In recent years, the popularity of advertising programs in marketing has grown. It is focused on the effective use of advertising budget with precise audience targeting, which allows you to optimize advertising campaigns and achieve the desired results in a short time. However, before you decide to invest in programmatic advertising, you need to evaluate all the pros and cons. In this article, you will learn about what is an ad exchange in programmatic advertising, as well as the benefits of using it.
What is Programmatic Advertising?
Programmatic is the automated purchase of advertising impressions for the target audience using special platforms based on audience data and artificial intelligence algorithms. In simple words, this is a way to purchase personalized, targeted advertising on the Internet in real time.
The advertising message will be seen by interested target users, and the programmatic platform will set the optimal bid depending on the value of the impression for a certain benefit. This helps you spend your budget efficiently.
How Does Programmatic Advertising Work and What is Ad Exchange?
To understand this, you need to understand how the programmatic advertising ecosystem works. The programmatic advertising ecosystem consists of four types of platforms:
- Demand Side Platform, or DSP, is the advertiser’s side; the platform buys advertising impressions to target users.
- Supply Side Platform, or SSP, is the supply side, a platform on which different sites and advertising networks sell advertising space.
- Data Management Platform, or DMP, are user data providers. They collect and store anonymized audience data, create audience segments, and determine which users should be shown creative content.
- Ad Exchange is an advertising exchange that conducts auctions and accepts bids.
The platforms interact with each other in real time through Real-Time Bidding, or RTB. As soon as a user enters a web page, the Publisher (any site with free advertising space) sends a request to the SSP to display advertising. The SSP generates a lot and sends it to the Ad Exchange. The DSP estimates the value of the impression to the user, assigns a bid, and passes it back to the SSP. SSP selects the winner and displays the advertisement.
All this happens in a split second. Additionally, brands can buy ad impressions on a specific site through a programmatic platform. This purchasing method is called Programmatic Direct. Then the RTB auction is not held.
Why Should You Use Programmatic Advertising?
Let’s look at a few benefits of programmatic advertising:
- Programmatic shows creative content to the right audience. Using ML algorithms, the programmatic platform identifies users who are suitable for the brand and displays the ad in the right place and at the right time. This greatly increases the likelihood of conversion.
- Automatic optimization of advertising campaigns. As statistics and data are collected, the programmatic platform’s algorithms learn and independently improve the advertising campaign. The budget is redistributed in favor of those formats, audience segments, and creatives that show better results. The system also independently controls and sets the optimal price per click or impression, which helps you spend your advertising budget wisely.
- Helps maintain brand reputation. Brand advertisements are not shown in negative and questionable content. All thanks to Brand Safety technology.
- Increased ROI. Programmatic shows an advertising message to users who are more likely to convert. Also, programmatic is about brand performance and work throughout the sales funnel: the technology allows you to fill the funnel with new users, increase their loyalty and interest, and then convert them into regular customers. This comprehensive approach helps improve ROI and LTV over the long term.
- Wider and more precise targeting. Programmatic is not limited to the classic typology of targeting; it is broader and more multifaceted. Therefore, brands can reach even specific audiences.
What Advertising Formats Exist in Programmatic Advertising?
The creative format depends on where the user sees your ad – in search results, on the display network, on social networks, on Smart TV, or on other channels. Let’s look at possible advertising formats depending on the advertising channel.
- Display: banners (animated, interactive, etc.)
- Video: in-stream and out-stream video
- CTV: video
- DOOH: in-door, out-door
- Native: text and graphic blocks
- Search: text ad on search
- Social: promo posts, stories, carousel, and others
- Audio: audio track
- Mobile: playable ads, fullscreen banners, videos, and others
Are Programmatic And Contextual Advertising the Same Thing?
No, these are different concepts. Contextual advertising implies an already formed demand, a need among the audience, and works through keywords. It helps to get conversions and increase brand income instantly. For example, a user needs to repair a car. He enters “inexpensive car repair” into the search bar and sees an advertisement for a car repair shop in the search results.
Programmatic works with the top of the sales funnel. It introduces users to the product, increases awareness, creates a need, and gradually leads the client to a purchasing decision.
Can Programmatic Advertising Work Without Cookies?
Cookies are one of the most popular methods of identifying users to serve relevant creative, but they are not the only ones. What other options are there?
- First-party data is the information that a brand receives directly from its customers, from its website or mobile application. This data includes contact information, behavioral patterns, past actions, purchase history, and others. They can be used to set up targeting and form audience segments.
- Contextual targeting. Contextual targeting uses artificial intelligence and is based on the context that users see on the site, rather than the individual. Thus, the advertisement matches the theme of the platform the user is visiting.
- Collaboration with data providers. DMPs can help you expand advertisers’ first-party data and create audience segments to show content to the right users.
- The fingerprint is a unique digital fingerprint of a browser or device with information about the operating system, browser, its settings, and more.
- Privacy Sandbox and cohort targeting – the tool distributes users into anonymous interest groups (cohorts).
Conclusion
The development of technologies in advertising is occurring at an accelerated pace and it is very important not to remain on the sidelines of development. With the constant emergence of new advertising platforms, new types of banners, and trends, marketers often cannot cope with the large flow of information alone. In Programmatic, the entire launch process is automated down to every detail; new ideas are constantly being introduced that make the advertising campaign of any business more effective. If you want to learn more about how ad exchange works and launch effective advertising, we recommend contacting SmartyAds.
