The Pitfalls of Programmatic Display Advertising & How to Avoid Them
Ever since the first form of programmatic display advertising was created in 1994, programmatic advertising has allowed us to effectively do what previously took us hours or weeks, in just a matter of seconds – or even fractions of a second.
Prior to that point, advertisers had to go to lengthy efforts to get their ads placed in front of their audience. This involved having to spend countless hours trying to directly get in touch with advertising publishers (or sellers) in order to secure an advertising space on places such as newspapers, websites, and e-newsletters. These advertisements were often shown for a fixed number of times, and locked into a rigid contract between the buyer and seller.
Then came programmatic advertising, which revolutionised the way ads were bought, sold, and shown to users on the internet.
Even though programmatic advertising is widely used and arguably the most popular form of online advertising today, there are a number of potential downsides or cons to programmatic advertising that advertisers need to be aware of – to ensure that you aren’t unknowingly wasting your budget.
That’s why at Integral Media, we’ve put together a comprehensive summary for business owners, marketers, and others alike to help your understanding in the fundamentals of programmatic advertising – including what it is, how it works, why it’s so popular, and most importantly, how you can avoid many of the potential pitfalls of programmatic advertising to ensure you get the best results out of your marketing budget.
Programmatic Advertising Explained
Before we jump into the pros and cons of programmatic advertising, here is a brief rundown of what programmatic advertising is.
What is Programmatic Advertising?
Programmatic advertising refers to an automated bidding system between buyers (advertisers) and sellers (advertising publishers) to auction off available ad inventory. The cost of programmatic advertising is measured by CPM or cost per 1000 impressions. Programmatic advertising uses what’s known as Real Time Bidding (RTB).
Real Time Bidding (RTB) involves holding auctions every time a user loads a new page. So instead of buying ad impressions in bulk upfront, RTB allows you to bid in real-time for a specific user every time they load a new page. With RTB, auctions are settled within 1/10th of a second (or within the time a page takes to load for a user).
Also, there are two types of platforms used in programmatic advertising:
- Supply side platforms (SSPs)
- Demand side platforms (DSPs)
Demand Side Platforms (DSPs) & Supply Side Platforms (SSPs)
Demand Side Platforms are used by advertisers. DSPs use programmatic advertising to automate the process of buying inventory at the best bids, across a range of advertising networks (such as Google, Bing, Amazon, etc.).
Supply Side Platforms on the other hand are used by publishers. SSPs use programmatic advertising to automate the process of selling inventory for the best prices, across a range of advertising networks.
Examples of Demand/Supply Side Platforms include Facebook Ads Manager, OpenX, BrightRoll, DoubleClick, Amazon (AAP), and more.
At Integral Media, we use Display & Video 360 (or otherwise known as DV360) which is Google’s Demand Side Platform – the best DSP available on the market. With DV360, you’ll experience transparency in how your ads are performing and clear connections to the right advertisers at all times.
How Does Programmatic Advertising Work?
Although there is a lot involved in programmatic advertising, here are the basic steps of what happens during the programmatic advertising process.
The Programmatic Advertising Process – 4 steps
- A user clicks onto a website or new page
- The website owner places an auction for the available inventory via the SSP
- Advertisers in the DSP bid for the inventory
- The highest bid attains the inventory slot and gets their ad shown
The bids will depend on how relevant the user is for your advertisement. Programmatic ads factor in information about the user through cookies or previous search history and behaviour. Other factors taken into account include:
- Interests of the user (e.g. gardening, sports, politics, etc.)
- Demographics (e.g. gender, age, background, etc.)
- Time of day
- Device (e.g. mobile, tablet, computer)
Types of Programmatic Advertising
RTB is only one of many types of programmatic advertising. Another popular type of programmatic advertising is ‘programmatic direct’ which involves buying a set number of impressions for inventory. This guarantees more exposure for your advertisements to show online, but you’ll have less flexibility in choosing who your ads get shown to.
Programmatic Advertising Examples
The most common example of programmatic advertising is display – such as a banner on a webpage. Others include video, mobile, as well as native advertising.
Why More Businesses Are Using Programmatic Advertising
There are good reasons as to why programmatic advertising has become so popular among business owners, advertisers, and marketers alike over the years. Some of the biggest benefits include:
#1 Time Efficiency
Long gone are the days of manual, time-consuming bidding systems. What used to take hours can be achieved within fractions of a second, meaning advertisers and marketers can utilise more of their time on other important things such as AB testing, refining ads, analysing data, and more.
#2 Cost Efficiency
Programmatic advertisers use automated bidding systems to bid at just above your competitor’s bids in order to secure an inventory slot (given that it fits within your budget). This means you’ll be putting your ads in front of your target audience for the best prices.
