What Is Programmatic Advertising? Full Guide with Examples

Programmatic advertising isn’t a new invention. If you’ve been in the marketing sphere, you’ve already heard of programmatic ads, real-time bidding, and demand-side platforms.

However, according to Google Trends, “programmatic advertising” is still a popular search result despite its common appearance. People continue wondering what it is and how it works.

To set the record straight and help you find answers once and for all, we’ve created an ultimate programmatic advertising guide. Here you’ll get examples and simple explanations — let’s begin!

What Is Programmatic Advertising?

According to the Merriam-Webster dictionary, programmatic means “relating to or having a program” — and this generally is the whole idea behind programmatic advertising.

Programmatic advertising is the use of automated technology for media buying, as opposed to the traditional, a.k.a. manual, methods of digital advertising.

This means that instead of humans selling and buying ad inventory, the entire process happens in real-time through automated bidding, known as real-time bidding (RTB). The whole action usually takes just a few milliseconds.

Here’s a simple example to understand how it works:

Imagine you want to buy an ad spot, but you’re too busy to do it yourself. So, you send your robot assistant to an auction and give it $2000.

The robot goes to the auction, where others are also trying to buy the same ad spot. It places your $2000, and you win if no one bids higher.

It works the same for publishers (those selling the ad space). They send their robot assistant to sell the advertising space, telling it not to accept less than $1500. The robot finds the highest bidder and sells the spot to them.

While this example explains the bidding process, in reality, programmatic advertising goes beyond just buying an ad placement. Advertisers care about who will see the ad — considering factors like the viewer’s age, location, time zone, and interests — not just where the ad will appear.

The key process in programmatic advertisement: both advertisers and publishers negotiate to ensure the ad reaches the right target audience.

What Are the Auction Models in Programmatic Advertising?

As we’ve said before, the auction in the programmatic advertisement is usually done via RTB. However, that’s not the only model. In reality, there are three:

1) Real-Time Bidding (RTB)

This is the most common method. It’s like an open auction where advertisers bid for an ad spot in real time. Whoever bids the highest — gets the spot. The whole process happens in milliseconds.

2) Private Marketplace (PMP)

The best way to describe it is an “invite-only auction.” Here, publishers must invite advertisers to bid on premium ad spaces. This gives them more control over who advertises on their site, and advertisers get exclusive access to higher-quality spaces — but usually at a higher price.

3) Programmatic Direct

In this model, there’s no auction. Instead, the advertiser and publisher agree on a fixed price for the ad space beforehand. It’s guaranteed placement, often used for high-profile campaigns where advertisers want to ensure their ads appear in specific places.

What Does Programmatic Advertising’s Tech Stack Consist of?

The entire programmatic ecosystem relies on several key platforms, each playing a critical role in how ads are bought, sold, and delivered. Wondering what are they? Here’s a list:

1) Demand-Side Platform (DSP)

Advertisers use this tool. The Demand-Side Platform (DSP) is like a control center that advertisers use to:

• Automatically buy traffic
• Create and optimize campaigns 
• Set up targeting
• Gather analytics
• Manage creatives

Popular DSPs: Display & Video 360 (Google), The Trade Desk, Amazon DSP, LiveRamp, Adobe Advertising Cloud DSP, StackAdapt, and Yahoo Ad Tech.

2) Supply-Side Platform (SSP)

The Supply-Side Platform (SSP) acts similarly to the DSP but on the opposite, publishers’ side. SSPs help publishers:

• Collect audience data
• Manage available ad space (inventory)
• Sell ad inventory to the highest bidder

Popular SSPs: Google Ad Manager, Amazon Publisher Services, OpenX, and Criteo.

3) Ad Exchanges

Sitting between DSPs and SSPs are ad exchanges. In these exchanges, advertisers, agencies, networks, and publishers can buy and sell ad space. 

The DSP connects to the ad exchange, allowing advertisers to bid for available ad space, while publishers offer their inventory. The final price for the ad space is determined through a bidding process.

Popular ad exchangers: Xandr (Microsoft), OpenX, and Google Ad Exchange.

How Does Programmatic Advertising Work?

So, how does the programmatic advertising process usually go? The process is fast, efficient, and completely automated. Here’s how it works step by step:

1. User visits a website: When a user clicks on a website, the process of RTB begins.
   
   
2. The ad request is sent: The website sends an ad request to an SSP when there’s an opportunity to show the visitor an ad.
   
   
3. Data is analyzed: The SSP gathers information about the visitor and checks if there’s available ad space. Let’s say, the publisher needs to fill a video banner at the top of the page.
   
   
4. Data exchange: Using an ad exchanger, the SSP shares this information with the DSPs that want to display ad videos, allowing advertisers to compete for the available ad space.
   
