Imagine that you’re scrolling through your social media feed, and all of a sudden, you see a barrage of ads. Some of them are probably specifically related to your recent searches, your interests, or websites you recently visited. This is, of course, thanks to programmatic ad targeting, a process advertisers can use to precisely target customers in digital advertising.
Programmatic ad targeting is a part of the digital advertising industry that has been steadily growing, with more than $545 billion spent in 2023. Programmatic ad targeting is highly specific in reaching the right people with the right content. It’s also highly efficient, saving both time and money.
But what is programmatic ad targeting? This guide will explain what programmatic targeting is and how it works.
What Is Programmatic Ad Targeting, and How Does It Work?
Programmatic ad targeting refers to the process of using automated marketing technology to deliver relevant ads to the right audience at the right time. It utilizes data and algorithmic tools to precisely target your ads to the most relevant audience. With programmatic ad buying, marketers can achieve a higher return on investment on their marketing spend by targeting customers who are more likely to buy their product or service.
Programmatic ad targeting uses demographics, browsing history, and other types of data to serve a segmented audience. Programmatic buyers use the data and audience segmentation to optimize their real-time bidding for ad space. Since everything is automated, the system allocates an ad to the highest bidder based on the data provided by the buyers. The winning ad is then placed on an app or a website for the target audience to see. Although the process may seem complex, everything happens in milliseconds, ensuring the correct ad is shown to the right person at the right time.
5 Main Targeting Strategies and Options for Programmatic Ads
Marketers use different targeting methods when setting up programmatic ads. Each of the methods is geared toward optimizing their ad spend. Here are the main types of programmatic targeting.
1. Demographic Targeting
Demographic targeting allows marketers to serve ads to specific parts of the population based on characteristics such as gender, income, age, education level, marital status, and more. Due to its diverse characteristics, demographic targeting is one of the most used techniques in programmatic targeting.
2. Geofencing
Geofencing refers to geographic targeting, which focuses on individuals within a specific area. It often relies on GPS data from users’ devices to function. Mobile devices have the option to broadcast their location via GPS, making them a better target for geofencing than desktops.
Geofencing enables advertisers to narrow down their targeting parameters based on different factors, such as customers within a specific area. This can be further narrowed down to IP addresses or ZIP codes.
3. Retargeting
Retargeting helps advertisers reach out to people who have visited a website or app in the past. It leverages data to deliver ads to visitors who have shown interest in your products or services. Advertisers apply retargeting to nudge users to take action or re-engage with the brand. They achieve this through the use of creative ads.
Retargeting is key in moving customers down the funnel by encouraging them to make a purchase. In most cases, retargeting campaigns supplement other forms of targeting.
4. Contextual Targeting
Contextual targeting refers to the process of showing ads that are related to the content of a website or app. It enables advertisers to serve ads related to the content website visitors and app users are currently viewing. A good example is when you’re reading an article about car maintenance, and then an ad for accessories or parts appears. Contextual targeting is often effective due to its ability to blend in naturally with the content being viewed.
5. Data Targeting
In programmatic advertising, data targeting is the process in which advertisers use data to precisely target a specific audience with highly personalized ads. Advertisers first collect data and then filter it out to focus on a specific target audience.
To clearly understand data targeting, let’s explore the different data sources.
First-Party Data
First-party data comprises data that the advertiser has collected on their own, usually from their website or app. This could be data collected from subscription forms, surveys, or customer relationship management systems. When advertisers are looking to build ideal customer profiles, first-party data comes in handy because it’s verifiable and is owned by the advertisers themselves. This means the advertiser can ensure the data was collected with the user’s consent, making it compliant with the General Data Protection Regulation (GDPR). Using first-party data for programmatic targeting usually has a higher return on investment than any other type of data.
Second-Party Data
This type of data is collected by a trusted partner and then shared with a second party. It’s common in areas where both parties target the same audience. When using second-party data, advertisers must always consider the origin of the data to ensure that they remain compliant with the GDPR.
Some common sources of second-party data include data-sharing agreements between two or more entities. When an advertiser has access to second-party data, they must use it only for the purpose stipulated in the mutual agreement.
Third-Party Data
This comprises data collected and sold by third parties. These third parties include data management platforms, consumer research firms, and data vendors. The data is then sold to advertisers, who can use it for their programmatic advertising campaigns.
