A guide to

Programmatic
Advertising

WELCOME TO THE FUTURE ➜

A W H I T E PA P E R
 02 | Welcome to the Future: A Guide to Programmatic Advertising

Programmatic advertising’s ability to quickly, accurately and cost-effectively

target a huge audience is rapidly reshaping the media business. Brands from
Amex to Ford to Kellogg’s are openly shifting their ad budgets to programmatic,
while premium publishers are making ever more high quality inventory available.

Already making up over half of US digital advertising, IAB research shows that UK
programmatic is forecast to grow from 28% in 2013 to almost half (47%) of digital
display ads in 2014. By 2017, it could reach 75%.

Well established in Canada, Australia and France, programmatic is spreading

rapidly across the rest of Europe and into new markets like China and Brazil.
Interpublic’s Magna Global predicts global ad spend will expand by 27% annually
to a total of $53 billion by 2018.

Despite all this, there is still a serious lack of knowledge about how programmatic
works. Every guide seems to tell a different story. This paper looks deeper into the
intricate building blocks of programmatic and seeks to explain how its unique
attributes differentiate it from any other type of advertising that has gone before,
digital or otherwise.

IAB research: UK programmatic growth forecast of digital display ads

28% 47% 75%

2013 ➜ 2014 ➜ 2017
 03 | Welcome to the Future: A Guide to Programmatic Advertising
Why is everyone so excited about Programmatic?
Marketers want to reach their desired audience across
all channels and devices from a single platform.
Publishers want to present audiences for their
properties defined by specific interests and behaviours.
Programmatic ad buying brings the two together
across web, mobile, video, social and beyond.
Conventionally, advertisers have booked digital media
from a single source, in advance. Ad serving networks
bring scale to that process, letting advertisers buy
impressions across multiple sites based on a single
customer profile. More recently, ad exchanges have
directly connected ad buyers (advertisers or agencies)
with sellers.
However, there’s usually still a lot of labour involved, you
have to pick up the phone and call people, swap
spreadsheets and emails and sign booking forms. As well
as limiting response tracking, targeting or optimised ad
buying across multiple networks, manual processes are just
too slow to manage today’s vast digital ad marketplace.
Interpublic Group
has stated that
it wants to move 50%
Programmatic changes all that. Its sophisticated data
and technology-driven infrastructure lets buyers bid for
impressions on demand in a real-time marketplace –
otherwise known as Real-Time Bidding (RTB). With huge
amounts of inventory to choose from, buyers can carve
out precise selections from millions of options.
This way, advertisers can deliver precisely the right
message to those consumers most likely to buy their
products and services – at the optimum time and in the
correct context. They can buy space when exactly the
right user is browsing a page or serve ads based on the
weather conditions at a consumer’s location.
The results? Lower cost per acquisition (CPA),
increased engagement and better overall ROI, along
with far lower overheads for ad purchase and fulfilment.
This high performance also translates to increased
ad relevance for the consumer and greater revenue
for publishers. Let’s look a little more closely at what
happens under the bonnet.
of its media buying
to programmatic
by 2015
 04 | Welcome to the Future: A Guide to Programmatic Advertising
So how does
Programmatic ad buying work anyway?
Demand-Side Platforms (DSPs) lie at the heart of
programmatic buying. Just as today’s stock traders
bid across many virtual stock markets rather than real
trading floors, programmatic buying via DSPs can
access digital advertising inventory across multiple ad
exchanges, ad networks and data exchange accounts, all
through a single intelligent interface.
DSPs give both agency trading desks and end-user
client buyers sophisticated tools with which to
define budget, reach, audience and content for
their campaigns. Based on those parameters, a DSP
uses bidding algorithms to bid on a client’s behalf
in many different real-time auctions simultaneously,
automatically adjusting the bid price and impression
selection to achieve the campaign goals.
Run as the ad impression becomes available and the web
pages loads, these auctions really do happen in real time.
Bidders have a very short time to respond, usually less than
100 milliseconds. Once the bids are in, the winning ad is
served instantly. As campaigns execute and consumers
respond, programmatic platforms use the incoming
response data in real time to re-select and optimise ad
audiences, pricing, content and context, shifting spend
from the lowest to the highest performing spots.
On the other side of the fence lie Supply Side Platforms
(SSPs). These are where publishers manage their
impression inventories and make them available for
purchase in ad exchanges and other locations.
Publishers can also use ad networks to present their
inventories, while some ad exchanges build in SSP
functionality that let publishers deal with them directly.
Other applications within the programmatic
infrastructure include Ad Verification and Brand
Protection, Data Management Platforms (DMPs) and
Creative Platforms. Working together with these,
the DSP is better able to target each consumer
segment with the right messaging, then track
consumer response and use that information to
optimise ad targeting and creative during campaign
execution. We’ll come on to these shortly.
 05 | Welcome to the Future: A Guide to Programmatic Advertising

