October 1, 2020

Brand, Media & Advertising

Layman Series: Everything you need to know about programmatic advertising Part-1

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Layman series is an educational initiative to explain the most complex but critical topics and concepts in media and advertising in a very simple language. The inspiration comes from a learning technique called “The Feynman Technique” named after noble prize-winning physicist Richard Feynman.

Part-1 What is Programmatic advertising?

If you are in the media/advertising/marketing industry you must have heard this word “programmatic advertising or programmatic media” at least once if not then it is more likely that you will hear that in some time soon. But, I do not want you to feel baffled when you hear that. So, I am making an effort to make you this understand in a very simple language with no or minimal use of Jargons.

Just imagine for a moment there is no such thing called programmatic and you are representing a brand say Maruti Suzuki and you are responsible for digital advertising of the brand. Your task is to launch a display (banner ads) campaign for the Baleno model on all the top news websites in India to reach out to the audience who are more likely to buy or sign up for the test drive.

Your next step will be to reach out to all the individual websites and discuss the campaigns to buy ad space (inventory), negotiate on the pricing and lot of paperwork. This is pretty much doable for one or 2 websites, do you think you can do this for 20 websites that you have shortlisted to run display banners ads. Let’s call this process “media buying”.

What if that number is more than 20. There are more than 4 billion websites in the world. The process of going to individual websites (publishers) is impossible. This is one problem of traditional digital media buying (buying of ad spaces in app/websites) of today considering there is no programmatic yet.

Let’s look at another problem for marketers like you responsible for the digital advertising of a brand. The news websites have thousands of users (audience) male and female coming every day from across the country, from different age groups and as when the users come to the website and load the page they can see the ad.

Since the news websites generate millions of page views every day and each page view is an opportunity for the brand to show ads. Each time a user sees an ad we call it impression. When you are making a deal with publishers (news websites) to show ads fo Baleno you are buying the impressions in bulk millions of them. What if you don’t want to buy all the available impressions because buying all the impressions in all those 20 websites will cost you a lot of money. Let’s say if these websites/publishers come to an agreement and they said you can buy 50% of the impressions available in a day instead of 100%. Slightly better deal but there is the third problem of this traditional media buying that Everyone coming to the website will see your ad regardless of thier gender, interest, location, and age. Because a 21-year-old college student interested in sports is probably not the kind of audience you want to reach out for your balleno model.

Now, you are lucky and there comes a technology called “programmatic” which works as a solution to all the problems of traditional media buying which I discussed. Let me recall again.

  1. Reaching out to indivdual websites/publishers to buy media and a lot of paperwork.
  2. Human interventions and in-person negotiations.
  3. You are not able to segment and target the right audience. Everyone saw the same ad regardless of their age, interest, gender, and location.

So, what is this holy grail “programmatic”? It’s a solution to all problems of traditional media buying. It’s a technology that automates the process of media buying and selling (i.e buying and selling ads) with no human interventions, no manual negotiations, and no paperwork in digital advertising.

Programmatic technology also allows you to target the right user based on data about the users rather than everyone. Programmatic is not any tool, it’s a technology which automates the buying of ads be it display, video or audio on hundreds of website and apps.

So far we have looked at the problems and challenges of traditional media buying from the lens of brands and advertisers. Let’s look at the problem from the lens of publishers (websites & apps).

Let’s say Times of India (TOI) has made a deal with you representing Maruti Suzuki as a brand to sell 50% of the impressions (inventory) and 25% to HDFC bank but they still have 25% inventory left to sell. Now, TOI has 2 options, option 1 to sell the leftover inventory to HDFC and Maruti at very low cost and option 2 let the remaining inventory go unsold if HDFC and Maruti are not willing to buy the remaining inventory. Programmatic also helps publishers to automate the process of selling the inventory by connecting hundreds of advertisers like you who want to show ads without any need for human interventions.

In nutshell, the programmatic is a technology that automates the buying and selling of digital ads using AI and machine learning without any need for humans and manual negations. programmatic is not any tool though there are tools like DV360 from Google marketing platform, Trade desk which uses this technology.

Real-time bidding (RTB) is a very important component of programmatic which facilitates the process of how the ads/media is bought and sold in real-time. I will explain this in Part -2.