What are Programmatic Ad Auctions?

14th February 2017

Real-Time Bidding looks set to grow and develop in the coming year as a way of buying and selling advertising inventory on a per impression basis, this inventory is sold via programmatic instantaneous ad auctions, like the mechanisms of the financial markets. When used in combination with deep learning algorithms and retargeting platforms they can offer effective ads at a relatively low cost.


How the Auctions Work

Typically, the highest quality ad space was sold in bulk to preferred clients, Waterfall auctions then saw the remaining ad stock placed into tiers based on how much money the advertiser has spent historically. The more they’ve spent, the higher tier they occupy.

When an impression goes up for auction, it is first offered to the highest tier; if that tier doesn’t bite, the same impression is pushed down to the next tier. This repeats until someone makes a bid.


The Move to Header Bidding

Header bidding looks to be the move of the future and collapses this model into an all-out war for the ad space, removing the need for bulk purchasing power and allowing the publisher to create more revenue.
With these higher costs in mind, going programmatic looks set to be the next game-changing technology to arise in the advertising industry, with one service provider of the new facilities predicting that its use will grow by more than 31% during 2017. This is higher than the predicted growth rate for both social media (25%) and online video (20%).

The usually reliable Dun & Bradstreet financial data service predicts almost 70% of b2b marketers plan to increase spending on programmatic advertising in 2017.


Programmatic Spending Sees Strong Mobile Growth

The trend towards programmatic spending will be strongest on mobile. It is little wonder. With around 80% of consumers now having access to some form of smartphone and checking the phone up to 40 times a day, this gives a large volume of precious minutes for the eyeball and ad to connect. Therefore around 75% of all programmatic ad spending in the USA is focused towards mobile.

Video is also a growing area for programmatic ad spending. With around 60% of US video ad space delivered in that manner. Europe lags far behind with only around 25% of video ads running through a programmatic campaign. However, the continent will fare better with display content, where the UK will remain the market leader with programmatic ads accounting for 75% of all display advertising purchases online.

According to Juniper Research, machine learning algorithms which are employed in programmatic advertising is expected to generate around $42 billion in annual advertising revenue by 2021, up from around $3.5 billion in 2016. The increase is partly due to a growing awareness of the platforms, and partly due to an improvement in how these machine learning tools function.


How Should you Use Programmatic Advertising?

  • Start with small, measurable tests and grow your budget as you garner results
  • Pick partners wisely
  • Make sure to choose a service that certifies its traffic
  • Find high-performing ad units on quality publisher sites. Better quality means higher CTRs and CVRs, along with brand safety


Negatives of The Header Bidding Process

As well as pluses, there are negatives of the auction process, as a blind auction, there is a risk of overpayment for the inventory available. In header bidding, as all inventory is placed on the market at one time there is also the possibility that the other bidder may be from your own brand, bidding through another marketplace or ad exchange. It is likely though that solutions will be developed in due course.


Expert Advice From DOM Marketing

If you are finding ad auctions hard to navigate, then call DOM Marketing for expert advice