Precision meets scale -

programmatic audience targeting & tracking

Unlike many pretenders to the title, programmatic

targeting really is Big Data Analytics in action. It has
similarities to the targeted advertising employed in Precision
familiar channels like direct mail or email, but combines programmatic
precision with instant execution while operating at truly marketing uses
enormous scale. unstructured data
to build custom
Where traditional segment-based targeting might audiences and
use a handful of attributes like age, gender, income or Amber Benson optimise them
past purchase, the best DSPs can employ thousands of VP, Marketing
Simpli.fi
on the fly
different variables and access petabytes of historical data
to target the right consumer segments in the correct
context at the right time. DSPs also make impressions
from many different advertisers and channels available for historical and real-time learning when bidding for
selection by buyers using the same audience definitions. impressions.

Programmatic’s ability to track and (anonymously)
identify individuals and their actions generates endless
insights. Which inventory delivers the best combination
of response and cost per click or per acquisition for a
given audience? Advertisers can learn which buying
strategies work best and DSPs can incorporate both
This information also contributes to more accurate
attribution modelling: which marketing actions in what
proportion or sequence have influenced a consumer to
act in a certain way? Buyers can compare performance
between channels and use the results to decide where
budget should be allocated.

In the funnel

Programmatic vendors often define

consumer groups by where “in the funnel” they are:
“higher in the funnel” refers to
cold prospects. “Lower in the funnel” means
warmer or closer to a sale. For this latter group, im-
pressions will be shown to site
visitors, enquirers or previous purchasers.
 06 | Welcome to the Future: A Guide to Programmatic Advertising

Targeting and retargeting

As well as engaging completely new prospects,

programmatic’s tracking abilities means it can retarget
known consumers that have previously engaged with
a brand. Site-based retargeting is the best-known Putting data at the heart of
example. If a consumer abandons a shopping basket, the your strategy and having the
advertiser’s website places a cookie on their computer. power to deploy highly targeted
campaigns to your consumer base
(both new and existing) means
As that consumer moves onto other sites, a retargeting that marketers are seeing
campaign uses the cookie as a trigger and, if ad space huge efficiencies from what
is free on the site, bids for it. If that bid is successful, the was previously a “spray
and pray approach”
consumer sees a free shipping ad (for example). Using the
power of programmatic to track, marketers can start with
brand advertising, then follow up with relevant messaging
throughout that same individual’s lifecycle, as they move Joel Christie, Client Strategy Director
from site visitor, to customer, to repeat customer. Rocket Fuel

Where’s the party?

Audience targeting usually starts with the advertiser’s own first party customer data, helping build definitions for
the desired customer segments and types. Buyers can then use tools on the DSP to import this definition, then
the DSP can work with third party audience information and historical ad performance data to decide which ad
impressions to buy.

First party advertiser data
describes an advertiser’s
own customers, such as
email address, purchase
history or browsing
behaviour. Advertisers use it
to tailor offers to their own
customers or to inform ad
buys elsewhere on the web.
First party publisher data
is typically visitor
behavioural information
collected from publishers’
online properties which can
then be used to target ads
on behalf of advertisers.
Second party data
is audience data passed to
an advertiser by a single
publisher to aid in targeting
ad purchases.
Third party data
is aggregated data
from multiple publishers
and other offline sources.
Companies with no direct
relationship to consumers
use this data to build
detailed individual profiles
showing users tastes and
browsing behaviour. This
information is then sold to
advertisers to help them
target ad purchases.
 07 | Welcome to the Future: A Guide to Programmatic Advertising

How do you track?

