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Our Blog March 4, 2024

What Is Programmatic Advertising? How Does It Work?

Writen by octaadsmedia

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Introduction to Programmatic Advertising

In today’s digital landscape, advertisers are constantly seeking more efficient and effective ways to reach their target audience. Programmatic advertising has emerged as a powerful solution, revolutionizing the way ads are bought and sold online.

How Programmatic Advertising Works

Programmatic advertising operates through automated processes, leveraging technology to streamline the ad buying process. Key components include automated bidding, real-time bidding (RTB), demand-side platforms (DSPs), and supply-side platforms (SSPs).

Automated Bidding

Automated bidding allows advertisers to set parameters for their ad campaigns, such as budget and target audience demographics. Through sophisticated algorithms, bids are automatically placed on ad inventory that matches these criteria.

Real-Time Bidding (RTB)

RTB is a crucial aspect of programmatic advertising, enabling advertisers to bid on ad space in real-time as a user loads a webpage or app. This instantaneous auction process ensures that ads are displayed to the most relevant audience at the right moment.

Demand-Side Platforms (DSPs)

DSPs are platforms that enable advertisers to manage and optimize their programmatic ad campaigns across multiple channels and ad exchanges. These platforms provide advanced targeting options and analytics to maximize campaign performance.

Similar to SSPs, these company names may ring a bell and offer DSPs.

Some of the top DSPs include:

  • Display & Video 360 (Google).
  • The Trade Desk.
  • Amazon DSP.
  • LiveRamp.
  • Adobe Advertising Cloud DSP.
  • StackAdapt.
  • Amobee.
  • Yahoo Ad Tech.
  • AdRoll.
  • Basis (formerly Centro).
  • RhythmOne.
  • Choozle.
  • BrightRoll.

Some of the larger DSPs for Connected TV and video include:

  • TubeMogul.
  • OneView (Roku).
  • MediaMath.

Supply-Side Platforms (SSPs)

This platform allows publishers to sell their ad impressions to advertisers in real time. This platform encompasses both DSPs and ad exchanges.

On the other side of the equation, SSPs allow publishers to manage and monetize their ad inventory efficiently. By connecting with DSPs, publishers can ensure that their ad space is sold at optimal prices to the highest bidders.

SSPs for publishers includes:

  • Google Ad Manager.
  • Amazon Publisher Services.
  • OpenX.
  • Google AdMob.
  • Yahoo Ad Tech.
  • TripleLift.
  • PubMatic.
  • Verizon Media.
  • Xandr (Microsoft).
  • Index Exchange.
  • Sovrn.
  • Magnite.
  • Criteo.

If you’re looking for a video SSP, some of the leading companies include:

  • SpotX.
  • Teads.
  • AdColony (now DigitalTurbine).

Benefits of Programmatic Advertising

Programmatic advertising offers numerous advantages for advertisers, including highly targeted advertising, cost efficiency, and real-time optimization. By leveraging data and automation, advertisers can deliver personalized messages to specific audiences, resulting in higher engagement and conversion rates.

Some of the top benefits include:

  • Large-scale audience reach.
  • Efficient and low-cost awareness.
  • Real-time data and analysis.
  • Ability to utilize first and third-party data.
  • Opportunities for cross-device campaign strategies.

Challenges of Programmatic Advertising

Despite its benefits, programmatic advertising also presents challenges, such as ad fraud, brand safety concerns, and ad blocking. Advertisers must remain vigilant and implement strategies to mitigate these risks, such as utilizing ad verification tools and partnering with reputable publishers.

Programmatic Advertising vs. Traditional Advertising

Programmatic advertising differs significantly from traditional advertising methods, such as print or TV ads. While traditional advertising relies on manual processes and broad audience targeting, programmatic advertising offers precision targeting, real-time optimization, and measurable results.

What’s The Difference Between Programmatic And Display Ads?

Display and programmatic ads are easily confused, especially given Google’s advancements in automated and real-time bidding capabilities.

The major difference between programmatic and display is:

  • The buying of advertisements is referred to as programmatic.
  • Display refers to the format in which adverts display.

The capacity to purchase advertising across many platforms is the second most significant distinction between display and programmatic.

Display advertising are more typically used when placing ads within a single ad network, such as Google Display Network.

In contrast, programmatic advertising elevates display media to a new level.

There are several platforms for programmatic advertising, including sell-side platforms (SSPs) and demand-side platforms (DSPs), which allow marketers to buy ad inventory across an open network of channels.

With both programmatic and display, advertisers typically have control over the following:

  • Audience.
  • Bidding strategy.
  • Budget.
  • Creative and assets.
  • Placements.

