The media buying and advertising scene is not what it was a decade ago. As the Internet has grown to accommodate Social Media Advertising, and Mobile Internet browsing has surpassed Desktop Internet browsing, the landscape of media buying has been adapting to match users’ with the right products, through programmatic buying.
Programmatic Buying vs. Traditional Media Buying
Traditional online media buying sold large groups of impressions to brands in exchange for showing the same advertisement to all visitors to a particular website. The process was a lot slower. It involved negotiations with publishers, finding websites that your brand’s target audience might visit, and inflexible purchase options. For example everyone who visited John Smith’s Fitness Blog may have been shown an advertisement for Nike running shoes, because Nike purchased that group of impressions. In other words, regardless of their demographics, pathway to purchase, or interests, every single person visiting that website saw the exact same advertisements. Furthermore media buyers had to pick a target amount of time for the campaign and were unable to deviate from these blocks of impressions.
Traditional ad buying left brands overspending on users who were not necessarily going to lead to a conversion, because not every person visiting John Smith’s Fitness Blog might have been in the market for Nike running shoes. It had the similar effects of someone standing outside of a store and handing out Nike flyers to everyone who walked by in hopes that some people would be interested in the brand – a lot of wasted time and money. Thankfully a new form of media buying emerged called Programmatic buying, aimed at matching the right advertisements with the right people.
In order to combat these problems, programmatic buying evolved from traditional media buying by targeting specific users, and providing flexible media buying options. Instead of buying chunks of impressions outright, programmatic buying targets specific users with bids fitting within an overall advertising budget. Simply put, programmatic buying is the automation of buying, placing and optimizing advertisements – It is smart ad buying and it is on the rise.
The overall goal of programmatic buying is to increase ROIs by making transactions more efficient. It gives brands the ability to put an advertisement in front of their target demographic at the exact moment they are most likely to make a purchase. Programmatic buying allows advertisers to place bids on each unique user’s visit to a website – a process known as real-time bidding (RTB).
The most popular form of programmatic buying is real-time bidding (RTB), which allows advertising purchases to be made through online auctions. Think of RTB like the stock market; publishers put their inventory up for sale so that advertisers can bid on that space. Specific parameters are set up in order to help match the brand with their ideal viewers, such as bid price, network reach, overall budget, goals, and type of user. Transactions occur instantaneously and can be illustrated by Figure 1.0 below.
As seen above, a User visits a website and thus begins the RTB process. This visit triggers a signal sent that bids are available for the advertisement being displayed to this particular user and based on the parameters set up, certain pre-set bids are put forth by brands. This then causes an auction to take place resulting in the winner getting to display their advertisement to the user. The incredible part about this entire process is that it occurs in less than 100 milliseconds. So in the time it takes a user to click on a link and load a webpage, bidding has already started and finished for that particular impression.
Taking our earlier example into account, all visitors to John Smith’s Fitness Blog will now see different advertisements based on RTB. For example a user visiting John Smith’s Fitness Blog might have an interest in basketball, and is therefore shown an advertisement for Nike’s basketball shoes (the winner of the advertisement bid). Whereas another visitor could be from an older generation interested in a healthy heart. In this case Nike would not necessarily bid on this second user, and another company specializing in heart rate monitors could place a bid to show this user their advertisement. All this added data, including if it’s a user’s first visit or return visit to a website, allows advertisers to specifically target their most likely customers, while avoiding wasted capital on users who are less likely to convert.
Programmatic Buying for Mobile
Programmatic buying is a rapidly growing area of advertising, and yet it is still a largely untapped resource by many large brands for mobile advertising. A recent study by IAB’s Mobile Marketing Center of Excellence found that over three quarters (76%) of brand marketers see value in programmatic buying for mobile devices, but only 27% of marketers are buying inventory through the programmatic process.
Since Internet browsing via mobile devices is booming, it seems logical that RTB on mobile advertising will be on the rise soon. RTB on mobile advertisements can send important data to media buyers such as if the user has visited a website previously, or viewed that particular advertisement before. It can also tap into a user’s location, giving companies the benefit of creating geo-specific advertisements such as promoting local sales events. If your company is adopting RTB, ensure that you are optimized for mobile advertisements.
The Future of Programmatic Buying
Even with the lack of mobile adoption, the overall ROI potential for programmatic buying has caused it to expand from the online world to traditional media sources. Recently AOL rolled out programmatic TV advertising targeting with FourWall Media. Similarly iHeartMedia is bringing programmatic ad buying to its broadcast radio stations, allowing brands to automatically increase or decrease their advertising spend depending on their demographic data. This shift from online programmatic buying to traditional forms of media, such as television and radio, opens up the market to a new method of media buying and consumption. The future of marketing could very easily consist of a world where advertisers are not buying ads based around the highest television or radio ratings, but instead ad space specific to their ideal consumer. Targeting for example households with a specific income, or particular TV watching or radio listening patterns.