Programmatic advertising is a concept that has become increasing popular in recent years. It is a rapidly-growing phenomenon in marketing and generates 12 billion US dollars in revenues on the European market.1 The fact is, according to IAB (Interactive Advertising Bureau) more than every other dollar invested in digital advertising is spent on programmatic advertising. In an international study of 100 B2B companies, the majority responded that they already buy programmatic advertisements.2
The word programmatic refers to purchasing and sales of advertising being programmed and automated. In practice this can work as follows. When someone visits a website, a question is sent from the site to an advertising exchange. The advertising exchange works like an agent between advertising publishers and buyers. The advertising exchange publishes a notice that there is an advertising display opportunity for sale. A number of advertising buyers evaluate, based on a given set of criteria, how much they think that the particular advertising display opportunity is worth, and respond with a bid on the advertising exchange. The advertiser that makes the highest bid wins the auction and the opportunity to display their ad for the website visitor. The entire process is automated and takes fractions of a second. Every second, thousands, or more likely millions, of auctions for programmatic advertising take place. The process is similar to what happens on the stock exchange, where supply and demand determine the price of stocks.
It’s gone from ‘Mad Men’ to math men. | Ken Auletta, writer and columnist, The New Yorker
What criteria are used for advertising purchases? Every advertiser creates a profile of the target group that they want to reach. Target-group analyses can be based on background information such as age, gender, place of residence, time of day, click-tendency and the user’s search history. The goal is to increase the accuracy of advertising. The idea is also to move from a model characterized by package solutions for advertising campaigns based on choice of media, to a model where the right message is delivered to the right target group at the right time, regardless of the channel. The hope is that, through programmatic advertising, the ads will become more relevant and likely to hit their target.
A relevant question is, of course, where and in which context the advertisement will be displayed. There is a concern that ads may be shown in undesired advertising environments. Therefore, some platforms offer functions to avoid showing ads in contexts that would risk damaging the brand.
One driver behind this development is that large publishers want to maximize revenues from online advertising. Eight out of ten publishers in Sweden offer programmatic advertising.3 Today, programmatic advertising is used primarily for banner adverts on the web, but mobile and video ads are emerging strongly. The concept is also applicable for other digital media and outdoor advertising on displays.
Even advertising buyers think that there is a need for this. Because programmatic advertising occurs in real time, one can immediately evaluate and improve campaigns. As an advertiser, one can change and adapt the cost of displaying advertisements based on how well a campaign works. Intermediaries, such as media and advertising companies, are not needed either; programmatic advertising can be managed via a web interface. Advertisers will increasingly manage programmatic purchases on their own, without involving an agent.
Let’s take an example. The company Epiroc has manufactured equipment for the mining and construction industry since 1873, previously under the company name Atlas Copco. In 2018 this part of the business was split off under a new company name. The change involved the challenges of quickly establishing the new name and maintaining customer relations. Epiroc used programmatic advertising to increase awareness of their brand while at the same time emphasizing that the only thing that had changed was their name – all of their products remained the same. The target group was people who work in repair shops, vehicle manufacturing and industry, and the goal was for 600,000 advertisement exposures to reach this target group in Sweden. After three months, they had almost reached two million.4
It is likely that more – not to say all – media types will be managed in the same way as raw materials and stocks in the future. Trade of media space will occur exclusively online. The conversations between actors are foremost about how one creates value and what has an impact. Marketing will involve fewer administrative tasks and focus instead on strategic issues. This will require better knowledge about which factors influence demand and how customers act.
1 Interactive Advertising Bureau (2017). IAB Europe Report: European Programmatic Market Sizing 2017. Downloaded 2018-10-22 from: https://iabeurope.eu/research-thought-leadership/iab-europe-report-european-programmatic-market-sizing-2017/
3 Dagens media (2015, 10 November). Här är branschens nya makthavare. [blog post]. Downloaded 2018-10-22 from: https://www.dagensmedia.se/marknadsforing/strategi-analys/har-ar-branschens-nya-makthavare-6086483
4 Match2One (2018). Case study, “Epiroc (formerly Atlas Copco) – Mining Company, Sweden & Global”. Downloaded 2018-06-04 from: https://www.match2one.com/customer-stories/epiroc-formerly-atlas-copco-mining-company-sweden-global/