Digital marketers employ many different techniques

to track users online, from traditional cookies and IP
address to methods like HTTP authentication, pixel
tracking, query strings and hidden form fields. Cookie
and pixel-based tracking are the most common methods
used in programmatic buying.

In simple terms, whether using pixels, cookies or

anything else, the aim is simple: identify the user in
question (even if they are anonymous). When you’ve
done that, you can begin to understand patterns of
behaviour and build a picture of your conversion rate.
When you can do that, you can place a value on an ad
impression. In years gone by, these processes would
have taken massive time and resources. Programmatic
manages all this and more on the fly.
 08 | Welcome to the Future: A Guide to Programmatic Advertising

Programmatic infrastructure
in more detail
The tools available for ad buying, targeting and tracking don’t end with the DSP. Other applications add extra
functionality to help improve ad placement and performance. It’s vital to remember that vendor specifications
vary enormously and that many – or even all – of the features described below will also be offered within many
programmatic platforms.

➜ The Data Management Platform (DMP)
DMPs let advertisers, buyers and anyone else involved
in programmatic better manage the many different
sources and types of audience data and analytics
involved in programmatic. Working hand-in-glove
with DSPs, DMPs help produce a single, coherent set
of metrics that can be used to intelligently describe,
target and track a consumer audience across all channels
and devices.
segmentations used in offline channels to cover ads
bought programmatically.
DMPs have so far only been for the most sophisticated
multichannel marketing outfits. One recent (CMO
Club) survey found that fewer than half of US marketers
(44%) using programmatic are incorporating their own
CRM or even their first party web data into their ad
buying strategy. However, their relevance will increase
as programmatic continues to grow.

Notably, DMPs aid in importing disparate user profiles

and segment data from sources such as CRM systems,
converting it and matching at individual customer
level. For example, that might mean extending
long-established demographic and behavioural
A data management
platform just for
display is not worth
it. Only [use one] if
you’re pulling a lot
of different things
together from
search to email

Megan Pagliuca
VP & GM of Digital Media
Merkle
 09 | Welcome to the Future: A Guide to Programmatic Advertising
➜ Creative optimisation platforms
The right creative content and optimal placement
translate into better consumer engagement and higher
conversion. So, for maximum ROI, advertisers must
choose the best performing content for a particular
audience from a seemingly infinite number of variations
in headlines, body copy, video or images.
Integrated with DSPs, creative optimisation platforms
dynamically serve different ad creative to engage various
groups and sub-groups within an audience. To make
the initial creative selection, these platforms use client-
entered parameters along with data on historical ad
performance, such as which message works best with a
certain segment, the right ad format for a message type
or where the optimum spot lies on a webpage.
The creative platform then revisits and optimises
those choices as data arrives on consumer response to
placements. Able to analyse and apply big data analytics
in real time, these platforms offer far more rapid and
accurate ways of testing both ad designs and audiences
over traditional cyclical test and learn approaches.
➜ Ad campaign verification and brand
protection platforms
Just as auditors verify print magazines’ claimed
circulations, ad verification platforms use
independent tracking to prove that a digital
campaign’s impressions reach their intended
audience in the right format and position. That
might mean checking that premium impressions
are delivered on a publisher’s core properties rather
than those of an affiliate, or spotting where ads are
invisible or adjacent to a competitor. For example,
a video ad intended for a pre-roll impression is
served as a banner video ad instead – a spot which
is far less attractive to consumers.
Brand protection or brand safety tools take
preventative measures to make sure ads are always
served in suitable locations. They score domains
based on keywords, images and many other criteria,
working with industry and campaign-specific
blacklists and whitelists to identify suspicious sites and
destinations. They then block those impressions deemed
to be low quality, fraudulent or otherwise suspicious.
 10 | Welcome to the Future: A Guide to Programmatic Advertising

Programmatic buying platforms

do more than just auctions
Real Time Bidding is synonymous with programmatic buying and remains the chief method used by DSPs to
purchase ad impressions. However, as the ad industry has realised the performance and cost benefits of RTB, so
programmatic platforms are adding other ways to buy and manage campaigns that aren’t necessarily auctions.
Here’s a few of them.

