Introduction to programmatic advertising
Programmatic advertising enables publishers to connect with advertisers more efficiently, ensuring that the right messages reach the right audiences at the optimal time.
What’s the first thing that catches your eye when you click on a news organization’s website? If it isn’t an arresting headline or striking image, it’s probably an ad, served up as a homepage banner by a single advertiser. It’s also probably irrelevant to most of the readers who see it.
A Pampers ad, for instance, isn’t going to appeal to readers who don’t have children. The placement and substance of the ad doesn’t matter — it could win advertising industry awards for its brilliance and still strike out with a news organization’s readers. This is where programmatic advertising could present a new opportunity for publishers.
According to a forecast by eMarketer, roughly 90 percent of spending on U.S. display ads in 2023 will be on programmatic advertising. For indie news publishers, programmatic ads can be a way to deliver tangible results for advertisers while also staying true to their voice, mission and audience.
Keep reading this guide to learn more about programmatic advertising and if this model is a good strategy for your news business.
What is programmatic advertising?
Programmatic advertising is a process where publishers and advertisers use software to automate the buying and selling of ad space. This streamlines the process and allows for more precise targeting and real-time bidding (RTB).
Instead of having an advertiser call or email a publisher for quotes, and then settle on a price, ad buying happens in seconds across platforms through the use of algorithms. That Pampers ad mentioned above would be bought based on its relevance to whoever would see it, not an educated guess.
Here’s how it works, according to Amazon Advertising. Let’s say you’re a publisher who wants to put up a banner ad for sale on your home page. You’ll do that through a program called a supply side platform (or SSP), which helps you pool together all of your advertising space, metrics and availability for advertising. This helps advertisers decide whether you’re a good fit.
Once that happens, and someone visits your site, a demand-side platform (or DSP) will place an automated bid based on what they’re looking for in an ad campaign, the advertising formats available on your site, and their budget. No one needs to haggle over rates in a programmatic advertising system: whichever advertiser gives the highest CPM, or cost for every thousand ad impressions, wins. Their ad automatically appears on your website.
Real-time bidding, as described above, is the most common way to arrange a programmatic advertising deal, but it isn’t the only one. Publishers can also invite a select group of advertisers to participate in what’s known as a private auction. They can start a preferred deal, which means publishers agree to prioritize a specific advertiser’s bid in an auction. And a guaranteed deal allows publishers to make direct sales to advertisers, not unlike the traditional ad sales model.
But publishers should keep in mind that while you can set a bid floor, raising it doesn’t automatically mean more money. The more expensive your bid floor is, the fewer advertisers will buy with you.
It’s important to remember that programmatic advertising is a process, not an ad format. You can deliver anything from display ads to video. That Pampers ad we mentioned before could be sold as a full banner through a DSP, or bought through an old-fashioned phone call to whoever handles advertising at your publication.
How can indie publishers use programmatic digital advertising?
The benefits of programmatic advertising
First and foremost, programmatic advertising saves time. At many indie publications, the publisher wears multiple hats, including editor, web designer and ad sales person. Programmatic ads don’t need a lot of manual input. Once you set up the parameters for a real-time bid, the SSP does the rest. This frees up valuable time for publishers to focus on overall ad strategy, editorial or other critical responsibilities.
The hands-off approach does come with a cost. According to the Google News Initiative, programmatic ads average about $1 to $5 USD per CPM, which means they’re around two to four times lower than the going rate for direct ads — although publishers can set their own prices, including a minimum ‘floor rate’ for an ad. However, for indie publishers, the sheer amount of data collected through the programmatic ad process may be well worth a discount on individual ad sales.
Advertisers use all sorts of metrics to evaluate their ad performance, according to State of Digital Publishing, from impressions to click-through rates to generated revenue. Publishers can unlock access to these metrics, and tweak their offerings accordingly. They can see who is noticing ads on their site, and start tailoring their offers in real-time auctions to advertisers who actually serve their audience.
If you happen to have a lot of parents visiting your site, and you regularly cover parenting or child care-related issues, a Pampers ad would make a lot of sense. Or, if you’re a local news site whose readers regularly click on ads featuring local businesses, a Pampers ad might be a poor use of your limited ad space, even if they happen to place the highest bid in an auction.
