DCO ad units use feeds of data and a set of rules to generate hundreds or even thousands of unique creatives on the fly. DCO actually emerged before programmatic took hold, originally with the purpose of retargeting customers to drive conversions and boost sales.
Dynamic creative optimization (DCO), is a form of programmatic advertising that allows advertisers to optimize the performance of their creative using real-time technology. While the actual optimization approaches may vary, they almost always involve the use of multivariate testing. The DCO process consists of creative development, identification of test variables, definition of the optimization objective, and method of optimization. Creative development is done using creative studio tools like Adobe Photoshop. It may include video, animation, native components, and interactive elements. Test variables represent the parts of the ad creative that are varied in the multivariate testing framework. These commonly include graphical elements, ad copy, colors, and click-through actions. It is helpful to have digital assets managed in a digital asset management system, especially when digital rights need to be enforced. The optimization objective can be initial engagement, a user action (such as click or install), or a post-install metric (such as purchase, registration, or lifetime value). Optimization of this objective is carried out using some form of discrete or combinatorial optimization.