Sit Back and Relax- Programmatic Advertising
In lecture, we’ve discussed how auctions play a huge role in the assignment of advertisement slots to the advertising companies. So far, our scenarios have involved a set of companies, a set of slots, and various prices and click rates. However, not much attention has been given to how these companies enter an auction or how they decide what value to place on an advertisement slot. The search industry is gigantic because of the thousands of advertising slots available as well as the thousands of advertising companies vying for optimal slots. From the viewpoint of an advertising company, there are so many potential auctions to be involved in. That is where the role of programmatic advertising comes in.
Programmatic advertising is the automated process of buying advertisement slots. In programmatic advertising, there isn’t a human who decides which keyword auction to participate in or how much should be bid. Instead, a complex automated system enters auctions and places bids for the advertising company. eMarketer reports that in 2014, $9.9 billion was spent though programmatic advertising, and those numbers are expected to rise to $14.88 billion in 2015. Also, programmatic advertising isn’t just limited to search advertisement. Companies use programmatic advertising for entertainment media sites like Hulu and social networking sites like Facebook.
In the scenarios in class, company valuations were given, but the process of how these valuations were obtained in the first place isn’t touch upon. One of the big advantages of programmatic advertising is that it can collect data on the success of its choices to determine the values of certain advertisement slots. This enables the system to make better decisions in the future. Choice of keyword, time of day, audience, and geography influence advertisement success, and the automated system can be tweaked so that the most effective ads are given a higher value in future auctions. Conversely, ads that aren’t as effective can be given lower values for future auction.
In lecture, we’ve looked at the different types of advertisement auctions and the reasoning behind certain strategies, but it is important to be able to step back and see the big picture. In order for advertising companies to participate in these auctions, they need to somehow prioritize which auctions to enter and determine the value of the advertisement slots they bid for. Programmatic advertising intelligently automates this process by using collected data, and companies continue to funnel more and more resources into programmatic advertising.
http://adage.com/article/print-edition/10-things-programmatic-buying/298811/
http://www.adweek.com/news/television/hulu-open-programmatic-advertising-starting-today-167681