What Is Programmatic Media Buying: Key Concepts to Know

Programmatic media buying refers to an automated technology for purchasing digital advertising space. This method leverages algorithms and real-time bidding (RTB) to buy ad impressions more efficiently than traditional manual methods. 

Still, the programmatic media buying process may seem complex in the beginning. This blog will explore key concepts to give you a basic overview.

Key highlights 

• Programmatic media buying revolutionizes digital advertising by automating the purchase of ad space using sophisticated algorithms and real-time bidding(RTB). This method enables advertisers to target specific audiences efficiently and receive immediate performance feedback. 
• Essential technologies involved include Demand-side platforms (DSPs) Supply-side platforms (SSPs), Ad Exchanges, and Data Management platforms (DMPs) each playing a crucial role in the buying and selling process. 
• Various buying methods such as real-time bidding, programmatic direct, PMPs, and preferred deals offer different levels of control and premium inventory access. 
• The benefits of programmatic media buying extend to both advertisers and publishers, providing advanced targeting, scalability, and optimal value and reach.

How Programmatic Media Buying Works

Automation is at the core of programmatic buying. These software systems automate purchasing digital ad space using software algorithms. Advertisers set parameters and the system bids on ad space that matches these criteria in real-time. 

Programmatic media buying automates ad space transactions using technology. Publishers display their ad inventory in Supply-side platforms, while advertisers, from their end, set the criteria and budget for ad purchases.

Programmatic media buying automates ad space transactions using AI-powered software algorithms. Publishers display their ad inventory in Supply-side platforms, while advertisers, from their end, set the criteria and budget for ad purchases. At the center of the process is the Ad Exchange, a digital marketplace where SSPs and DSPs connect, facilitating the real-time auction for ad impressions. 

The process, which takes seconds -while the user visits a site – involves the SSPs auctioning off the available ad space to the highest bid from DSPs allowing advertisers to place targeted ads efficiently. 

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What are the Key Technologies Involved in Programmatic Media Buying? 

There are several technology solutions involved in this process, from the buyer’s side and the seller’s side: 

• • Demand-Side Platforms (DSPs): DSPs enable the automated purchase of digital ad space across various publishers’ sites. Advertisers set their targeting criteria based on demographics, behavior, and other data, and the DSP uses this information to bid on ad impressions in real-time auctions. This automation optimizes ad placements to meet campaign goals. 
  • Supply-Side Platforms (SSPs): Publishers use SSPs to manage and sell their ad inventory. These solutions allow publishers to optimize their ad space by connecting with multiple DSPs through ad exchanges. SSPs help in maximizing revenue by offering inventory to the highest bidder while maintaining control over pricing and placement.
  • Ad Exchanges: These are digital marketplaces where DSPs and SSPs interact to buy and sell ad space. Ad exchanges enable real-time bidding, where impressions are auctioned off to the highest bidder. They play a central role in the programmatic ecosystem by making more efficient transactions. 

• Data Management Platforms (DMPs): Data management platforms aggregate and analyze large volumes of data from various sources, such as web behavior, CRM systems, and social media. They provide valuable insights that help advertisers refine their targeting strategies and enhance ad effectiveness. By leveraging data, advertisers can better understand their audience and deliver more personalized ads. 

Types of Programmatic Media Buying

Programmatic media buying automates the ad purchasing process using advanced algorithms to optimize and target ads effectively. 

Ads can be purchased via several buying methods: 

Real-Time bidding

Real-time bidding is the most popular of the methods, and growing at a fast CAGR of 19.21%. In this model, impressions are sold to the highest bidder in a real-time auction. Advertisers set their bids according to their targeting criteria. Once the auction goes, the highest bid wins and its ad is displayed. This system allows advertisers the advantage of finely targeting their ad placements. 

Programmatic direct

This model allows advertisers to buy premium ad impressions without an auction, directly from the publisher. Advertisers can then ensure they have inventory in advance. Programmatic Direct also gives a certain degree of control to advertisers over the ad placement, often in premium locations. 

Private marketplaces (PMPs) 

Private marketplaces are invite-only auctions where select advertisers can bid on premium inventory. PMPs commonly offer ad space that is not yet available in ad exchanges. 

The exclusive nature of this method offers greater control and transparency than previous systems. 

Preferred deals 

In this model, advertisers can have access to ad inventory at extremely preferred conditions. Preferred deals offer ad inventory at a fixed price before going to auction. The method is used for premium ad space.

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Programmatic Media Buying Goals and Metrics

When running programmatic ads, tracking metrics helps make quick adjustments to the campaign when needed. What metrics to track will depend on the campaign, but here are the seven most common KPIs to track. 

• Impressions

They help understand how many times the ad was displayed, and it is an important baseline metric. Unlike other metrics, impressions don’t require an action from the viewer but serve as a basis for other critical metrics. 

