Modern advertising is powered by artificial intelligence and advanced analytics, which allows marketers to provide more relevant content to potential customers. However, just two decades ago, marketers had no such advantage. So what is programmatic advertising, and how did it come about?
In this article, you will learn about:
- How we went from manually negotiated banner ads to the sophisticated programmatic advertising technologies we use today.
- How we went from a simple network of ad servers to the Google-powered advertising giants we see today.
- How marketers have taken advantage of programmatic advertising platforms to more easily buy and sell ads across various properties, including Google, publisher websites, and social media platforms.
- Other technologies, particularly AI & Deep Learning, and how they have helped shape the advertising space.
- The advantages and disadvantages of different approaches, including how you can offload some of the tricky stuff to expert third parties.
Table of Contents:
- What is programmatic advertising?
- The origins of programmatic advertising
- What are the latest programmatic advertising trends?
- Can in-house teams handle programmatic advertising?
What is programmatic advertising?
Simply put, it is an automated system that oversees the transactions involved with buying and placing ads on either a website or an app.
Acting as an efficient real-time buying and selling platform of ad space, programmatic advertising uses algorithmic software and real-time data to drive impressions. 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.
This kind of solution is enormously complicated and the result of hundreds of small technological advances, which ultimately lead to the comprehensive ad-buying solutions we use today.
The origins of programmatic advertising
Before programmatic advertising, negotiations for buying digital ads were a manual, time-consuming process, and advertising itself was expensive. The oldest “ancestor” of the modern digital ad is generally considered to be a well-known static banner ad introduced to the advertising market by HotWired (presently Wired.com).
In 1994, it was something new and even a little intriguing for users – at least intriguing enough to score an impressive CTR of 40-50%. In those early days of advertising, users were exposed to far less advertising content. As the number of adverts users saw increased, the average CTR began to creep closer to the levels we see today.
The first signs of programmatic ads appeared just two years later. In 1996, the first ad server – Double Click – was created (and bought by Google 11 years later), and, in time, new servers were built, and the first network for advertising started to take shape. This began in 2000 when Google AdWords (now known as Google Ads) was released. However, we didn’t see programmatic ads until 2013, when Google AdSense was released.
Google, driven forward by its popular search engine, began to transform the advertising space and caused the rise in the number of programmatic advertising platforms.
How do programmatic advertising platforms work?
The programmatic advertising platform was born with the advent of the Google Ads suite. These tools automate how marketers and advertisers control the purchase of ads and manage digital campaigns—seamlessly linking publishers and marketers globally. The rise of these platforms, particularly AdSense, provided alternative revenue streams for publishers, ultimately enabling the advertising-supported internet we know today. This also created some challenges – suddenly, Google had to contend with 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 that moment on, advertising companies started to follow the general tendency in business to become more data-driven and automated.
As automation methods became increasingly sophisticated, brands could advertise more effectively. These automation methods also lowered the barrier to entry for RTB companies, leading to an arms race as these new companies worked to develop better tools to maximize the value of programmatic advertising platforms.
As more and more companies entered the space, this competition had the unfortunate side effect of increasing customer acquisition costs compared to historical levels, which only increased the importance of using the right tech.
What are the latest programmatic advertising trends?
The ad-buying market is still undergoing a significant transformation. Companies that understand how to apply new innovations correctly will have a considerable advantage over their slower-moving competitors. Over the next ten years, there will be some significant opportunities for forward-thinking advertisers.
The best example of these changes is the elimination of third-party cookies. Third-party cookies have been a central component of the advertising industry for over 25 years, but privacy concerns have led Google to make the decision to depreciate them by Q3 2024. This will require advertisers to adopt novel approaches to improve the overall outcomes.
General process automation drives efficiency
Automation has become a key tool for improving efficiency, particularly in the marketing and advertising space. Aside from the general savings from eliminating the need to negotiate for adverts manually, automated systems require companies to create standardized processes and datasets, creating valuable datasets that can be used to improve further.
This data can then be fed into advanced algorithms, like RTB House’s Deep Learning solutions, that can find unique insights that can be used to target users better. The loss of third-party cookies will significantly alter the make-up of the data used. More advanced algorithms will have a significant advantage over legacy solutions built for cookie-based targeting.
Contextual targeting services availability
Another key tool in the cookieless future is contextual targeting. This solution allows advertisers to place ads with a publisher based on their audience’s predicted interests and can rely entirely on first-party data.
In 2022, 82% of the traffic on the internet was by video. Customers are increasingly consuming video rather than written content. This means that OTT ads should be a central part of any brand’s strategy. Programmatic video advertising enables brands to select shows with the right demographic for their product and directly show them content when they are most engaged.
Can in-house teams handle programmatic advertising?
The answer depends on the brand’s digital investments, maturity, and capabilities. Managing an advertising campaign can be challenging for small or less experienced organizations. You need proper tools, resources, and knowledge. In many cases, working with an external organization specializing in programmatic advertising techniques is more effective.
Specialized advertising partners, like RTB House, have more efficient technologies and methodologies and often access to a wider pool of resources than you could build in-house. By working with them, you can leverage these resources to access the best advertising opportunities.
If you want to discover how you can leverage our expertise to make the most of the latest techniques, please get in touch.