Future Trends in Programmatic Advertising

Looking ahead, the future of programmatic advertising is ripe with innovation. Emerging trends include the integration of AI and machine learning for advanced targeting and optimization, cross-device targeting to reach consumers across multiple platforms, and contextual advertising based on user behavior and content relevance.

How Much Do Programmatic Ads Cost?

Simply simply, programmatic advertising can be as cheap or expensive as your budget allows.

It is a prevalent misperception that small businesses cannot benefit from programmatic technologies; however, we are here to change that.

Programmatic advertisements are often purchased on a cost-per-thousand impressions (CPM) basis.

CPMs often vary between $0.50 and $2.00.

However, CPMs might be significantly higher depending on circumstances such as:

  • Which DSP do you choose?
  • Your target audience.
  • The level of competition.

A good rule of thumb for programmatic ad cost is: The more niche your audience, the higher CPM you will pay.

So, whether you’re a multi-million dollar advertiser or a small business just getting started, you can likely fit programmatic into your advertising budget.


In conclusion, programmatic advertising has transformed the digital advertising landscape, offering advertisers unprecedented control, targeting precision, and efficiency. By understanding the fundamentals of programmatic advertising and staying abreast of emerging trends, advertisers can unlock the full potential of this powerful marketing tool.


What is programmatic advertising?

:- Programmatic advertising is a method of buying and selling digital advertising space in an automated manner, using software and algorithms. Instead of traditional manual negotiations and placements, programmatic advertising uses technology to streamline the process.

In programmatic advertising, advertisers use specialized platforms or software to target specific audiences and bid in real-time auctions for ad placements across various websites, mobile apps, or digital platforms. These auctions happen within milliseconds, allowing advertisers to reach their desired audience with precision and efficiency.

How does programmatic advertising differ from traditional advertising?

:- Programmatic advertising differs from traditional advertising in several key ways:

  1. Automation: Programmatic advertising uses automated technology and algorithms to buy and sell ad inventory, while traditional advertising typically involves manual negotiations and placements between advertisers and publishers.
  2. Real-Time Bidding (RTB): Programmatic advertising relies on real-time bidding in auctions to purchase ad space, allowing advertisers to bid on impressions as they become available. In contrast, traditional advertising involves fixed pricing and buying ad space in advance.
  3. Targeting: Programmatic advertising offers advanced targeting capabilities based on factors such as demographics, interests, and browsing behavior, allowing advertisers to reach specific audiences with precision. Traditional advertising often relies on broader targeting methods and demographic data.
  4. Optimization: Programmatic advertising enables real-time optimization of ad campaigns based on performance metrics such as click-through rates, conversions, and engagement. Traditional advertising typically involves less immediate feedback and optimization opportunities.
  5. Scale and Reach: Programmatic advertising provides access to a vast and diverse range of ad inventory across multiple digital platforms, including websites, mobile apps, and connected devices. Traditional advertising may have limitations in terms of reach and scalability, depending on the medium used.
  6. Transparency and Efficiency: Programmatic advertising offers greater transparency into ad performance, costs, and audience insights through data analytics and reporting tools. Traditional advertising may have less transparency and require more manual tracking and analysis.

What are the benefits of programmatic advertising?

:- Programmatic advertising offers several benefits for advertisers:

  1. Efficiency: Programmatic advertising streamlines the process of buying and selling ad inventory, reducing the time and resources required for manual negotiations. Advertisers can set up campaigns quickly and efficiently, saving time and effort.
  2. Targeting Precision: Programmatic advertising allows advertisers to target specific audiences based on factors such as demographics, interests, browsing behavior, and geographic location. This precision targeting increases the relevance of ads and improves campaign effectiveness.
  3. Real-Time Optimization: With programmatic advertising, advertisers can monitor campaign performance in real-time and make adjustments on the fly. This includes optimizing ad placements, adjusting targeting parameters, and reallocating budgets to top-performing channels or audiences.
  4. Access to Diverse Inventory: Programmatic advertising provides access to a vast and diverse range of ad inventory across multiple digital platforms, including websites, mobile apps, and connected devices. This broad reach enables advertisers to reach their target audience wherever they are online.
  5. Cost-Effectiveness: Programmatic advertising offers flexibility in budget allocation and bidding strategies, allowing advertisers to maximize the efficiency of their ad spend. Advertisers can set bid prices based on their campaign objectives and adjust budgets as needed to optimize performance.
  6. Data-Driven Insights: Programmatic advertising generates valuable data insights into audience behavior, ad performance, and campaign effectiveness. Advertisers can use this data to refine their targeting strategies, optimize their campaigns, and improve overall ROI.
  7. Brand Safety: Programmatic advertising platforms often include features to ensure brand safety by screening for fraudulent or inappropriate content. Advertisers can have more confidence that their ads will be displayed in brand-safe environments.
  8. Scalability: Programmatic advertising is highly scalable, allowing advertisers to reach large audiences across multiple channels and devices. Whether targeting a niche audience or launching a global campaign, programmatic advertising can accommodate various campaign sizes and objectives.

