What is Programmatic Marketing?

What Is Programmatic Marketing

In the ten years since the infancy of Programmatic marketing, it has delivered it’s promise to be the future of advertising on the web.  This is shown by the latest Zenith report on programmatic marketing which states that:

In 2020, 69% of all digital media* will trade programmatically amounting to $US122 billion.

  • Definition: Digital media refers to all forms of paid-for advertising within online content, including banners, online video and social media, but excluding paid search and classified advertising.

This growth of programmatic is certainly impressive with the Zenith statistics showing how ten years ago programmatic accounted for less than 10% of Programmatic marketing.

Worldwide Share Of Programmatic Display Advertising 2012 2021

Global Programmatic Share Of Display Advertising 2012 2021

However, these charts and the definition of digital media and programmatic is also misleading as we’ll explain in this post. As someone who has worked in digital marketing since the mid-1990s I’ll level with you and say I find Programmatic a challenging term to define since it doesn’t include what you think it might.

So, if you’re unfamiliar with the concept, the first thing to understand is that Programmatic advertising DOESN’T include paid search (and classified). This is significant since eMarketer research tells us that Google Ads (including YouTube) is the largest online ad seller.

To understand the opportunities of programmatic you have to understand who buys and sells this form of advertising and which types of businesses it is available. The clue is contained within the * which indicates that for Zenith…

The opportunities of programmatic display?

The only thing standing in the way of increased adoption of programmatic is marketers’ lack of knowledge of the process and reluctance to give up previous ways of purchasing ads in favour of the complex yet extremely effective instant, automated bidding process used in programmatic marketing. A little knowledge can go a long way, so we thought an introduction to the concept of programmatic marketing would be useful for digital marketers. But what is programmatic digital marketing?

This post covers just a handful of the benefits and potential opportunities of programmatic marketing. We also have a ‘Programmatic Marketing Glossary‘ to aid readers in their understanding of different terminology and definitions. For a more in-depth look at what programmatic marketing is, the potential benefits, and how to get started with programmatic, see our new guide for all members.

The sections are:

  1. An introduction to programmatic
  2. A data-led approach
  3. Programmatic platforms and auctions
  4. Benefits of programmatic for the marketer
  5. Ad fraud
  6. Compliance

Forecasts for Programmatic Digital Marketing

The Magna Global Programmatic Intelligence report gives forecasts for programmatic by format from 2014 to 2019. They estimate that by 2019 it will be 50% of all advertising, which is less than the Forrester estimate, but still a significant growth.
Programmatic Marketing Spend By Format

Defining Programmatic Marketing and Ad buying

Let’s start with what Programmatic isn’t, by reviewing a series of statements.

Q. Is Programmatic marketing the same as Marketing Automation? 

Answer: No

Q. Does Programmatic include Ad Spend on Google Ads (paid search)?

Answer: No

This is clear from the Zenith definition we mentioned earlier that

Digital media refers to all forms of paid-for advertising within online content, including banners, online video and social media, but excluding paid search and classified advertising.

Q. So is Programmatic Marketing limited to Programmatic Advertising? 

Answer: Yes

So, really when we talk about Programmatic Marketing, we will be clearer if we talk about Programmatic Display Advertising… This is what I try to do…

What is programmatic ad buying?
“Programmatic” ad buying typically refers to the use of software to purchase digital advertising, as opposed to the traditional process that involves RFPs, human negotiations and manual insertion orders. It’s using machines to buy ads, basically.

Because it involves millisecond long auctions during page loading times via algorithms, programmatic marketing can at first glance seem a baffling concept, but when boiled down to its simplest form it is in essence quite simple. We define Programmatic Marketing as:

Programmatic marketing is automated bidding on display advertising inventory in real time, for the opportunity to show an ad to a specific customer, in a specific context. It doesn’t include paid search bidding. 

‘Programmatic Marketing’ or advertising is a general term, so it’s best to divide it based on whether it involves Real-time Bidding (RTB) or not. Often it is only considered to be real-time transactions to bid  This summary, also from the Magna Global report is useful to show the differences.

Definition Of Programmatic Marketing Rtb Vs Non Rtb

Need more information about Programmatic Marketing and Paid Media strategy?

Smart Insights has a toolkit dedicated to paid media strategy to help increase online reach and awareness. Learn best practices to improve your ROI using Google AdWords, Social media and Display Ads. Our guides include:

Or view our FREE 10 costly AdWords mistakes guide.

How does Programmatic Marketing work?

When anyone clicks on a web page that has advertising space that is configured for programmatic advertising, the publisher of the page puts up an ad impression for auction in an ad marketplace. The ad marketplace then runs an auction among advertisers interested in displaying an ad to that specific customer that just click on the page. There may be many advertisers competing in this auction, and whichever one ultimately is willing to bid the most wins the auction and then their ad is displayed to the customer when the page loads.

Because the process is automated and the maximum price each advertiser is willing to bid for the impression has already been programmed in, the auction can be completed within the milliseconds it takes for the page to load. Our simple infographic takes you through 6 steps that explain how programmatic marketing works.

What are the advantages of Programmatic Marketing?

Programmatic marketing opens up a series of opportunities, which would not be possible if ad placement was done manually, as it has been done in the past. It allows advertisers to procure digital media without having to pre-negotiate a price, so they pay only for the relevant impression that they actually receive. They can also sign up for a minimum number of impressions or a minimum budget, which makes digital advertising more flexible, and they can buy digital media across publishers, which reduced administration costs.

But the opportunities are much greater than just making ad buying easier and more flexible. Because programmatic marketing means bids are arranged for each individual accessing the site people can be targeted to a far greater extent than before.

Using customer data, Programmatic technology can identify what resonates with each individual and target him or her on the sites on the sites they are most likely to engage with and at the time they are most likely to engage.

Ad blockers effect on Programmatic Advertising

With the advancement of Programmatic ads, consumers are becoming frequently aware of their personal data usage and ads that “stalk” them across the internet. Thus, popularity in adblockers has risen within the last couple of years. Reasons for using an adblocker vary depending on a user’s personal concerns and which country they reside in. As an overview of the state of adblock usage in 2017/18:

AdBlocker Usage

Why do users user adblock software?

Motivation Adblock Usage Perferred Ads

With this growing concern over data security, marketers will need to become more approachable and evolve their advertising. Some publishers are now not allowing users to view their site at all if they are using adblockers. However, restricting the number of retargeted ads will limit the feeling of “stalking”, which may prove more effective in gaining users trust and removing the negative stigma surrounding online ads.

Global programmatic ad spend

This is why customer data is becoming so highly valued (one of many reasons), and why programmatic advertising is growing so fast – it was projected to become where the majority of non-search digital ad spend went by the end of 2015. It was revealed at the end of 2017 advertisers will have spent an estimated £3.39 billion on programmatic trading. This is a 23.5% rise from the year before. Programmatic spend now equates to 79% of all UK digital ad spend, as reported by MarketingTech.

According to a study from the World Federation of Advertisers, Programmatic is most popular in North America, with 31% of digital budgets allocated to it in 2017/18. Those less keen on automated buying are Latin America and China, both are allocating it 20% of digital spend.

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