2016-12-16 | Article written by David Ismailov

What is programmatic advertising and what will it bring in the near future?

What is programmatic advertising?

Programmatic advertising is basically using a software to purchase and sell digital ads through ad exchange, instead of using manual insertion orders, RFPs, and human negotiations. At first, digital ads were bought and sold manually, where ad networks bought impressions from a lot of different sources ahead of time and then repackaged them and sold them with no transparency. Now, with programmatic advertising, buying ads is way faster and cheaper due to the use of software and dashboards that lay everything out and make it easier.

The first use of programmatic advertising was not as great as it is now. At the start, the target audiences were reached as cheaply as possible, with little focus on the quality of sites where the ads were shown. Now, it is all being used together with data segments in order to use intelligent and creative ways to target users, identifying those that are more likely to respond to a brand’s message.

How does it work?

Typically, programmatic advertising happens through RTB (real-time bidding).

Programmatic advertising includes the use of SSPs, DMPs and DSPs. DMPs (data management platforms) are integrated into DSPs, which provide the ability to reach a target audience and facilitate the process of buying ad inventory on the open market. DMPs analyze and collect cookie data which further allows the marketer to make more precise decisions on who their target audience might be.

The SSP is used on the publisher side, where they manage their unsold ad inventory with it. It reports data such as how many pages were viewed per visit or how long a user was on a specific site, and other similar data. Ultimately, SSPs will be in charge of selecting the winning bid and serving the winning banner advertisement on the publisher’s site.

What will happen in the recent future?

A number of reports say that programmatic advertising will grow 31% in the next year, which will be faster than all other channels, such as social media and online video, which will both grow 25% and 20% respectively.

According to a research done by Zenith Media, “Programmatic will become the principal method of trading digital display this year, accounting for 51% of expenditure, and will rise to 58% of expenditure in 2017.”

In 2012, programmatic advertising was only 13% ($5 billion) of display ad spend, which further grew at an average of 71% every year to $39 billion in 2016.

The US is the biggest market in programmatic advertising worth $24 billion in 2016 and accounting for 62% of total global programmatic ad spend. United Kingdom comes in second place, compared to the US, worth only $3.3 billion, and China comes next, worth $2.6 billion. Even though programatic trading accounts of display is 23% in China, it is 70% in the US and UK, meaning that there might be some rapid growth in China in the next couple of years.

What are the trends for 2017?
  1. 1. Personalization and targeting
    Personalization has been used well this year, however the level of targeting and depth will only grow in the following year, with programmatic offering being more personalized to individual users. It is believed that effective personalization will be reached through a number of ways, such as further in-depth demographics capabilities and geolocation. In a 2013 study, it has been said that 61% of consumers in the US feel more positive about a brand when marketing messages are personalized.

  2. 2. Programmatic and manual ad buying gap will widen
    With huge advancements in technology and the growth of programmatic advertising, it is believed that the brands that buy ads manually will not benefit as much as the brands that will focus on automation and will actually fall behind. Hence, the use of programatic advertising will become a wider spread practice and more brands will start focusing on it.

  3. 3. UK programmatic display ad spend will increase
    A prediction by eMarketer stated that UK programmatic display ad spending will be £2.46 billion in 2016, which is a 37% growth from 2015 (£1.8 billion). Looking at these statistics, it is expected that there will be similar or even bigger growth in 2017. Another research by eMarketer stated that “This year, programmatically traded ads will account for 70% of all UK digital display ad spending, and by the end of 2017 it will be more than three-quarters”.

  4. 4. "Programmatic" adoption
    Programmatic has become an established industry phrase that is understood with no problem across different industries. In the recent years, programmatic advertising became more or less established, hence we expect the automated technology and its adoption to grow dramatically in 2017. Every opportunity to interact with users and customers needs to be maximized, especially with the rise of ad-blocking and different uncertainties. This is where programatic advertising comes in.

  5. 5. Programmatic mobile
    As stated by Econsultancy, accounted for 59% of all mobile programmatic transactions across Europe in Q4 of 2015, and grew to 71% in Q1 of 2016. This can only suggest that 2017 will be the year where programmatic mobile will become more dominant and will soon become the standard in the industry, opposed to doing everything manually.