According to GourmetAds, other advantages of programmatic advertising are increased flexibility and greater reach. Ad campaigns can be tweaked at any time to respond to changes in the target audience or market, allowing more room for testing and experimentation. The real-time bidding process of programmatic advertising means that your ad can be placed on any spot that matches your targeting criteria, which will help you reach a larger audience.
The limitations of programmatic advertising
While there are advantages to programmatic advertising, there are also limitations that publishers should be aware of, according to GourmetAds:
- Eligibility: Small, indie publishers may face eligibility hurdles like being denied by demand partners for a number of reasons, such as audience size, not having enough demographic data or not being seen as a “valuable” website.
- Less control over ads placement: The reliance on automated technology means that publishers won’t have as much control over where ads are placed and who they’re targeted to
- Chance of Inappropriate placement: Since there’s no human to vet the quality of placements, your ad may be placed on a website that’s misaligned with the values of your publication.
- Ad fraud: According to Cloudflare, this is a type of cybercrime that involves scammers often using bots to trick advertisers and ad networks into paying them through fake clicks.
- Requires tech expertise: The buying systems can be difficult to understand and use to their full potential if you don’t have sufficient knowledge and training.
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Is programmatic advertising right for you?
Allison McIlmoyl, Senior Product Manager of Advertising at Indiegraf, says that before publishers jump into programmatic advertising, there are important considerations to think about.
- Are you tech-savvy enough to set up a programmatic connection? Whether you’re connecting to Google Ads Manager or another provider, you’ll need to have some in-depth knowledge or to work with an expert. If you want to look at header bidding or server-to-server connections, it all involves working with the website’s code.
- Do you have a regular publishing frequency and a history of solid content on the website? If not, you’ll get declined. According to Metro Publisher, many of the well-known demand partners require a high minimum traffic, such as 10 million page views per month. But there are partners that have no traffic requirements.
- Do you have a large enough audience? For example, take a publication that’s averaging around 50,000 views per month. If their programmatic ads get 50,000 impressions at a $3 CPM, they will be making $150 gross. If the publisher also sells direct, their programmatic ads will get even fewer impressions. (In some cases, publishers with smaller audiences can use programmatic to back-fill the gaps in their direct sale ads. It might not generate a ton of revenue, but it gets readers used to seeing ads.)
- Do you have the time and capacity to manage the programmatic connection? It definitely isn’t set and forget. You need to monitor your ad performance, adjust things like bid floors, manage the platforms you’re connected to and more. As Metro Publisher also noted, the tasks will also vary based on the amount of traffic your site receives and the amount of demand partners you work with.
When Indiegraf publishers are interested in programmatic ads, McIlmoyl usually asks the following questions to gauge whether this strategy makes sense for the publication:
- What are your revenue goals?
- What do you hope to accomplish by connecting to programmatic advertising?
- How much time per week can you dedicate to this?
The future of programmatic ads
On its own, programmatic advertising can be a very powerful tool for advertisers, but constant innovations, especially through the use of AI and machine learning, are expected to make the technique even more useful in the future. For independent publishers, these developments will make programmatic advertising even more efficient, hands-off, and relevant to their existing audience.
Advertisers are already using generative AI to draft copy, images, and even entire videos for ads. But AI isn’t just useful on the ad end. As Forbes recently pointed out, ads can be customized quickly to suit the local language, tastes and even recent search history of a consumer. If you run a news outlet in Arizona serving Spanish speakers, AI tools can quickly translate English ads, including equivalent idioms or expressions.
Machine learning algorithms can also analyze vast amounts of data related to buying and selling ads to bid aggressively on ads. Forbes says companies can use these algorithms to more precisely target ad placements, better predict user behavior, and ultimately convert more readers into paying customers.
When taken together, programmatic advertising doesn’t replace the process of buying ads, drafting an ad strategy or understanding your audience. Instead, programmatic advertising can be another strategy for publishers to generate a steady flow of advertising dollars.
📌 Programmatic ads are just one approach—compare them with other ad strategies in our comprehensive guide.
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