How to aproach the advertising market as an entrepreneur

3 min reading
How to aproach the advertising market as an entrepreneur


The patterns of digital advertising are changing significantly, in the buying and selling of media campaigns and formats as well as regarding the results themselves. Part of this change is due to the so-called 'programmatic advertising'. This purchasing model has become one of the most sophisticated and efficient, as it allows companies to reach their target in a more precise way and at a better price.

These qualities are important advantages for entrepreneurs. In fact, many companies already using this model emphasize that they have multiplied the return on investment in some campaigns, allowing them to better maximize the investments in advertising.

Advertising is moving towards real-time exploitation. The same as keywords can be purchased in search engines' contextual advertising, these systems allow you to buy a subject category or hashtag and serve ads to users who are accessing content through those terms, regardless of the medium or website.

This is basically the automation of the buying and selling of ads in all media: display, video and mobile. This programmatic buying of advertising is done via digital platforms, as exchange brokers, trading platforms, and it works through a bidding system in real time. Somehow, this system is similar to the stock market.

In terms of operation, although it's a complex framework and there are a lot of intermediaries involved, basically it works like this: the media agency buys advertising space to different websites, video platforms, social networks, etc. On the other hand, it maintains a real-time auction with advertisers. Each advertiser sets a price depending on the user who's going to see the content, browsing history, etc. An automatic auction occurs in tenths of a second and the winner gets the space to display the ads.

Five advantages and an obstacle

Like every upward trend, market analysts have already highlighted the advantages of this new advertising system, as well as the obstacles. These are the five main advantages:

  1. Price transparency. Price auction systems increase the feeling of transparency. Furthermore, you can even set the base prices depending on the buyer or the segment that is making the purchase.

  1. Granularity. Instead of going to large audiences or broad campaigns, buyers can choose a specific segmentation and even an average price based on the estimated return. Concepts such as the ratio per click are shelved, since campaigns directly impact the potential audience.

  1. Improve performance. Advertising is based on efficiency. The use of technology and data analysis to find the right audience for a client tries to enhance the impact of a campaign, improving performance and helping to meet the advertiser's objectives.  

  1. Reduce costs. The efficiency and automation of these systems reduces costs, which makes programmatic buying much more attractive at a time when advertisers are pushing agencies to offer better prices.

  1. Optimisation. Advertisers can have control at all times of their purchasing decisions, optimising parameters in real time.

Despite these advantages, there is some reluctance to adopt this new advertising model, mainly for privacy reasons, since most of the companies offering programmatic advertising analyse user data to achieve the desired segmentation. In order to do this they collect large amounts of user profiles worldwide – however, it is assumed that this information can't be used to identify individual users.

Despite these reservations, this is a growing market. In fact, according to IDC, spending on display advertising through real-time auction systems will grow about 59% each year until 2016, making it the advertising segment with more growth in the coming years. IDC estimates that the expenditure on real-time bidding for online ads has been about 5 billion dollars in 2013.

Within these projections, online video is a format which seems to be capturing a lot of attention. According to a report by Forrester Research, real-time bids for online video advertising are growing at a rate of 57% per year, and total spending will reach 1,140 million dollars in 2014.

Digital media are the most demanded to insert advertising messages, and real-time bids are becoming almost the perfect formula for spreading the values of your brand in a medium with much more return on investment than traditional media.


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