tinkerEdge > Blog > Paid Advertising > The Truths & Beginner Guide to Programmatic Advertising

The Truths & Beginner Guide to Programmatic Advertising

  • Paid Advertising
  • Cheok Lup

Programmatic advertising is not a new term in digital marketing, however, many marketers I have come across often mention that they want to run programmatic ads without knowing how it works and the hidden costs involved.

In simple terms, programmatic advertising is actually leveraging the use of 1st party, 2nd party, 3rd party data or a combination of them to serve display banner ads to targeted audiences with the right message at the right time.

An example of how programmatic ads work: A grocery online marketplace that wants to serve banner ads that offers a 10% discount to past purchasers who have a lifetime value of $500.

Programmatic advertising v.s. display advertising

In the above example, identifying past purchasers will require access to the 1st party data in the grocery marketplace’s CRM.

Since it requires additional first party data, you might just say; “I can just stick with Google Ads platform, since I can create a customer list of this group of purchasers with their email addresses.”

Google Ads will match your uploaded email address list with the associated Google accounts to create the customer list. These matched audiences will only see your ads when they are signed in to their Google accounts. There is also a minimum customer list size for Google Ads which has to be fulfilled before you can run any display campaigns targeting those audiences. A small list size will not get you started for Google Ads. Moreover, using Google Ads will be limited to serving ads within Google Display Network (GDN).

Programmatic ads on the other hand do not have such limitations. With programmatic ads, you will be able to reach your audiences beyond GDN, using DSPs which will be explained below further.

Use of demand side platform (DSPs)

Programmatic ads run on demand side platforms, commonly known as DSPs. These advertising platforms are similar to other platforms like Google Ads, Facebook, LinkedIn but are not linked to them, hence you will be competing with another group of advertisers beyond those networks.

Most of the time, DSPs are self-served and usually require some time for you to explore and get familiar with the features and functions, if you want to do it on your own. Getting support or fully-managed by agencies would be suitable for unfamiliar or novice marketers, but note that it comes with a price tag on top of your media spend.

Let me share a brief history on how DSPs came around. To date,providing ad spaces to allow advertisers to pay and put up their banner ads, is one of the main modes of monetization for many websites. In the past, advertisers have to manually negotiate on the price and banner ad sizes with every single website publisher. Imagine the effort it takes for an advertiser to negotiate and talk to 20 website publishers at the same time; not to forget that the website publisher may also be talking to over 20 advertisers at a go.

DSPs convert this manual process of negotiation to real time bidding (RTB) auctions, where advertisers set a price to pay for the campaign schedule, upload all the possible ad creative sizes, and just hit the “START” button. The ads will go through the bid auction and reach out to your audience across extensive ad exchanges and networks (some DSPs offer more than 70 ad exchanges, varying across DSPs). And there you go, with just a simple 1-2 hours of campaign setup.

Other than the extensive reach, some DSPs do offer exclusive ad spaces inventory like CNN or Bloomberg, which may ease your pain to get to their ad trafficker teams. Google Display & Video 360 (previously known as DoubleClick Bid Manager – DBM) has exclusive access to YouTube ad spaces inventory, which you may not be able to reach using Google Ads. Ad spaces exclusivity is definitely a selling proposition for some DSPs, and advertisers might want to check that out while selecting which DSP to use.

What are the available campaign targeting options on DSPs?

Not all DSPs offer the same targeting options, but you can often get the common targeting options like geolocation, browsers, language, operating systems, age range, topics/interests etc. As I have mentioned above, data is the key element in programmatic ads to identify the right audiences and serve the right ads. If you are not careful in defining the audience, it may end up just like TV ads pushing the message to every single person in front of the screen.

Data management platform (DMPs) is the data depository where you start to collect 1st party data from the interactions on your website, be it add to cart, checkout, purchases or sign-ups. You can also upload your CRM data onto the DMP to further segment the customers you want to target. Unfortunately, not all DSP providers offer DMPs as part of their suite like Google Marketing Platform or Adobe Marketing Cloud, so you might want to check whether there is any DMP support during your evaluation of DSPs.

To add on, DSPs often partner with 3rd party data providers like BlueKai, Lotame in providing audience group lists, e.g. automobile lovers, frequent fashion shoppers, for campaign targeting as well. Use of such 3rd party data usually involves add-on costs to your campaign bids. For example, if your bid is $1.00, your final bid will be $1.90, paying additional $0.90 for the use of 3rd party data.

You’ll be paying CPM most of the time

Bids for programmatic ads are generally by cost per thousand impressions (CPM), so it can definitely be costly when your campaign targeting is poorly defined. Most of the DSPs, including Google Ads, do allow advertisers to bid on viewable impressions.

Viewable impressions, as defined by the Media Rating Council (MRC) and Interactive Advertising Bureau (IAB), refers to the ads being shown at least 1 second and 50% of the ad space. This means that if the user has not scroll down to view your ad at the bottom of the page, then you will not be charged for that impression.

Requires high media spend to start with

Most of the DSP providers will require at least $10,000 as monthly media spend to start with, and often you find that they quote big brands as their clients, because they are the ones that are able to afford large media spend. Not many DSP providers will entertain anything below their minimum spend, but as the programmatic advertising arena gets heated with more competition between DSPs and bigger brands no longer afford large budgets, DSP providers are lowering their minimum criteria.

Conclusion

Programmatic advertising should neither be seen as a short term online advertising channel, nor a cheap avenue to reach out to your customers. It is indeed costly, where there may be add-on charges on top of the media spend for the DSPs. Furthermore, the use of DMPs, API calls to upload your CRM data and collection of data from your website require time and internal resources to set it up and running.

It will be useful for advertisers to project the total cost of ownership – that includes all involved usage charges, internal resources – and determine whether they are ready to run programmatic ads.

We will also be sharing a case study on whether programmatic ad campaigns works with performance-based objectives.