What is programmatic advertising?

Imagine you’re a retailer marketing a new type of sneaker to a specific demographic — say, young professionals who are passionate about fitness, visit running blogs, and use fitness-tracking apps.

Traditional display ads would involve manually targeting sites, negotiating with their publishers, and working with fixed pricing models. But today, programmatic advertising adds AI automation to make the buying and selling of ad space so much easier.

Programmatic advertising increases efficiency, improves targeting, and boosts ROI. Find out everything you need to know about it today.

In this guide:

• What is programmatic advertising?
• How does programmatic advertising work?
• Essential components of programmatic advertising.
• Benefits and use cases of programmatic advertising.
• How programmatic differs from display ads.
• Getting started with programmatic advertising.
• Setting up a programmatic campaign.
• Programmatic advertising best practices.

Programmatic advertising is the automated buying of media or advertising inventory on digital channels such as social, over-the-top media (OTT), video, display, mobile apps, and even TV and audio.

Rather than manually bidding on ad placements, marketers use artificial intelligence (AI) to connect with publishers, analyze data, and automate bidding in real-time—freeing teams from repetitive, low-impact tasks.

Several factors are accelerating the shift to programmatic:

• Rising demand for transparency
• The need to combat ad fraud
• The efficiency gains of automation
• Better measurement of return on ad spend (ROAS)

In 2024, programmatic advertising accounted for 80% of all digital ad spend in the US, while 60% of advertisers in the US planned to increase their investment, according to Statista research.

Programmatic advertising uses AI insights to connect publishers with available advertising space — or inventory — to brands and agencies wanting to advertise products and services.

Buying and selling online ads is based on supply and demand. Publishers have the supply of ad space and traffic, while the needs of advertisers determine the demand. Traditionally, ad space was bought and sold manually, which could be a hugely time-consuming process.

Programmatic advertising, by contrast, automates that process. Here, the buying and selling of ad space takes place in a virtual forum called an ad exchange. All negotiations between the publisher and the company are automated using a technique called real-time bidding (RTB).

How programmatic software works in 3 steps.

1. Brands use programmatic software to set up campaign parameters such as target audience, budget, and geographical reach.
2. The platform then connects with online publishers who want to sell ad space and traffic.
3. AI analysis informs the automated auction with real-time bidding over the best available ad space for their needs.

Ad exchange.

The ad exchange is where ads are bought and sold. This is a virtual marketplace which brings together the supply side — that is, publishers with ad space to sell — and the demand side — brands and agencies with products to advertise.

Within the exchange, available ad space is displayed, and different brands bid for it — with the space going to the highest bidder.

Supply-side platforms (SSPs).

A supply-side platform (SSP) is the software that digital publishers use to sell their available advertising inventory and traffic online. It connects publishers with multiple demand-side platforms and ad exchanges to aggregate their available advertising space across their websites and apps.

Once the publisher has set its criteria for the ad space, the SSP sets up an online auction for it. The space then goes to the highest bidder.

Demand-side platforms (DSPs).

A demand-side platform (DSP) is the software advertisers use to buy traffic in various ad formats — desktop, mobile, TV, and more — from a large pool of digital publishers. A DSP is like an SSP, but for buying ad space rather than selling it.

Via their DSP, brands connect with SSPs and ad exchanges selling space and then bid on that space. Everything is automated, so the manual effort is vastly reduced.

Real-time bidding (RTB).

Real-time bidding (RTB) is the technique that makes programmatic advertising possible. It essentially enables publishers and brands to buy and sell digital ads in real time. It works by triggering an auction for available ad space when a user lands on a website.

The auction takes place in the ad exchange and brings together SSPs DSPs to advertise and bid on the space.

Data management platforms (DMPs).

Data management platforms (DMPs) are data warehouses that connect to a DSP or an SSP to store data, which is needed to enable strategic decisions on the virtual bidding floor.

Programmatic advertising streamlines and simplifies paid advertising in a variety of ways, giving you and your marketing team more time for creative projects and strategic decisions that build the brand and drive revenue.

Benefits include:

Increased efficiency.

Setting up separate campaigns on multiple platforms — Google, Microsoft, Facebook, TikTok, Spotify, and more — can be tedious and time-consuming. Monitoring each campaign across different devices, meanwhile, adds even more complexity.

