Digital Advertising

The Evolution of Programmatic Advertising

The Evolution of Programmatic Advertising

Today, advertisers rely strongly on artificial intelligence and advanced analytics that allow them to provide their business customers with better results for their marketing campaigns, but about two decades ago, no such solutions in digital advertising were available. Do you know when programmatic advertising started, and what modern catalysts brought about its evolution? Read our article to learn more.

In this article, you will learn about:

  • The history of programmatic advertising
  • What is programmatic advertising & the definition of programmatic advertising
  • How programmatic advertising works
  • The events in the advertising industry and technologies that affect the shape of modern advertising
  • The pros and cons of in-house programmatic advertising and alternative approaches

Table of Contents:

Markets can change overnight, but they rarely do so. More commonly, there are multiple micro-changes that cause other changes, and suddenly we realize that our business environment has transformed significantly, due to the new technologies and solutions that have become available. Programmatic advertising is not a thing that just happened one day – there were various events that made it indispensable and stimulated its growth, and still, there are many events and changes that affect it. How did it all start?

The beginning of programmatic advertising

Before programmatic advertising, negotiations of agreements for buying digital ads were time-consuming and as a result, advertising itself became quite expensive. The oldest „ancestor” of the modern, digital ad was probably an old, well-known, static banner ad introduced to the advertising market by HotWired (presently Wired.com). In 1994, it was something new and perhaps even a little intriguing for users – at least intriguing enough to score a CTR between 40-50%. Sounds impressive, right? Of course, these were different times, and users were exposed to so much less advertising content. Over time, the average CTR went down, when more and more ads started to appear on the Internet.

Just two years later, in 1996, the first ad server – Double Click – was created (11 years later, it was bought by Google) and, in time, new servers were built and the first network for advertising started to take shape. In 2000 the famous Google AdWords (currently known as Google Ads) was released. Perhaps this wasn’t the beginning of programmatic just yet, because it only enabled advertising in Google’s network, but it was a breakthrough in digital advertising. Finally, in 2013, Google’s AdSense was released – this was a display ad network. There were, of course, other companies in the advertising market, but Google’s solutions were the most popular due to the success of its search engine.

The definition of programmatic advertising

So now that we know its origins and how it came about, let’s dive into the question of ‘what is programmatic advertising?’

Simply put, the definition of programmatic advertising can be summarised as an automated system that oversees the transactions involved with buying and placing ads on either on a website or an app.

Acting as a super-efficient, real-time buying and selling platform of ad space, programmatic advertising uses algorithmic software and real-time data to drive impressions. In turn, this results in a high ROI for marketers by ensuring that ads are specifically targeted and placed in the right locations at the right time.

Platforms and automation: How does programmatic advertising work?

With the clear reason why programmatic advertising was introduced, we can now take a look at the platforms that were created and how programmatic advertising works for marketers. So what are programmatic platforms?

A programmatic advertising platform is a tool that automates the process of how marketers and advertisers control the purchase of ads and manage digital campaigns. Linking publishers and marketers globally that have a vested interest in strategic ads, programmatic advertising platforms yield strong benefits in terms of reach, scalability, and efficiency.

The adoption of programmatic started from the need for premium publishers to monetize all of their inventory, but in the end, it made the entire process much easier for all parties involved. AdSense gave the publishers the possibility to offer their websites as an advertising space. This had negative consequences as well – suddenly Google had to face enormous amounts of SPAM sites etc. Before Google’s Panda Update for search optimization, the first RTB (real-time bidding) solutions were designed and built in the first decade of the 21st century. From this moment on, programmatic advertising companies started to follow the general tendency in business to become more data-driven and automated in general – so how actually does programmatic advertising work?

By eliminating the human factor and the automation of that process, it was made to allow for more efficiency and allowed brands to advertise more effectively. Costs were reduced and effectiveness increased… Did it, though? In a way, yes. You have to remember that competition is increasing, so new technologies and solutions are required. What sort of programmatic advertising techniques are leveraged?

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The catalysts for the evolution of programmatic advertising 

The programmatic advertising evolution is still underway. Below, we describe the most popular trends that influence the world of digital advertising today.

General process automation

Automation became popular among various industries and company departments. The time also came for marketing and advertising. It serves all the parties involved – programmatic platforms owners, website owners, and companies that want to promote their content. Automated ad placement reduces the time needed for displaying an ad (because no face-to-face negotiations are needed) and improves the ad’s performance, as the right media for displaying an ad is selected by advanced algorithms.

Contextual targeting services availability

The development of the new targeting approaches requires the advertising environment to improve continuously in order to support new advertising solutions. As programmatic advertising is evolving, new solutions like contextual targeting are evolving as well. The very existence of programmatic advertising has improved user experience. Of course, the entire SPAM problem was rather inevitable. The negative connotations related to it can be avoided by the brands that invest in programmatic advertising. The main benefit of contextual targeting is to provide users with non-organic content (ad) which will be closely related to the content they are viewing at the very moment.

Video advertising 

According to our estimation, In 2022, 82% of the traffic on the internet will be by video. Research shows that video advertising is becoming more relevant to customers. They would prefer to consume content in the form of a short video, rather than in other forms. Programmatic video advertising techniques include ContextAI, with which we are able to display your ads to the right audience. Proper video ad campaign optimization can help brands to promote their content more efficiently.

Changes in the privacy requirements and the elimination of 3rd-party cookies

3rd-party cookies have been leveraged by some companies for over 25 years, but their importance has decreased. It no longer meets the current privacy trends, hence in January 2020 Google made a decision about removing it and in June 2021 the company declared that it would phase out 3rd-party cookies at the end of 2023. The removal of 3rd-party cookies is a huge change, for sure, but it’s just the beginning of a bigger revolution in the digital advertising area. Advertising companies have to adjust their services and processes to the new privacy regulations (for example, GDPR, CCPA, the new EU-US Privacy Shield, etc.).

Can programmatic advertising be handled by in-house teams?

The answer to the question of whether programmatic can be managed in-house depends on the brand, its digital investments, maturity, and capabilities. As you see, these days, managing an advertising campaign on your own is quite challenging, but it is not only just about the regulations… To succeed in programmatic advertising, you need proper tools, resources, and knowledge. You may realize that it is more cost-effective to cooperate with one of the experienced programmatic advertising companies, rather than handling it in-house.

Specialized advertising partners have bigger resources and, by cooperating with experts, you may gain access to the best advertising opportunities. It is important to bring at least some competencies in-house to stay informed and in control of the process, but in many cases, carrying out programmatic advertising fully in-house may prove to be inefficient.

If you have any questions, comments or issues, or you’re interested in meeting with us, please get in touch.

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