There are two types of impressions: served and viewable. Served impressions count as an impression every time an ad is served. Viewable impressions provide more data and help understand if a user saw the ad or not. 

• Clicks

This KPI measures how many times the ad has been clicked on. Marketers usually combine this metric with impressions to calculate the click-through rate percentage of people who saw and clicked on an ad.

• Conversions

The ultimate goal of a campaign ad is to convert, so marketers track if the user carried out measurable actions, such as buying, signing up, commenting, or downloading. 

• Cost

This financial metric measures the cost of the programmatic ads campaign. There are many methods to calculate ad rates, like cost-per-mile (CPM), cost-per-click (CPC), cost-per-engagement (CPE), cost-per-view (CPV), and Cost-per-action (CPA). 

• Return on Ad Spend (ROAS)

ROAS is a campaign-specific metric that is used similarly to return on investment (ROI). Return-on-ad spend measures the gross revenue from the ad spend campaign and gives you an insight into the effectiveness of the campaign. 

• Reach

This metric helps us understand how many users the campaign reached. It is different from impressions in that it is calculated per person. Marketers often compare reach with CTR and impressions, to understand the ad’s impact. 

Benefits of Programmatic Media Buying 

Programmatic buying is widespread now, with 73% of companies that adopted digital advertising methods using programmatic methods to buy ad space in 2023. 

Buying ads programmatically simplifies the process and brings benefits to advertisers and publishers. First, let’s explore the overall benefits of using programmatic media buying to buy ads: 

• Efficiency and automation

It streamlines the ad purchasing process by automating the negotiation and transaction steps. The automation speeds up transactions and optimizes rates. Programmatic platforms can efficiently match ads with the right audience. 

• Advanced targeting capabilities

 Programmatic platforms provide advanced targeting capabilities. Advertisers can set specific targeting criteria, including demographics, interests, browsing behavior, and location. This fine targeting enhances ad effectiveness by ensuring that ads are shown to relevant users, resulting in higher engagement rates. 

• Real-time data and analytics 

Once the ad is displayed, marketers get immediate feedback on the ad’s performance. This real-time data allows marketers to monitor and adjust their campaigns. 

• Scalability and reach

Automation allows advertisers to quickly scale up campaigns across multiple platforms and devices. The scalability not only helps adjust the campaign to objectives but also allows it to extend its reach to a broader audience. 

Advantages for Advertisers and Publishers

Now that we talked about the general advantages, let’s review how programmatic media buying benefits both advertisers and publishers. 

For advertisers: 

Programmatic media buying ensures advertisers get the most value for their investment, here are some of the advantages:

• Provides a more efficient way to buy and sell inventory – automating the traditional process of purchasing ad inventory, significantly reduces the time and effort for buying and selling ads. It reduces wasted impressions and ensures the ad reaches the right customer. 

• Optimizes ad ROI for advertisers – advertisers set specific criteria and budgets, and the system will automatically place bids to secure the best possible ad placements. Therefore, it means advertisers only pay what the ad space is worth to them.

For publishers:

Publishers also benefit from programmatic media buying which maximizes their revenue and reach:

• Ensures the higher-paying bid gets the ad space – the process of programmatic buying automates the bidding process and facilitates the highest bid winning the ad. 
• Gives publishers a larger reach – programmatic media buying platforms connect publishers with a broader pool of advertisers than they’ve reached on their own. 

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Examples and Success Stories 

When using programmatic media buying, advertisers get improved targeting. Let’s review an example where Perion’s cookieless SORT technology boosted in-store visits and digital metrics for Stop & Shop. 

perion.com

The campaign used a SORT targeting strategy to identify potential customers, which then were targeted geographically for maximum relevancy and impact. The results of the campaign include an 84% increase in page grabber CTR, and a 42% increase in page grabber interaction rate. 

What is the Difference Between Media Buying and Programmatic Advertising?

Traditional media buying involves purchasing ad space in bulk, giving advertisers a bit of control over the inventory and placement. Ad buyers and publishers meet and trade digital ads. This process is time-consuming and in most cases, costly. 

Programmatic advertising, specifically programmatic media buying automates the transaction process, considerably shortening the transaction time to seconds. This automation allows advertisers to buy ad space across millions of websites almost instantly. 

What’s Next for Programmatic Buying 

Perion delivers cross-platform high-impact ad solutions, creative intelligence, unique data, and smart technology, connecting brands with consumers throughout their day. Perion’s unique AI technologies and machine learning provide deep intelligence for advertising campaigns. Technologies such as the SORT cookieless solution and WAVE dynamic audio optimize ads at every touchpoint and for every customer, enhancing performance. These solutions can unlock revenue potential across search, video, and online content. 
Keen to learn more about how this works? Reach out today.