Programmatic marketing streamlines and automates your ad buying across multiple channels.

While the software’s doing all the hard work, marketers can focus on other, important matters — such as understanding their audience, creating effective ad copy, and figuring out their next campaign strategy.

Improved ROI.

Programmatic marketing can improve the return on investment of your marketing efforts in several ways:

• Eliminating guesswork. Real-time data, sophisticated algorithms, and a single view of every channel increase your odds of success.
• Diversifying programs. A programmatic ad campaign can diversify your risks in different markets, audiences, and devices.
• Staying agile. Since the bidding threshold is often low, you can start slow. Additionally, real-time data lets you react to a poor campaign or channel quickly and redirect your funds.

Indirectly, the consistency with which you can connect with your target audience when using a programmed, unified campaign leads to more happy, loyal customers.

Improved targeting and personalization.

A survey by ParcelLab found that 49% of users are targeted incorrectly by online ads, with 42% of those immediately unsubscribing from the brand’s marketing content. That leaves a big opportunity for marketers who are actually targeting people correctly.

Programmatic advertising helps marketers send accurate personalized ads based on their audience’s demographics and behavior across devices and media. You can target, test, and measure throughout the entire customer journey by creating customer profiles that target people with the latest insights.

Greater flexibility.

Programmatic advertising gives you access to dozens of publishing networks, and a programmatic campaign lets you easily choose where to put your money and quickly pivot when necessary.

Running an omnichannel marketing campaign all from one place allows you to see all your ads and make better decisions about placement. You can personalize ads for different scenarios, and have them ready to deploy automatically whenever a new opportunity arises.

Spending is flexible too. You can sign up for a minimum number of impressions to test the waters, and there are no pre-negotiated contracts that forbid you from changing direction midstream.

Display ads are the traditional form of online advertising in which publishers sell space on their websites to brands and agencies. These ads were originally sold either in direct negotiations between the publisher and advertiser, or via an ad network. It was typically a manual process.

Programmatic advertising emerged in the late 2010s as a more efficient way of buying and selling online advertising space based on supply and demand, and using automated rather than manual processes. It’s important to clarify that the ads that appear through programmatic are still a type of display ad, but with a more sophisticated method of delivery.

Targeting.

With traditional display ads, targeting is much more broad-brush. Brands and agencies manually select the sites they want to place ads in, often selecting those that publish content relevant to their products (contextual targeting). Programmatic, on the other hand, uses real-time data to deliver automated, hyper-targeted ads to a space with a relevant live user.

Targeting is generally considered more precise with programmatic advertising.

Efficiency.

Because the traditional buying and selling of display ads is a largely manual process that involves human actions and decision-making, it can be time consuming and laborious. Conversely, programmatic advertising is automated, with the buying and selling of ad space largely handled by AI and advertising technology platforms such as DSPs and SSPs.

Advertising workflows are generally more efficient with programmatic advertising.

Cost.

The main difference is that traditional display ads use fixed pricing models, whereas programmatic ads use dynamic pricing. With fixed pricing, the cost is manually negotiated in advance and cannot be amended in real time. With dynamic, ads are being purchased in real-time auctions based on demand.

Programmatic advertising is generally considered more cost efficient.

Programmatic advertising offers you a much broader scope of customers to reach with your ads, because it connects you with the greatest possible number of digital publishers. It also equips you with greater control and supervision over your campaigns so you can target buyers with extreme precision.

Since you can gauge your bidding to meet your budget, programmatic advertising requires relatively little investment to start.

Choosing a platform.

Programmatic ad platforms are the software that makes it possible for digital publishers and marketers to sell and buy ad space. There are four different types of software.

We covered these in more detail earlier in this content, but to recap, they are:

• Demand-side platforms (DSPs) for brands and agencies with products to advertise.
• Supply-side platforms (SSPs) for publishers with advertising space to sell.
• Data management platforms (DMPs) for brands, agencies and publishers.
• Ad exchanges to unify publishers (SSPs) and brands and agencies (DSPs) to buy and sell the ad space.

If you have products or services to advertise and you’re ready to try programmatic advertising, the first step is to choose a good demand-side platform.

Three things to consider when choosing a DSP.

