Programmatic Advertising 101: A Beginner's Guide for Advertising Sales Reps (Part II)

In publishing, the addition of digital advertising has opened a new world of revenue opportunities as well as many challenges. And the technological transition has brought with it opportunities for publishers that did not exist as publishers gain the ability to sell advertising inventory across the entire internet.

It’s a challenge for many sales reps to understand how programmatic digital advertising works so they can take advantage of these opportunities. For those looking to get programmatic advertising explained quickly, we’ve already broken down the terms you need to know in our programmatic advertising glossary; here, then, is a beginner’s guide to how to sell programmatic advertising.

Understanding the Concept of Programmatic Advertising

To best illustrate what programmatic advertising is and how it’s sold, we’re going to center the conversation around a hypothetical advertiser that we’ll call The ABC Store.

If I’m marketing The ABC Store, my initial approach might be to spread word of my products to as many people as possible. In a traditional digital sales landscape, I could contact local publications to find out their rates, write a check for some primo banner ads, blanket this market, and hope for the best.

With programmatic advertising, however, I have the opportunity to make my money work much more efficiently. I can cater my ads to the perfect subset within a target audience. I could find ad spaces that, thanks to digital analytics, will show up in front of enthusiasts who browse online for whatever it is The ABC Store sells. I could also target by geography through a process called geofencing, which is picking an area or even a building where you are going to buy ads on all of the internet sites visited by people in that location.

Programmatic advertising allows me, the advertiser, to not only create those ideal shopping parameters, but then put a price I’m willing to pay to put my ad on those optimized screens. As social media provides even more ways for audiences to explore their interests and let their flags fly, these insights provide valuable data to marketers looking to find specific segmented audiences to spread a more personalized message.

Programmatic Direct

There are two different methods for purchasing ad space with programmatic advertising: programmatic direct and real-time bidding (RTB).

Programmatic direct works similarly to the traditional methods of media buying in that I, the advertiser, have the ability to buy a specific number of impressions in advance from the publisher. The benefits of knowing the exact available inventory and precise agreed-upon prices can be a reassurance to my emerging brand, just as it can provide certain control and confidence to you, the publisher. With all of that advanced intel, negotiations can begin around a defined time and a guaranteed number of impressions.

One of the few difficulties in programmatic direct is attaining a 100% fill and finding willing advertisers to purchase less-desirable spaces. But, as AdPushUp writes, “programmatic direct is an ideal method to sell only the exclusive and high yielding inventory.”

“For small advertisers,” AdPushUp continues, “it can be hard to get hold of such exclusive inventory because a.) they won’t be invited by the publisher and b.) even if they are invited, they might not be able to pay high prices set by the publisher. Hence, they choose easier methods like RTB.”

Real-Time Bidding

Because programmatic direct is used mainly by large ad agencies who have relationships with large publishers, we’ll focus on what your sales staff is more likely to be selling: programmatic advertising through real-time bidding using a third-party ad exchange.

In real-time bidding, an auction begins amongst potential advertisers as soon as a visitor loads a webpage. According to one forecast from 2021, the global RTB market is expecting to grow around 22% at a compound annual growth rate over the next five years.

With those expectations, it’s important to better know the entities within that growing ecosystem. There are too many unique ad exchanges and platform intricacies to cover in one overview, just as there are many strategies behind how data is narrowed down and ultimately computed. For simplicity’s sake, we’re going to generalize the process considerably to better convey the basic concepts.

Jounce Media’s The Little Black Book of Private Marketplaces

I, the ABC Store, want to reach alphabet enthusiasts who visit your site, so I would place a bid to reach that specific targeted demographic. In this abstract instance, let’s say my bid is $3. Similarly, the XYZ Store marketer is bidding for the exact same demographic, but their bid is only $2.

When a user visits a publisher’s site, their relevant visitor data is instantly captured and the publisher can auction any impressions using a supply-side platform (SSP). Likewise, we advertisers are using a demand-side platform (DSP) to place our bids.

The ad exchange instantaneously processes all bids and I, the $3-bidding advertiser, would win the ad-space impression in an automated auction that, to the mouse-clicking customer, takes just a few imperceptible split-seconds behind the curtains of your site. The web visitor sees ABC and clicks on it to open in a new window — win-win everyone (except XYZ).

This flowchart, from Smaato, breaks down programmatic advertising and the different types of auctions

In breaking down types of RTBs even further, Smaato says open-exchange auctions may be more cost-effective for advertisers, while private marketplace auctions may ensure higher-quality ads and transparency for publishers.

Just how big is this potential digital market?

Now that you have an understanding of the ecosystem, let’s talk about the size of the market.

In a survey of advertisers and agencies, the marketing company MiQ found that 70 cents of every digital ad dollar spent is “being allocated to programmatic channels now and is expected to increase to 90 cents by 2025.” For more than one-third of publishers, a “large” or “very large” portion of their revenue came from programmatic ads.

Not only is the pie slice getting bigger, but so is the pan. Insider Intelligence estimates that global digital ad spending will hit $667.58 billion in 2024 — an increase of more than 10% from this year.

Source: Insider Intelligence

What is the “Sweet Spot” for Small-to-Midsize Publishers in Programmatic Ad Sales?

The skill set that most small-to-midsize publishers have is content creation and the ability to sell advertising to small-to-midsize businesses. That advertising sales skill set traditionally focused on their own products, but many publishers are realizing there is more opportunity and growth in selling the entire internet rather than just their websites, newspapers, or magazines.

Effectively, many small publishers are becoming digital ad agencies that specialize in catering to small-to-midsize businesses.

It’s difficult for publishers to compete against large ad agencies bidding for large media buys from major companies, but in the publishers’ sweet spot of $1,000 to $5,000 media buys, a publishing sales staff is better equipped to serve this market because of their relationship advantage with small businesses. Once the media buys go above $10,000, the competition from more experienced digital sellers at digital marketing agencies increases dramatically. So it’s in these smaller buys where publishers will find the most success.

One caveat that I have from experience is if the purchase is below $1,000, you just don’t get enough impressions for the campaign to have any success. And the cost of the transaction for you is high with a small return. So get as close to that $2,500 to $5,000 ad spend range as you can. The bigger the spend is, the more likely you will be to show your clients results.

Ad Sales Opportunities for Publishers

As the publisher, providing space for potential display ads isn’t always enough. Fortunately, programmatic advertising platforms can manage the inventory of many advertisers, collect and analyze the website visitor data, and manage current and past campaigns to keep the whole machine moving.

A programmatic advertising vendor such as AdCellerant can help simplify the marketplace, just as Magazine Manager’s forthcoming integrations with AdCellerant and Google Ad Manager can make it accessible with what you’re already working with.

One of the larger benefits of programmatic advertising in general is the transparency that traditional advertising models simply can’t compete with. “Fraudulent traffic remains a critical issue for the digital advertising industry,” MonetizeMore writes, “and [programmatic] direct deals help put an advertiser’s mind at ease. Publishers also benefit as they gain valuable information on which creatives to serve, the number of impressions needed, audience types and more.”

Now that you know the basics, take a good look at your inventory and the ways you’re currently selling them. Chances are, there’s a better way to both identify your audience and profit from the relationship they’ve established with you.