➜ Private Marketplaces (PMP) ➜ What is Programmatic Direct?

Publishers use private marketplaces or ad exchanges
to control exactly who can buy their inventory and at
what price. They are often used to sell the most prized
impressions or the ability to target a specific audience.
Rather than selling through an auction on an open
ad exchange, the publisher can offer impressions in a
private auction to a restricted set of clients or agencies,
often with a strict lower price (floor) limit. Private
marketplaces can also feature fixed-rate sales (non-
auction) for various types of ad placement.
Though closer to the old model of ad buying, PMPs
are now part of the programmatic infrastructure with
all the efficiency and intelligence benefits that entails.
Good DSPs and creative platforms offer tools that let
advertisers buy in private markets, then track and
measure those ads’ performance alongside all their
other impressions bought via RTB or elsewhere.
Programmatic Direct takes the automation mechanisms
used in RTB and applies them to the traditional ad
buying process. Also known as Programmatic Premium,
Reserved or Guaranteed, it simply means that ads are
bought directly from publishers or SSPs without going
through an auction, for either reserved or unreserved
inventory.
In return for paying more, impressions are typically
premium inventory shown to many high-quality visitors
at optimal peak traffic periods. Buying direct through
programmatic platforms lets advertisers benefit from
much lower operational and sales overheads, plus they
can track and evaluate their direct ad performance
alongside all their other ad buys.
It used to be clout
that won in media, but
that’s not necessarily
true anymore. The new
clout is the strength of
your algorithms and
your capacity to
exploit data

Matt Green
senior marketing manager
World Federation
of Advertisers
 11 | Welcome to the Future: A Guide to Programmatic Advertising
➜ How do you find out the type of content
your ad will be displayed against?
In traditional digital campaigns, brands know exactly
each and every placement and website where their
ads will feature. In contrast, programmatic transactions
offer varying levels of detail on different ad impressions
ranging from a full URL to a completely blind sale with
no information at all.
That’s why buyers should make sure their suppliers
employ protection platforms and processes to screen
out poor quality inventory (see above) in real time.
Using web crawlers, human panels and other screening
technologies, it’s possible to pre-classify and evaluate
the content on millions of properties.
Programmatic-buying providers also often maintain white
lists of approved content. Clients can choose to bid only
for these and to exclude all other properties by default.
➜ Can you handle programmatic
buying yourself or should you still
use an agency?
The trend is definitely towards independent buyers and
in-house teams, and away from agencies. A late 2014
World Federation of Advertisers (WFA) survey found
that American use of agency trading desks had declined
by 15% over the last year. Meanwhile, client adoption
of independent trading desks (not owned by media
agencies) had more than tripled to 30%.
One driver for this is that companies see the intelligence
conferred by the analysis of programmatic data as
providing a competitive edge. Handing your ad budget
to an agency means other clients on their roster may
benefit from your campaign learnings. However,
agencies still fulfil their traditional function: providing
expert advice while delivering performance benefits and
cost savings that substantially exceed their own fee.
 12 | Welcome to the Future: A Guide to Programmatic Advertising

Is Programmatic just for

response-driven advertising?

Direct response campaigns solicit an immediate and
measurable response, typically with the purpose of
driving website traffic and sales, while brand advertising
is more focused on awareness and brand recall.
Branding campaigns have traditionally focused on broad
demographics and fixed audiences, with advertisers
hand-selecting impressions that help convey their
desired brand image.
Though the optimisation features that DSPs use to
control RTB are certainly well suited to helping direct
response campaigns reach their conversion and other
targets, they are just as effective in driving ROI for
branding campaigns.
By targeting an optimised audience at an influential
stage in their path to purchase, programmatic can use
its dynamic geographic, demographic and behavioural
targeting capabilities to maximise engagement and
contextual relevancy – ensuring brand ads are reaching
precisely the right audience at the right time.
Most premium and standard sized inventory can
now be bought via programmatic, including video,
expandables and large brand formats. Brand-centric
advertisers such as Ford, Kellogg’s and Heineken are
spending more of their budget than ever this way, with
P&G recently stating it aims to buy 70% of digital ads
programmatically.