If you’re a brand marketer looking for a DSP, here are some factors to be aware of.

1. Campaign management efficiency. Some DSPs are limited to certain media types or don’t allow you to see a complete picture of your customer. Choose a DSP that gives you the most control possible when you set up your campaign. Look for time-saving editing features like bulk editing tools and flexible scheduling.
2. Data processing power. Technically, a DSP doesn’t even have to use a DMP to have some ability with data. That said, data is at the core of a good DSP, so you want one a DSP with a workhorse DMP that has access to all the relevant data.
3. Monitoring and reporting capability. Your DSP should have a single dashboard where you can analyze performance metrics across all your advertising channels. The best DSPs offer real-time reporting.

Now that you’ve found the right platform for buying ad space to market your products, here are some tips for setting up your first programmatic ad campaign.

1. Define objectives. What do you want to achieve through your campaign? If you’re aiming to drive traffic to your site, this is all about boosting brand awareness and involves the cost per mille metric (CPM), which tracks cost per thousand impressions. If you want to increase sales of a specific product, this is all about conversions and involves the cost per acquisition metric (CPA).
2. Identify target audiences. Who are you aiming to reach with your campaign — busy professionals looking to get fit, or committed amateur runners wanting to maximize performance? Have a clear target audience in mind, then use behavioral, demographic, and interest-based targeting to be laser-focused with your programmatic campaign.
3. Design ad creative. Your ad needs to do two things — follow best practices for eye-catching display ad design, and fit into one of the recognized ad format templates. Know whether you’re designing a banner ad that’s a medium rectangle or a leaderboard, and ensure you have an engaging headline and compelling call to action (CTA).
4. Set a budget. Decide how much you can afford to spend on this campaign — or how much you want to spend. Programmatic spend is fluid rather than fixed. It uses real-time bidding, so costs fluctuate. You may want to set a lower budget initially, then increase that based on performance and overall budgets.
5. Monitor performance. There’s no point running ad campaigns if you’re not analyzing their performance. Be sure to set clear KPIs and then track against them with metrics like click-through rate (CTR), conversion rate (CVR), cost per click (CPC) and cost per acquisition (CPA).

Once you’ve chosen a DSP and are ready to embark on your marketing campaign, there are a few best practices to keep in mind.

Establish goals and KPIs first.

An automated system to buy your ad space and traffic doesn’t free you from the responsibility of understanding your financial goals and campaign priorities. Defining your KPIs will help you set up your ad buying correctly and read your reports right, so you can relate each metric with the goal you’re trying to achieve.

Manage the automation.

The biggest benefit of programmatic advertising is automation, but you can’t put your campaign on autopilot without checking on its progress. Pay attention to the tools your DSP gives you to keep an eye on attribution and other key measurements.

Remember, you’re still the brains behind the operation. Look to develop a healthy relationship between your marketing acumen, and the AI tools at your disposal.

Beware of fraud.

Global digital ad fraud is surging. Statista, estimates losses will climb from US$88 billion in 2023 to a projected US$172 billion by 2028.

The most common types of fraud include fake clicks (click fraud), non-human traffic (bots), and domain spoofing—where fraudsters impersonate premium websites to trick advertisers.

This shouldn’t deter you from using programmatic ads. But it’s a clear reminder to choose a demand-side platform (DSP) with strong fraud detection, brand safety tools, and transparent reporting. You want real traffic. You want placements that actually matter.

Prioritize privacy.

Another issue is your customers’ privacy. A Chapman University study showed that while 26% of consumers preferred relevant ads, many are still concerned about how their personal information is being used. Make sure your ads are all compliant with privacy regulations.

The California Consumer Privacy Act (CCPA) covers the state of California, and working in line with the CCPA can show that you take customers’ privacy seriously.

Create great targeted ads.

Take advantage of all that data processing power and improved targeting capabilities to create effective, specific ads for niche audiences. A good DSP will let you see all sorts of demographic and behavioral parameters and allow you to tailor your ads to follow them along the customer journey — even across devices and platforms.

Adobe Advertising DSP is the only independent ad platform that unifies and automates all media, screens, data, and creativity at scale, bringing the days of siloed media to an end.

Learn more by booking a demo or check out the overview video.