AD TECH INSIGHTS
by Roman Vrublivskyi
Posted on Jan 16, 2024
The Role of Targeted Advertising Algorithms in Programmatic Media Buying
by Roman Vrublivskyi
by Roman Vrublivskyi
The evolution of advertising never stands still, and nowadays, marketers can leverage technology to reach their customers in the most effective way. This is why programmatic ad spending is expected to reach almost $725 billion in 2026.
But what exactly makes programmatic so efficient? What role do advertising algorithms play? What should you consider as an ad exchange owner? This article is here to answer these and other questions.
Basically, any algorithm can be defined as a set of rules that must be followed to complete a certain task. Digital advertising heavily relies on algorithms since they allow marketers to reach their target audiences.
For instance, when a user browses a social network, they often see sponsored posts that may be interesting to them. All this happens thanks to algorithms that evaluate the relevance of the content to this specific user according to the targeting settings.
Programmatic advertising is also based on algorithms, which allows for minimizing human intervention. Marketers can target specific users and make decisions in real time to improve the performance of their campaigns. They only need to set everything up; the rest is done automatically, thanks to algorithms.
Modern programmatic platforms are continuously enhancing their algorithms. Thus, marketers can benefit from a wider selection of targeting options, automated optimization features, etc. More and more advertisers prefer programmatic solutions (which means more deals for you), and here is why this happens:
For advertisers, ML and AI play a vital role. First of all, artificial intelligence and machine learning algorithms for advertising are the core of programmatic as multiple processes involved are possible exactly thanks to them. These algorithms ensure precise targeting and high personalization, ad spend optimization, etc.
Secondly, advertisers can leverage AI and ML algorithms to analyze vast amounts of data, collect insights on their audiences’ characteristics, predict their behavior, and so on. This knowledge can then be used for adjusting campaigns.
And it is not only about targeting and analysis. As an ad exchange owner, you can also benefit from specific applications of ML and AI. For instance, SmartHub offers the adaptive margin feature, a self-learning mechanism that automatically calculates the most optimal margin and allows you to maximize your revenue.
Now, to illustrate the performance of advertisement algorithms, let’s review a couple of popular platforms.
Meta is among the companies that have already implemented ML technology to deliver ads. For instance, Facebook advertising algorithm relies on two factors: audience targeting set up by marketers and the ad auction results. ML is responsible for generating the ad quality score and the estimated action rate.
Along with the bid, these rates take part in calculating the total value score. Ads with the highest score are then delivered to the target users.
Instagram advertising algorithm can also be fine-tuned with multiple targeting settings. In general, advertisers can launch ads on Instagram and Facebook using a single platform since both social networks are parts of the Meta ecosystem.
Apart from a standard self-service platform, Amazon also offers a DSP. This Amazon advertising algorithm works like any programmatic solution, allowing advertisers to automate the process of purchasing ad inventory.
Powered by machine learning, Amazon DSP helps marketers improve campaign performance, target previously unaddressed audiences, benefit from contextual targeting, etc.
To ensure the ultimate experience for shoppers, eBay has launched a so-called Advanced Audience Technology. Ready for the cookieless future, this solution allows advertisers to target even those customers browsing eBay for the first time.
Besides, eBay supports automatic targeting and bidding, although manual targeting is still available to marketers. Another eBay solution, Offsite Ads, is a way for advertisers to reach relevant audiences on external channels like Google.
In terms of targeting, advertisement algorithms are so effective because every Internet user has a digital footprint. For instance, these can be previously purchased products, likes on social networks, Google searches, location, etc. This data is used by algorithms to ensure a relevant and personalized advertising experience.
However, it is important to remember that cookies are fading away. Therefore, advertisers should prefer programmatic platforms that do not rely on third-party data and are fully compliant with privacy regulations.
As for you, your ad exchange must be compliant with data processing standards and privacy regulations as well. Note that SmartHub white-label solution already meets these requirements, so choosing it means you will not have to deal with regulations on your own.
As you can see, thanks to effective advertising algorithms, programmatic media buying has a secure spot in the market. More and more advertisers prefer programmatic instead of looking for relevant ad inventory on their own.
But what does this mean for you apart from a higher number of deals? As a current or future ad exchange owner, you will not have to specify audience characteristics for advertisers. They will do this themselves via the selected DSP. As for you, you need to ensure that your DSP and SSP partners can connect effectively via your platform.
On SmartHub white label ad exchange, setting up such algorithms does not require coding skills or technical knowledge. The solution is intuitive to use, and you can set up an advertising algorithm for each of your partners when creating an endpoint.
For DSPs, you can specify the following parameters:
Besides, there are many other filters that you can apply to deliver the ultimate experience to your DSP partners.
As for SSP connections, you can specify ad format, traffic type, geo, and ad size. Numerous filters are available here as well.
Note that the more targeting settings and filters you apply when connecting your SSP and DSP partners, the more effective performance your algorithms will deliver. Your platform will match relevant DSPs with relevant SSPs, which means higher trading income for you. Feel free to learn more about targeting on SmartHub ad exchange.
Does SmartHub seem like a perfect white-label ad exchange solution for you? Then contact us to learn more!
The digital advertising landscape keeps evolving, and a programmatic approach, powered by algorithm advertising, is the most effective way for media buyers and publishers to find each other.
While these parties benefit from algorithms behind demand- and supply-side platforms, you need to match your DSP and SSP partners efficiently to ensure the proper performance of your ad exchange. Therefore, pay special attention to targeting settings when connecting partners to the system. The more settings you apply, the better. Besides, continuously analyze the results your platform delivers. This will help you identify opportunities and potential weaknesses, as well as allow you to adjust targeting.
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