own data on their customers, while second-party data is collected by someone other than the advertiser, such as an agency, who shares that data with the brand to help structure the programmatic strategy. Third-party data is available to anyone at a cost and is usually sold on a rate card basis.

Brands should think about data as customers or potential customers, says Harcus. Sending existing customers messages about upgrades or new product offers is known as retargeting. To grow beyond that point, he advises brands to use data to find new prospects, looking for similar audiences to the existing customer base.

“That’s where terms like lookalike modelling come along. We look at the data and how existing customers are behaving on the internet, and then we look for people exhibiting similar behaviours who could feasibly be a customer in the future,” says Harcus.

“We look at similar behaviours and then we’re able to target the advertising for different levels of scale and accuracy. If we need to do a scale campaign we might need to dilute the accuracy, or if it’s a very targeted campaign we can maximise the accuracy and compromise on the scale.”

This balancing act is a consideration for all brands. In August, P&G chief brand officer Marc Pritchard said the company was shifting its marketing spend away from targeted Facebook advertising, saying the company had gone too narrow in it’s search for specific consumer groups. Going forward, Pritchard confirmed P&G is looking to achieve a balance of reach and precision with its programmatic strategy.

READ MORE: Why P&G is moving away from targeted Facebook advertising

When the team at Nespresso carried out messaging around its coffee expertise the communications changed when talking to club members, compared to new prospects.

“Club members are already aware of Nespresso and are more advanced in terms of the coffee they drink, so we targeted them with different messaging versus someone who is just a prospect, who you might need to educate more,” explains Dufouleur. “For club members you look at people who already buy a certain product and give them the story behind the product.”

Global head of programmatic solutions at Havas Media Group, Hossein Houssaini, advises brands not to focus solely on retargeting if they want an optimum strategy for their programmatic campaign.

“You can’t rely on retargeting. I think a good data team and a good strategy gives you the ability to predict and prospect right from the start to make every campaign better and hit your KPIs with less retargeting,” he explains.

How to find the right programmatic model

Currently the most common method to buy programmatic is through media agencies, using a DSP to run the programmatic activity.

READ MORE: The questions clients should ask the programmatic agency

The agency model is most prevalent in the UK, says Frew, with more than 90% of companies opting for this approach. However, concerns around transparency and ad fraud mean increasingly brands are transitioning from managed buys to running programmatic in-house.

Unilever, for example, has a dedicated unit within its agency Mindshare called Ultra, which works solely on its programmatic interests. In contrast, fellow consumer goods company Reckitt Benckiser has opted for an internal programmatic team.

Kulbok acknowledges a ‘one size fits all’ approach to programmatic does not work, rather it’s a matter of being able to adapt quickly and control the spend, making the buys more efficient.

“An in-house team would need the necessary knowledge, tech or resources to do this efficiently,” he adds.

“It’s important to have the right understanding within an in-house team, so that you can ask your agencies the right questions and challenge them. But too much focus on the execution may not be as fruitful as working with an experienced partner.”

While in theory marketers could start buying programmatic themselves with a credit card and access to a demand side platform, there is much to consider both logistically and in relation to the campaign’s ambitions, notes Harcus.

“You need to consider what kind of sophistication you want to bring. What level of resource or risk are you willing to take? The reason for working with an agency is simply scale.

The real time aspect is only an advantage if you know how to use it. If you’re buying real time, but you’re not looking at the result and you’re not optimising then it’s like when you make a TV booking two months in advance.

Sophie Dufouleur, Nestlé Nespresso

“I would say there are four pillars to programmatic success – data, inventory, technology and expertise/knowledge/resource. Agencies and programmatic businesses are able to dial up on all four of those areas and take the risk away from advertisers.”

Harcus, however, is seeing more brands take a hybrid approach, whereby the advertiser licences an aspect of the technology to run in house, enabling them greater visibility of the process.

While Nespresso relies mainly on its agencies to work on the buy, Dufouleur understands why some brands might want to bring programmatic in house.

“There have been a lot of shifts in terms of really trying to have transparency on programmatic and some brands thought the best way to deal with it was to get internal team.

“But it’s very heavy to have programmatic in-house. You need to have the right team and there’s a shortage of people who understand programmatic. If you don’t [have internal teams] then you need to push your agency and know who you’re working with. You need to put tools in place to verify the buys because there’s a lot of fraud out there.”

To achieve the best result and a level of transparency, Houssaini advises brands and agencies alike to work hard to obtain a thorough understanding of programmatic.

“You think you understand 80%, but it is still 20% to 100%. And the second you go in the wrong direction it might have a bigger impact on media spend than you think,” says Houssaini.

“I’m not a fan of brand trading desks because programmatic is an ecosystem that needs strategies, data scientists, data managing platforms and buys that optimise attribution. It’s not enough to have two traders to deal with a £100 million media spend. You will hit your limits. It is easy to say I’ll just go to the big players like Amazon or Google, but it doesn’t mean it’s the best route for you.”

What to consider when defining KPIs

Programmatic is enabling marketers to track the impact of their investment and optimise their ad campaigns in real time. At Xaxis, programmatic campaigns are given a week or two to run before advertisers are advised to make performance optimisations in relation to their specific KPIs.

While Harcus acknowledges the big draw of programmatic is the increased level of control for advertisers, it is essential to always be clear about the desired objective.

“It’s very important from the outset to establish what the primary and secondary KPIs are. Due to the real-time nature, where changes are possible all the time, it’s very important to remain crystal clear on what the goal for the advertiser is,” he adds.

Dufouleur believes the real-time advantages of programmatic are only as good as the marketer’s ability to analyse the results.

“The real time aspect is only an advantage if you know how to use it. If you’re buying real time, but you’re not looking at the result and you’re not optimising then it’s like when you make a TV booking two months in advance,” she says.

Programmatic buying should free up brands and agencies to spend more time thinking creatively about the customer, argues Kulbok, who has seen B2B brands and publishers leveraging programmatic in increasing numbers.

Frew agrees programmatic advertising will eventually enable brands to move beyond the traditional budget allocation to a more customer-centric approach.

“Eventually I don’t think you’re going to be sitting down buying your TV based on your TV budget, or your display, search, outdoor and audio. Instead you will look for the audience that is going to work best for you. You know everything about your audience and then you will model out from that.”

However, despite the significant advantages of programmatic, Frew believes adoption will never reach 100%, because automated media buying does not suit every brand.

“If you have mass-market appeal you absolutely should [use programmatic], but we anticipate that programmatic adoption will never quite make it to 100%.

“There is always going to be a niche website or brand that doesn’t want automated decisions. If you are a luxury brand like Louis Vuitton or Bugatti maybe you don’t want any risk at all. You want hand-tillered creative in prime positions that are unique executions and you can’t have machines making those decisions.

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