What are some challenges associated with programmatic advertising?

:- While programmatic advertising offers numerous benefits, it also comes with its own set of challenges:

  1. Ad Fraud: Programmatic advertising is vulnerable to various forms of ad fraud, including bot traffic, ad stacking, and click fraud. Advertisers may unknowingly waste budget on fraudulent impressions or clicks, reducing campaign effectiveness and ROI.
  2. Brand Safety Concerns: Advertisers risk having their ads displayed alongside inappropriate or controversial content when using programmatic advertising. Ensuring brand safety requires robust monitoring and filtering mechanisms to avoid associating brands with harmful or offensive content.
  3. Ad Blocking: The prevalence of ad-blocking software presents a significant challenge for programmatic advertising. Ad blockers prevent ads from being displayed to users, reducing the reach and effectiveness of ad campaigns.
  4. Ad Viewability: Ensuring that ads are actually viewed by users is a challenge in programmatic advertising. Advertisers may struggle to achieve satisfactory levels of ad viewability, leading to wasted impressions and reduced campaign performance.
  5. Data Privacy and Compliance: Programmatic advertising involves the collection and use of vast amounts of user data for targeting and optimization purposes. Advertisers must navigate increasingly strict data privacy regulations and ensure compliance with laws such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
  6. Transparency Issues: Lack of transparency in the programmatic advertising ecosystem can make it difficult for advertisers to fully understand how their ad budgets are being spent. Advertisers may encounter challenges in verifying the quality of ad placements, assessing the performance of intermediaries, and identifying hidden fees or markups.
  7. Ad Blocking: The rise of ad-blocking software poses a significant challenge for programmatic advertising. Ad blockers prevent ads from being displayed to users, reducing the reach and effectiveness of ad campaigns.
  8. Ad Verification: Ensuring that ads are displayed correctly and in the intended context can be challenging in programmatic advertising. Ad verification tools are necessary to monitor ad placements and detect instances of ad fraud, brand safety violations, or non-viewable impressions.

What are some future trends in programmatic advertising?

:- Several future trends are expected to shape the landscape of programmatic advertising:

  1. Advanced Targeting and Personalization: With advancements in data analytics and AI, programmatic advertising will enable even more precise audience targeting and personalized ad experiences. Advertisers will leverage data to deliver tailored messages to individual users based on their preferences, behaviors, and interests.
  2. Cross-Channel Integration: Programmatic advertising will continue to evolve towards seamless integration across multiple channels and devices. Advertisers will adopt strategies that span display, video, social media, audio, and connected TV, ensuring consistent messaging and optimal reach across various touchpoints.
  3. First-Party Data Utilization: As privacy concerns grow and regulations tighten, advertisers will increasingly rely on first-party data to power their programmatic campaigns. Brands will prioritize building direct relationships with consumers to gather consented data, enabling more transparent and privacy-compliant targeting.
  4. Contextual Targeting Resurgence: With the demise of third-party cookies and increased privacy regulations, contextual targeting will experience a resurgence in programmatic advertising. Advertisers will leverage contextual signals such as content relevance, sentiment, and context to reach audiences in brand-safe environments without relying on individual user data.
  5. Incrementality and Attribution: Advertisers will place greater emphasis on measuring the incremental impact of their programmatic campaigns and attributing conversions accurately. Advanced attribution models and multi-touchpoint tracking will help advertisers understand the true value of their ad investments and optimize accordingly.
  6. Dynamic Creative Optimization (DCO): Programmatic advertising will increasingly leverage DCO technologies to deliver personalized and dynamic ad creatives in real-time. Advertisers will create flexible ad templates that adapt to user context, behavior, and preferences, maximizing engagement and relevance.
  7. AI-Powered Optimization: AI and machine learning algorithms will play a central role in programmatic advertising, driving automated campaign optimization, predictive modeling, and audience insights. Advertisers will rely on AI-powered tools to optimize bidding strategies, ad placements, and creative performance.
  8. Transparency and Supply Chain Efficiency: Advertisers will demand greater transparency and accountability in the programmatic supply chain, leading to initiatives to combat ad fraud, improve ad viewability, and reduce inefficiencies. Blockchain technology may be increasingly explored to enhance transparency and traceability in programmatic transactions.
  9. Connected TV (CTV) and Streaming Audio: With the continued rise of streaming services and connected TV devices, programmatic advertising will increasingly target audiences on CTV platforms and streaming audio services. Advertisers will capitalize on the growing popularity of OTT (over-the-top) content consumption to reach engaged audiences in premium video and audio environments.

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