What is programmatic advertising? It’s a simple enough topic, that covers applied complex technology practices in the marketing industry. The term “programmatic” means ad exchange, like an adapted version of the stock exchange, but what is traded is ads impressions instead of shares. But unlike the stock exchange, the term “programmatic” is used because buying and selling of the advertisement slots are handled automatically without the intervention of humans. Most ads you see on Facebook, LinkedIn, and Google are displayed through programmatic advertising.

There are three ad exchange approaches all are executed automatically

  • Private marketplace: the publisher invites only a selected group of advertisers to bid
  • Open exchange or real time bidding (RTB), anyone bids for anything and the market decides
  • Programmatic direct: the publisher deals with an advertiser directly

This youtube video describes the whole scenario in a simple illustration.

Recently, in November 2014, the Internet Advertising Bureau (IAB) Canada published The Canadian Programmatic Landscape, which illustrates a complete and promising Canadian programmatic ecosystem that connects the advertiser from one side and the consumer on the other side across three layers:

  • Demand layer: trading desks and DSPs
  • Supply layer: publishers, network, exchange, and SSP/programmatic direct
  • Data layer: DMPs/ data suppliers and data verification

Programmatic advertising offers different usage opportunities across industries

The retail industry, although popularly known for employing this method, isn’t the only industry to make use of programmatic advertising. Financial services, automotive, entertainment and others also employ this form of marketing.  Healthcare providers and healthcare product manufacturers are also users of programmatic advertising, market services and pharmaceuticals to the target consumer at the right time and context.

Programmatic advertising has two key factors

The first is the usual side effect of automation. Where marketers used to be the ones to handle most of the manual steps in the buying and selling the ads, with programmatic most of the job is automated. Marketers should shift their attention from the transactions to understanding their audience more. The second point is about measuring the effectiveness of the marketing campaign which is run automatically. There might be some soft of KPIs and metrics to make sure that the campaign reached the target audience and that the return is well captured.

Challenges facing programmatic advertising

As a new technology, there are several issues associated with programmatic advertising such as the technical complexity and data security. Also defining metrics and measurement to make sure the advertising campaign is delivered to the right customers, on the right time, at the right context.

These issues and others triggers the need for a new standard, a framework to bring all concerned stakeholders on a common ground. An example of such an effort is the OpenRTB 2.3 which is a new standard by IAB. OpenRTB 2.3 released the latest revision a few days ago this month.

The future of programmatic advertising

A recent report shows how non programmatic advertising is losing ground for the both types of programmatic advertising, the direct and the RTB.

Much is expected in the near future as we are talking about an evolving technology where a lot of changes take place. It is expected that spending on the programmatic advertising is expected to triple over the coming three years.

Canada is aligned with these global trends. In its forecast, the IDC, International Data Corporation, estimated that Canada’s RTB market, which was nearly doubled in 2013, to grow at about 50% levels through 2017.

It worth mentioning that the future of programmatic advertising is going side by side with two other technology trends: big data and mobile. Marketing is all about consumer behavior which could be mined for in the vast amount of data. Also with consumers spend more and more time with their mobile devices it simply means ads will be optimized for mobile devices. Something to watch for within the same context of programmatic advertising.

For relevant discussion review the #ITWCchats recap on the same topic.

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