Marketers are
beginning to realise
that the ability to
optimise in real time
will help them to drive
improved ROI for
their branding Dominic Trigg
campaigns SVP, MD Europe
Rocket Fuel

Online ads A 2012 study by RapidBlue found double-digit

influence increases in both the number of shoppers
offline and the amount of time they spent in store
action when stores ran Google AdWords campaigns
 13 | Welcome to the Future: A Guide to Programmatic Advertising

Rise of Brand

Over the past 18 months there has been a dramatic shift in the amount of brand pounds being
spent in digital. According to the IAB/ PwC UK Digital Adspend Study 2013, brand budgets online
have almost doubled over the past 5 years. In 2009, 10% of total online spend was attributed to
brand advertising rising to 17% in 2013. Budgets are not being transferred from TV to digital,
in fact TV budgets continue to increase. The shift is coming from within the digital channel itself.

By Andy McNab, UK Managing Director, Rocket Fuel

Why is this? Measuring Effectiveness

Ultimately, a shift has taken place in the mind-set of brand
marketers. The focus has shifted from buying publisher
placements in the hope of reaching your audience, to
audience guarantee buys. This is not only a first in digital, but
in advertising. Marketers realise that the importance of digital
buys does not rest on content alone but with the consumer.
It’s the who, not the where.
Even with advanced data segments and targeting,
marketers today are only reaching about half of their target
audiences, not because they are not available, but because
when accuracy of this audience targeting is measured, it is
proving to not be as accurate as one might hope. According
to a study by Nielsen (OCR Norms zone 4), over 60% of
online ads are delivered outside the brand advertiser’s
target audience. Finding the best placement is more difficult
given the growing complexity of devices, formats and
content modules.
As investment in digital brand grows, brands must evolve
their understanding of the digital KPI, especially in relation
to offline media channels where the majority of branding
budgets are spent.
In order to measure effectiveness of programmatic brand
activity, another shift in mindset also needs to take place;
that of measurement. Marketers need to focus on brand KPIs
and look at the uplift in brand consideration, not clicks. As
far back as 2011, Nielsen’s Beyond Clicks and Impressions
Study demonstrated that there is no correlation between
clicks and brand metrics or offline sales. And yet still
brand marketers are clinging to the click-through-rate as a
measurement of success.
When it comes to targeting, brand marketers will continue
to focus on specific audience groups. Historically, the
ability to deliver to these groups has relied on the audience
analysis of individual publishers and/or the quality of third
party data segmentation. Nielsen Online Campaign Ratings
and comScore Validated Campaign Essentials individual
analysis has shown the relative inaccuracy of these
approaches. The programmatic space has enabled those
with the ability to ingest and utilise big data to improve
upon this situation using advanced algorithmic approaches
to building audiences that match with measurement by
these 3rd parties.

Therefore, brand campaign success in the RTA space must Conclusion

consider these challenges by incorporating 4 key elements
of success:
l Reaching your true target audience.
l Discovering the right opportunity to generate that
moment of influence.
l Creating that moment of impact in a brand-safe
environment.
l Driving real results that echo client-led ROI principles.
Another key reason for the rise in brand spend is simplicity
and insight. No longer do brand marketers have to wait until
the end of a brand campaign to analyse its effectiveness.
This insight is given in real-time and, more importantly,
The creative brain will continue to be a key KPI in
programmatic branding activity. It is most critical here
that we ensure that we do not lose the human touch. The
evolution that we are witnessing in digital advertising
will create an expectation in the future for other brand
channels. Measurement and accuracy will be needed in
TV, radio and other brand engaging media. Ultimately, the
digital evolution will be transferred to traditional channels,
resulting in the expansion of the digital footprint.