Third-party data is normally shared with other users, and therefore, its effectiveness depends on how advertisers differentiate their ads from their competitors. While it provides an opportunity to focus on a diverse audience, advertisers have no knowledge or control over how the data is collected. They may, therefore, face issues with data that was collected without the consent of the owners. It is, therefore, crucial for advertisers to vet their data providers before buying any third-party data.
Understanding the Core Programmatic Platforms
The programmatic ecosystem comprises several components that work together to enable advertisers to deliver precisely targeted ads to their audience. Here are some key parts of the ecosystem.
Demand-Side Platforms
Demand-side platforms (DSPs) are automated software solutions that enable advertisers to buy ad inventory across different ad exchanges. They’re a key part of the programmatic advertising process, as they form the avenue through which advertisers are able to showcase their ads. When an advertiser decides to list their ads, they upload their ad creatives through a DSP, which scans publisher databases, looking for one that matches the advertiser’s criteria. Once an ideal publisher is found, the DSP resolves the bid and places the ad.
By automating the process of publishing an ad, DSPs save advertisers time, which they would have otherwise spent contacting publishers for quotes. DSPs optimize the ad to be listed through the most preferable publisher, something that may be hard for an advertiser to do manually. DSPs also offer campaign management tools that enable advertisers to track and review the performance of their ads. For any programmatic campaign that isn’t performing well, DSPs offer advertisers the option to end it and allocate their resources to a different campaign.
Supply-Side Platforms
Supply-side platforms (SSPs) are automated software solutions that allow publishers to list their ad inventory. They’re also referred to as sell-side platforms. SSPs enable publishers to manage, track, and optimize their ad inventory’s mobile and web assets. Once a publisher has set their properties, they engage an SSP to make the ad inventory available for marketers.
Through automation, SSPs help publishers optimize their properties to achieve the best price in exchange for impressions. SSPs also help publishers by ensuring that their ad space is fully utilized. Due to their role in seeking revenue maximization for publishers, they’re also referred to as yield-optimization platforms.
Data Management Platforms
Data management platforms (DMPs) are software solutions that collect, organize, and help in interpreting customer data. They act as the repository for the data that’s necessary for programmatic targeting. DMPs are essential to both advertisers and publishers. Advertisers use DMPs to sort and segment customer data, looking for insights on the best advertising approach to take.
Due to the massive amounts of data held by DMPs, advertisers can create ideal customer profiles that help them improve their advertising strategies and better understand their target audience. Most DMPs collect first-, second-, and third-party data but then anonymize it to ensure that the data can’t be traced to real identities.
Ad Exchanges and Real-Time Bidding
Ad exchanges work as the link between SSPs and DSPs. An ad exchange is a virtual marketplace where publishers and advertisers exchange ad spaces through auctions. Ad exchanges use real-time data, provided by both the advertisers and the publishers, to match the highest bidder to the ad space being auctioned. If the ad exchange is automated, it uses preset bidding to complete the process. Ad exchanges are driven by the principles of supply and demand.
Real-time bidding (RTB), on the other hand, is a form of programmatic buying that’s facilitated through a real-time auction. RTB differs from private marketplaces in that it allows for multiple bids on available ad spaces.
Ad Networks and Servers
Ad networks exist as intermediary marketplaces that connect publishers and advertisers. They’re a key element in programmatic advertising, offering both technical and commercial support.
Ad servers, on the other hand, help in managing display ads on websites and mobile apps. They provide a central platform for ad management, distributing ads to the most suitable ad space. Whenever a website or an app gets a visitor, ad servers deliver the best ad according to the parameters set by the advertiser.
Best Practices for Targeting Programmatic Advertisements
Although programmatic advertising has the capability to reach the right audience at the right time, it’s crucial for advertisers to adhere to best practices to optimize their ads. Some of these best practices include:
- Know your audience: Before undertaking any programmatic advertising campaign, it’s key for advertisers to completely know and understand their audience. Knowledge of your target audience means you can create the best content for your ads and set the correct criteria. It also means your ads will focus on prospects who are more likely to buy, increasing your return on ad spend (ROAS).
- Leverage data: For any programmatic campaign to be successful, it’s paramount to leverage data. You’ll need to gather adequate data, whether it’s first-, second-, or third-party data, to supplement your advertising campaigns. Data gives you the opportunity to understand your target audience through past insights and interactions. Through data, you can deliver a personalized ad experience.
