MACHINE-LEARNING-AND-DIGITAL-ADVERTISING-ENGLISH

MACHINE LEARNING AND DIGITAL ADVERTISING

XXX: Avoid using complicated technical jargons

XXX: Expand to broader context (digital industry) — ES

Machine learning is probably one of the most hyped words of the last
few years, and rather justifiably so. The field is currently the
subject of widespread theoretical research, practical industrial
implementations as well as a few distant fears (most of them being
about robots killing all humans).

Machine learning is typically defined as “a type of artificial

intelligence (AI) that provides computers with the ability to do
certain tasks, such as recognition, diagnosis, planning, robot
control, prediction, etc., without being explicitly programmed. It
focuses on the development of algorithms that can teach themselves
to grow and change when exposed to new data.”

How is machine learning used in digital advertising industry? Here

is how machine learning algorithms are currently helping advertisers
drive campaigns more efficiently and cost-effectively. We selected
three use cases: Real-Time Bidding (RTB), lookalike targeting and
user data enhancement.

Machine Learning Helps DSPs Bid on RTB Traffic

The first area of digital advertising which can be improved by

machine learning (ML) is Real-Time Bidding (RTB) traffic. In an RTB
environment, Demand-Side Platforms (DSPs) need to determine the
optimal amount to bid on every single specific impression. Most RTB-
enabled exchanges will only allow a maximum response latency of 100
milliseconds, meaning that a data-driven assessment of the
impression has to be generated within an extremely short amount of
time.

In order to determine how much to bid, the algorithm needs to assess

the probability of the impression resulting in good performance
metrics, such as click-through rate (CTR), conversion/install rate
(CR/IR), and even post-install events that enable to approximate
Lifetime Value (LTV). This assessment is done programmatically,

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utilizing data provided with the impression, either from the
publisher or from a data management platform (DMP), as well as first
party data from the advertiser as input.

ML algorithms take historical data samples to estimate future

performance. For instance, they can determine that a banner coming
from a specific ISP, operating system, website, demographic, etc.
has a 2% likelihood of resulting in a conversion. The hardest part
of using historical data samples is knowing which ones to take
(determining time span as well as a myriad of other attributes).
Algorithms are much more efficient than humans at evaluating exactly
which attributes of impressions are good predictors of better ad
performance, as it can look at all of them simultaneously, whereas a
human is rather limited in finding patterns in historical data sets
of ad traffic.

Setting up the ML algorithms remains the hardest part as data

engineers need to make smart decisions on a lot of variables within
the algorithm, such as which approach to use (e.g. logistic/Poisson
regression, Bayesian Bandit; XXX: add more relevant algorithms),
which length of time span to allocate in order to create the
historical data set, as well as which encoding scheme to present the
impressions to the algorithm with.

Machine Learning Helps Determine Clusters for Lookalike Targeting

The second field of digital advertising where machine learning

algorithms come to serve is lookalike audience clustering and
targeting. Lookalike audiences became better known through Facebook,
whose extensive first-party data made the functionality extremely
powerful.

Today, most ad networks and exchanges offer granular targeting

options to buyers, at least at the device level. You can for
instance show ads to Android users living in the Greater Jakarta
area. The hard part is knowing which cluster, or set of attributes,
is relevant to target for a specific objective. The role of ML
algorithms is to help define the best audience clusters, as defined
by a specific set of attributes, in order to target similar -
lookalike - clusters.

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More specifically, ML algorithms will determine, out of a wide set
of available attributes, which ones are the most relevant in order
to reach a certain objective, thereby creating an audience cluster.
To take a straightforward example, they will find out that females
above 30 are more likely to finish a game tutorial. Diving even a
bit deeper, ML algorithms will derive rules to automatically assign
a new user to a defined group, and ultimately predict how this user
will react to given ads. With both clusters and the rules for
allocating them users defined, lookalike targeting can be
implemented in order to show specific ads only to the users with the
highest likelihood of showing interest in the advertised product.

Machine Learning Helps DMPs Enhance User Data for Better Decisions

The third area where machine learning algorithm help improve digital
advertising is impression data enhancement for data management
platforms (DMPs). In an RTB environment, impressions usually come
loaded with user and device data from the publisher level. The
latter can be more or less extensive depending on the extent of the
data collected by the publisher. However, it is seldom sufficient
for buyers to make an informed buying decision, especially in a
demanding, programmatic environment. For instance, not many
publishers are able to offer demographic data about the users (only
Facebook and a few others do), but this type of data is essential to
buyers. This is where DMPs come in, enriching and augmenting the
supply-side data to give a better picture to the demand side of what
they’re bidding over.

In this context, machine learning algorithms serve to improve the

buying decision by enriching user data for each impression. Using
dynamically-created statistical models, they derive additional,
relevant information about users from third-party data sets. This
third-party data can either be provided directly by the publisher
(device, app or website the user is in), or can come from an
external data set (user reviews).

More specifically, by distilling statistical cross-correlations from

third-party data, it is then possible for DMPs to infer otherwise
unknown attributes, such as user demographics, which are crucial for
targeting. Ultimately, algorithms help cope with the inherent
inaccuracy of such information by calculating the probability that a
given impression attribute can be used to derive additional

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attributes which are then more specific and more relevant to the
advertiser. For example, they can calculate the likelihood for a
user to be male, under 21 and a frequent player of strategy games.

With the help of machine learning algorithms, DMPs can then help
DSPs improve pricing a bid over a specific impression.

Machine learning algorithms play a crucial role in the RTB

ecosystem, which is a growing piece of the mobile and online
advertising pie. All the use cases have in common that algorithms
enable the scalable automation of predictions based on historical
data. Their ultimate strength is to enable advertisers, along with
all other adtech players, to overcome the limitations of aggregate
metrics analysis for decision making. Instead, they make it possible
to optimize at the most granular level possible: every single user
interaction.