10% 17%
optimised in real time. Through programmatic advertising it
is possible to see the impact of a brand campaign on brand
consideration. This insight is acted upon in real-time.

2009 ➜
2013
 14 | Welcome to the Future: A Guide to Programmatic Advertising

Programmatic challenges

Even as its rapid rise continues, programmatic still has obstacles to overcome

➜ Enhanced tracking across devices ➜ Is programmatic ad fraud a real problem?

Though tracking and targeting individuals is one of
programmatic’s great advantages, the same workflow
can be hard to achieve when consumers use multiple
devices for browsing. The removal of cookies – an
increasingly endangered species, particularly in Europe
– could make the situation even more challenging.
“Fingerprinting” technology designed to recognise and
unify a collection of user devices is still in its infancy.
➜ Looking for consistent targeting
The metrics used to define publisher audiences are
often incompatible; consistent targeting is one of
the main reasons for adopting DMPs. Companies like
Nielsen, Experian and comScore, amongst others, are still
fighting it out for supremacy in the marketplace, but no
measurement or technology is anywhere near achieving
market dominance.
More positively, the metrics used to target and evaluate
programmatic video campaigns are moving closer to
those used for TV. This means marketers can directly
compare the reach of digital and offline brand campaigns.
With billions of ad impressions flowing through ad
exchanges every day from millions of publishers,
fraudsters try their best to take advantage of the open
marketplace within programmatic buying. The fake
websites and bot fraud (ads delivered to hijacked
computers) that they use are definitely challenges
that programmatic has to face, but their effect on
well-managed campaigns is almost always greatly
exaggerated. Adopting rigorous brand safety procedures
and using the latest screening tools lets advertisers and
their partners quickly detect and block suspicious or
fraudulent sites.
The situation is analogous to the early days of email
marketing, when spam and click fraud presented real
problems before responsible industry leaders and
government regulators rooted them out. Wider adoption
of brand protection and anti-bot tools along with metrics
like traffic quality score will help the industry win the war
against the fraudsters and make it uneconomic or too
risky for them to operate.
In the meantime, advertisers must always demand details
on placement quality to ensure their ads are running
when and where they’re supposed to. Like any ad channel,
strict A/B testing is the best way to measure the real
incremental value programmatic adds to their advertising.

Fraud reduction
is a work in progress.
The industry won’t
Henry Blaufox
solve this in just
DragonSearch a week or two
 15 | Welcome to the Future: A Guide to Programmatic Advertising

Programmatic coverage in the ad market?

Premium inventory is widely available on programmatic,

in fact that’s one of the reasons behind its success.
Double-digit annual growth means that programmatic is
rapidly overtaking conventional direct ad sales in the US
and the UK will shortly follow.

However, it’s true that some publishers still sell all or

part of their inventory directly through their own sales
force. So it’s not yet possible to cover the entire online ad
universe, buying only through programmatic.

Innovations like private marketplaces and programmatic

direct however are rapidly attracting publishers into
the fold who don’t necessarily want to sell by auction.
Whether or not all ads are eventually bought this
way, ignoring the performance and price benefits of
programmatic would be a costly error.

Programmatic
direct will
make up 42% of all US
programmatic
buys by 2015

eMarketer
 16 | Welcome to the Future: A Guide to Programmatic Advertising

Programmatic is here to stay and hopefully this white paper has shed a little more
light on how this vital new sphere of the marketing industry functions. Though
its internal workings are certainly complex, programmatic’s automation and
targeting capabilities actually make ad buying far simpler and more productive
compared with traditional methods. It just makes advertising work better.

Now starting to encompass offline ad media like TV, radio and print, the shape of
the future can be seen in programmatic’s firm grip of video ad impressions. With
more and more publishers making their inventories available, programmatic’s
sheer efficiency, effectiveness and convenience makes its eventual dominance
seem both desirable and inevitable.

A GUIDE TO

PROGRAMMATIC
ADVERTISING

WELCOME TO THE FUTURE ➜

A W H I T E PA P E R

A marketingfinder.co.uk publication in association with RocketFuel.

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