- Track and monitor your campaigns: Reviewing the performance of your programmatic ads helps ensure that your campaigns are optimized to reach the right audience. Tracking helps you take action and improve the performance of your ads. It’s also key in ensuring that your campaigns meet the objectives you initially laid out.
How to Measure Your Programmatic Ads’ Targeting Success
For any advertiser committing a portion of their budget to programmatic media buying, it’s paramount to evaluate their ads’ effectiveness. Here are some ways to measure the success of your programmatic ad targeting:
- Define your goals: The first step in measuring the effectiveness of your programmatic ad targeting is to define what success means to you. For example, what are you looking to achieve with your ads? Do you want to generate more impressions? Are you trying to improve the conversion rate on your website or app? Your defined goals set the benchmark from which the success of your campaign will be measured. While it may seem obvious, some advertisers fail to set goals at the onset of a campaign and then pull the plug on the campaign without a reference point.
- Track the relevant key performance indicators (KPIs): Once you’ve established goals for your campaign, it’s crucial to set up KPIs to track. This ensures that you have measurable indicators to evaluate the effectiveness of your campaign. Examples of KPIs that can be tracked include click-through rate (CTR), cost per acquisition, and return on ad spend. These metrics provide a clear picture of the performance of your programmatic ad targeting.
- Iterate and test: With different variables affecting the effectiveness of your programmatic targeting, it’s crucial to perform iteration and testing on your campaigns as you seek the best possible combination. Continuous testing will help ensure you settle on the best iteration of your ads.
How Will the Cookieless World Affect Programmatic Ads?
Google’s decision to ban third-party cookies is set to upend the digital advertising market. Advertisers and marketers who have heavily relied on third-party cookies as a source of data and insights will no longer have access to crucial third-party data. So how will advertisers proceed in a cookieless world, and how will the absence of cookies affect programmatic ads?
As Google intended, a cookieless world will prompt advertisers to develop first-party data collection mechanisms to replace their lost source of data. Advertisers will need to be more creative and innovative in devising new ways to target their audience.
The lack of cookies can also be a challenge for personalized ads, as advertisers will have less visibility to track users’ online behaviors. Sectors that are highly dependent on cookies, such as e-commerce, will have to find alternative ways to personalize their ads.
Many advertisers will likely rely on contextual targeting to replace the lost third-party data. Some will also add AI-powered solutions, such as our own AUDIENCEX Intelligence (AXi) suite. AXi tools can rapidly analyze first-party and CRM data, as well as provide access to opted-in data sets, to deliver futureproof, cookieless and privacy-safe performance. These tools can build custom predictive audiences that are most likely to convert and leverage real-time autonomous optimization while providing full transparency into performance across channels. Tools like those in the AXi suite will be incredibly powerful in solving for effective targeting, as well as personalization, in the cookieless landscape.
For end users, a cookieless world is a win for their privacy. They’ll be less wary of being tracked by websites without their knowledge or consent. Companies that are transparent about their data privacy practices are likely to see higher confidence from consumers, encouraging loyalty and lifetime value. The cookieless era is, in many ways, a win-win for everyone, as it has driven rapid innovation of more powerful solutions while addressing common concerns around personal information.
Discover the Power of AI-Driven Programmatic Ads
Programmatic targeting is a key strategy for improving the effectiveness of your ad campaigns. With precise targeting, advertisers can achieve a higher ROI with their ad spend and focus on the right audience at the right time. Programmatic ad targeting saves advertisers from the spray-and-pray tactics that lack direction and effectiveness.
AUDIENCEX is an ideal partner to help your business with its programmatic ad targeting. Our AI-driven tools will ensure that your campaigns effectively reach the right audience today and well into the post-cookie landscape. With holistic strategies, tech-enabled creative services, and seamless omnichannel media access, we drive performance across every channel, digital and traditional alike. Our expert teams ensure that you get the most out of every ad spend by ensuring that our technology and data access are leveraged effectively throughout your campaign to drive performance in every touchpoint. We are driven by extensive experience not only within individual channels, but also in understanding how each channel drives performance across all others.
Reach out today to be connected with a member of our team to discuss your challenges, goals, and needs. We’d love to explore how we can help grow your business with the power of AI-driven programmatic ads.