All about Programmatic Advertising

Melanie Mura, manager agencies & marketers at AppNexus, explains in eight brief points the basics of programmatic advertising

What is programmatic advertising?

Programmatic advertising is automated, data-based, real-time buying and selling of media inventory.

How long has programmatic advertising existed?

Already for more than ten years. Today, programmatic advertising is the most common way to buy and sell online advertising space. More and more brands and companies are booking their advertising media directly, programmatically via technology platforms or agencies, no matter what the industry. Not only can banner advertising on Internet pages be purchased programmatically, but also video or audio spots, digital billboards, and increasingly television advertising.

A few statistics:

37% of all media ad spending is digital, 70% of all digital advertising spending in Germany is programmatic. The growth forecast for 2019: + 15% (Source: emarketer Paper). AppNexus is the second largest programmatic marketplace for digital advertising with 11.4 billion impressions per day.

How exactly does this work?

Through the interaction of algorithms, data, and complex technology, it is decided within milliseconds in “real time” where, which advertisement and for what price is played out. Important parameters for the setting of a campaign are, for example, the maximum bid amount for the campaign, performance target values, targeting according to geodata, sociodemographics, etc., environments, frequency of user address (frequency caps), and many more.

What role do the algorithms play?

They play an important role both on the buyer and seller side. With the help of algorithms, a multitude of parameters can be evaluated and calculated in fractions of a second during the bidding process. This makes it possible to make well-founded decisions about whether to bid at all and at what price. To do this, connections must be established between a wealth of different data points and probabilities must be calculated. For example, within a campaign for a smoothie maker, the corresponding advertising medium on the weather channel of a news page can only be played out to culinary-interested women in their mid-forties.

What about the auction procedure?

The majority of the purchasing and sales processes in programmatic advertising are regulated by auction procedures.  There are two main auction logics: in the “first price auction”, the highest bidder wins the auction and also pays the price offered. In the “second price auction”, the highest bidder also wins, but the price of the second-highest bid must be paid, plus one cent.

Advertising remains a people business

Data points can be used to make more accurate predictions, but programmatic doesn’t mean you don’t need people anymore. The more complex the algorithm, technologies, and possibilities to control campaigns become, the more difficult it is to explain this to the customer, for example. Programmatic advertising is in the best sense a human/machine collaboration. The machine does what it does best: collect data and process it quickly. The human being takes over the mediating or interpreting part. There is an evaluation – but what does it mean? What conclusions can be drawn from this? This human component, saddled with all these algorithms, is the key to success.

An industry with a lot of potential

There are many career changers in programmatic advertising. There are different reasons for this: on the one hand, there have only recently been courses of study in this direction. On the other hand, it is an interdisciplinary field in which employees with analytical skills and high flexibility are required. In adtech companies and the entire industry, technical experts such as software engineers and physicists as well as sales professionals and marketing experts can be found. In any case, the industry is an ideal biotope for people who are not afraid of agile processes and do not need routine procedures or rigid structures to feel comfortable. Those who like variety, speed, and a high learning curve will be happy here.



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