#3 Accurate Data Tracking & Analysis
With programmatic advertising, you’ll have access to accurate pieces of information and data regarding your ad performance in real-time. You can also benefit from A/B testing methods to analyse the best performing ads that bring the best leads or conversions. This way you can be more strategic about how you spend your marketing and ensure your campaigns are optimised to get the best returns.
The Pitfalls of Programmatic Display Advertising – What You Should Be Careful Of
Even though programmatic advertising can bring great results, it also comes with just as much risk – especially when it isn’t executed or managed properly by those with experience or expertise in the field of programmatic advertising. Without a well-refined and optimised ad campaign, you’ll likely end up wasting much of your advertising budget, only to receive little to no return on investment, ROI.
When it comes to programmatic advertising, here are the things you should be careful of –
#1 Hidden Margins & Costs
Perhaps the biggest drawback of programmatic display advertising is that it can have potentially high hidden margins and costs.
An experiment was done by The Guardian where they deliberately sold and bought their own ad inventory using programmatic advertising. In the end, they found that for every dollar they spent, they received barely over 30 cents. This means the remaining 70 cents was leaked into the rest of the supply chain involving DSP/SSP execution fees, transaction costs, etc.
For publishers (those selling inventory), this means you aren’t receiving the amount of revenue from your inventory that you’d expect.
Whereas for advertisers (those buying inventory), this means you’ll end up paying for hidden buy-side fees that you aren’t aware of.
Without transparency in terms of how much of your budget is going to advertising versus supply chain fees, it’s extremely easy to be cut short of what you actually deserve.
This is a very common issue with programmatic advertising, and many advertising companies fail to provide a clear picture to their clients on how their programmatic ad spend is being used.
This is why at Integral Media, we find it crucial to inform our clients of how much of their budget is going to generate revenue and conversions for their business, versus how much will be redirected to other fees instead.
We’ve been using programmatic advertising for years, and are highly experienced in managing budgets to produce the best ROI – whilst providing you with clear and understandable explanations to keep you informed at all times.
#2 Your Targeting May Not Be Specific or Accurate Enough
With so many data point options to choose from such as age, gender, income, location, etc. you may not be targeting your ads well enough to yield the best results. Programmatic advertising can be tweaked and adjusted multiple times using methods such as A/B testing, but without accurate targeting strategies, it can be difficult to see the ROI you’re after.
#3 Impressions & Clicks Could be Wasted on Bots
Although many of the experienced ad specialists navigate their way around this, many business owners or junior marketers who are unfamiliar with programmatic advertising may end up utilising their marketing spend on impressions and clicks from bots. This makes it all the more important to get the help from reputable ad specialists who know how to avoid such situations in the first place.
#4 Inappropriate Ad Placements
Similarly with #3, top ad agencies ensure that your ads appear on suitable websites that align with your business’ brand and values.
However, without proper management of your programmatic advertising, you could easily have your ads showing inappropriately or on inventory that is damaging to your business’ reputation. For instance, an advertisement for an airline may appear on an article that is about airplane crashes and accidents.
#5 Competitive and Saturated Market
Programmatic advertising has been around for decades and has slowly become flooded with buyers and sellers in all types of industries, sizes, and types. The first ever banner published with programmatic advertising had a click through rate of around 44%, whereas now, the average click through rate of programmatic display advertisements is around 0.5%.
#6 Need Exceptional Ad Creatives to Stand Out
To continue off with the previous point, due to the saturated and competitive nature of programmatic advertising, there’s also a bigger demand for higher quality ad creatives to ensure you’re optimising the number of impressions and clicks for every dollar you spend.
How to Choose The Best Programmatic Advertising Specialist Agency
With all of that being said, the good news is that you can easily avoid the above risks or disadvantages with programmatic advertising by partnering with the right ad specialists.
At Integral Media, we’ve been helping businesses of all types, sizes and industries best leverage their programmatic advertising spend to get the results they’re looking for.
By leveraging the best Demand Side Platform available – Google’s Display & Video 360 – we make sure your best ads appear in front of your target audience with low and transparent margins and efficient use of your advertising budget.
You’ll be connected to publishers and ad inventory across a wide range of advertising networks, and have expert guidance on programmatic advertising best practices every step of the way.
If you’re interested in starting or improving your programmatic advertising performance for your business, we can help you
- Set up your campaigns in DV360
- Create targeted and professional ad creatives
- Perform highly refined research to determine how to best bring your ads to your target audience
- Analyse your campaign performance and outline areas of improvement
- Regularly monitor, refine, and optimise your ads
If you’re interested to learn more about how programmatic advertising can bring you the leads, conversions, and results that you’re after, simply get in touch with our director, Alex Morrison, at Integral Media today. Or you can hop on our website to fill out an online form and we’ll be with you right away.