Online display advertising is likely the most sophisticated of all electronic trading markets, where online advertising processes tens of billions of transactions daily, making every other marketplace look like a lemonade stand. To compare, on the 13 US stock exchanges combined, roughly 50 million trades happen every day. In this blog post, our goal is to simplify what happens every time your display ads are served, and what occurs every time you load a website that features display ads.
It may sound odd to refer to display advertising as a market, but that’s exactly what it is. Similar to a stock market, there are buyers, sellers, and an exchange to facilitate the transactions. But in display advertising, publishers are the sellers (think Time Magazine or BuzzFeed) and advertisers are the buyers. Most of the transactions between publishers and advertisers typically take place on “ad exchanges”, and this whole process of buying and selling ad space on ad exchanges is called programmatic advertising.
Programmatic advertising is very comparable to the stock market, and they even use some of the same logic in defining their structure;
- Both use a decision-making algorithm based on machine-learning
- It streamlines transactions and uses simple economic theory to make ad buying more effective
- Share of media placements have a value determined by scarcity and supply and demand
- The scarcer the placement is, the higher the value and the higher the price
All of the programmatic advertising transactions are an automated process (called real-time bidding), and it occurs every time a user loads a web page, at the speed of fewer than 100 milliseconds. Multiply it by billions of internet users around the world, and you can start to appreciate the scale.
At this scale, ensuring the right ad appears in front of the right person, at the right time, is no simple task, and this responsibility is largely up to the advertiser to set up the targeting settings correctly for every campaign. Setting up the targeting settings has a significant impact on campaign performance, because if you’re delivering the display ad to the right person at the right time for them, there is a much greater chance they will take action when viewing your ad.
Thankfully, advertisers have tons of control over their targeting settings, including settings like location, demographic, topic targeting, timing, and even control over what specific websites the ads appear on. Optimizing these settings for each campaign can greatly improve performance metrics (such as click-through rate) results in lower media costs, stretching media dollars further and increasing the number of ads served.
When display campaigns perform well everyone wins, publishers are happy because the ads are less intrusive, and advertisers are happy because they’re getting more clicks on their ads. To help encourage advertisers to optimize and create compelling ads, ad exchanges typically offer lower costs when your ad performs well, because it knows that since everyone is benefiting in the transactions, lowering costs will help encourage more transactions in the future.
Therefore it is very important for advertisers to optimize their campaigns to ensure that their media spend is reaching its full potential. All in all, the better understanding the advertiser has about how the display advertising ecosystem works, the better off their campaigns will be. If you’re thinking about running a display advertising campaign or would like some help optimizing your current campaign, feel free to contact the Digital Marketing Team at adHOME.