   
5. Bidding process: Based on targeting options, multiple DSPs place bids on the ad impressions. For example, three advertisers bid with CPMs of $5, $6, and $2.
   
   
6. Winning bid: The ad exchange identifies the highest bid, $6 in this case, and that advertiser’s ad is placed on the publisher’s website.

This entire process happens in under 200 milliseconds. That’s faster than the blink of an eye!

Programmatic Vs. Display Network Advertising: What’s Better?

A common question many marketers have is: how does programmatic advertising stack up against traditional display network advertising? And more importantly, which approach is better for your business? Let’s break it down.

What Is Display Network Advertising?

First, let’s clarify what we mean by display network advertising. This traditional method typically involves using an ad network like the Google Display Network.

Here, advertisers choose specific websites or apps where they want their ads to appear. However, this approach offers less flexibility in targeting specific audiences. Advertisers generally rely on broad placements rather than precise audience targeting.

Key Differences

1. Targeting Flexibility:
   
   
   • Programmatic: Highly flexible; allows for granular audience targeting.
     
     
   • Display Network: Limited targeting; primarily based on site selection.
     
     
2. Cost Efficiency:
   
   
   • Programmatic: More cost-effective due to targeted bidding.
     
     
   • Display Network: Can be less efficient, as it often involves paying for ad space without specific targeting.
     
     
3. Scalability:
   
   
   • Programmatic: Highly scalable due to real-time bidding and automated processes.
     
     
   • Display Network: Less scalable; reliant on manual placements.

Programmatic Ads Examples

If you’re curious about how major brands use programmatic advertising, the answer is clear: they’re all in! Here are some noteworthy real-life examples that illustrate the creative and effective use of programmatic ads:

Hot Wheels

Hot Wheels, a model car brand by Mattel, used programmatic advertising to grow engagement after noticing changes in consumer behavior. They chose in-game advertising to introduce their products in a creative, non-intrusive way. Instead of interrupting gameplay, their ads were integrated into the game environment.

The campaign was successful, achieving a 99.58% in-view rate — 1.5 times higher than the industry standard — and a 95.98% fully on-screen rate, 41% above the in-game ad benchmark.

The Amanda Foundation

The Amanda Foundation, a non-profit focused on cat and dog welfare, used programmatic advertising to match animals with the right adoptive families. 

Using programmatic tools, the Foundation segmented the audience into dog or cat lovers and those preferring either calm or active pets. Next, they adjusted creatives to each segment — like matching calmer pets with older people or active pets with younger adopters. 

This approach worked well, successfully helping every featured animal find a loving home.

McDonald’s

McDonald’s used programmatic advertising to deliver personalized ads and boost foot traffic with the “Raise Your Arches” campaign. By using dynamic creative optimization (DCO) and location targeting, they adjusted ads to users’ current situations — like time of day and location — making the ads more relevant and impactful.

The campaign delivered impressive results, increasing foot traffic by 7.5% and boosting sales by 4.5% at physical locations.

Haleon

Haleon, a global consumer healthcare company, launched a seasonal campaign using VAST video ads to boost brand recall for its nasal congestion product. By integrating programmatic strategies with storytelling, Haleon effectively showcased the product’s benefits.

The campaign exceeded expectations, with views surpassing projections by 58.38% and impressions exceeding the plan by 44.85%.

Pros and Cons of Programmatic Advertising

Like any form of advertising, programmatic comes with its strengths and weaknesses. Let’s take a closer look:

Pros:

1. Precision Targeting: Programmatic advertising precisely targets your ideal audience based on demographics, location, interests, and behaviors, ensuring your message reaches the right people.
   
   
2. Efficiency and Automation: Once set up, programmatic ads operate automatically in real time, eliminating manual placement management and saving time and resources.
   
   
3. Cost-Effective: By using real-time data for bidding, programmatic advertising reduces budget waste on ineffective placements, allowing for improved ROI.
   
   
4. Real-Time Optimization: Campaigns can be monitored and adjusted in real time. This means that you can analyze and quickly adjust your targets or bids to enhance results.

Cons:

1. Ad Fraud: Ad fraud, like fake impressions or clicks generated by bots, poses a significant risk and can waste budgets if not monitored closely.
   
   
2. Lack of Transparency: It can be challenging to track where your ads are placed, leading to potential brand safety issues and placements on low-quality or inappropriate sites.
   
   
3. Hidden Costs: While programmatic advertising can be cost-effective, hidden fees from DSPs, SSPs, and ad exchanges can lead to unexpected expenses.

Now, you’re ready to enter the programmatic space with confidence. But remember, a good ad campaign never goes well without proper tracking and analyzing along the way. That’s why using ad trackers, like Keitrao Tracker, is important — even for programmatic ads.

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