What is Programmatic Advertising?

Programmatic is defined in a lot of ways, before we jump into that — what is it? Programmatic buying is basically using a platform which has a whole bunch of settings to get to the right person at the right time with an advertisers’ creative.

Now on to the definition — Programmatic (Prog) has been defined as the automated buying and selling of online advertising. Think about it this way, we all know what social media ads are right? Well programmatic is the same but for everywhere that isn’t search or social e.g. display banner ad on a webpage — that’s prog, video ad on YouTube — prog, video ad on a website — most probably also prog, audio ad on Spotify — could be prog as well!

Before Programmatic, a publisher had to call an advertiser, negotiate terms for different value of ad inventory, and use a manual insertion order process before buying. Today, ad exchanges have entirely changed the process of selling and buying in programmatic advertising.

Publisher: someone who displays the advertisements, normally the “owner” or “reseller” of a website or a blog, but also as the industry develops it also includes digital billboards, smart TVs etc. For example Spotify, ESPN, The Guardian, etc. They get paid for displaying ads on their page/app.

Inventory: The actual space on the page where the ads will be displayed — the publisher sells the space on the website as inventory.

Now on to that platform I mentioned earlier — agencies / advertisers use what is called a DSP (Demand Side Platform) to decide which impressions to buy and how much to pay for them, while publishers (e.g. website owners) use a supply side platform (SSP) to sell ad space to brands. These two platforms are then matched up in real time through an exchange.

Impression: When an Ad gets loaded on a webpage that is considered as an impression — it is basically a count of how many times and ad loaded and therefore was probably viewed.

Advertiser: is someone who is trying to sell the products/services, e.g. Coca-Cola, Nike, etc. They pay to get their advertisement displayed on different digital channels. An Agency normally works on behalf of an Advertiser.

Infographic taken from https://www.pmg.com/

DSPs are really important and super smart because they not only allow you leverage behavioural and contextual targeting to get as niche or as broad as you want, they can use algorithms to ensure you are getting the most bang for your buck, it uses artificial intelligence to understand what types of users / websites our creatives perform the best on and then bids more aggressively there vs on sites it doesn’t do as well on.

Another acronym that gets thrown around when talking about programmatic is RTB or Real Time Bidding — this is what revolutionised the old school market, one of the ways to buy programmatically is through RTB, where as a website page loads, multiple advertisers enter an auction to try to place their ad on the website and show their creative to “you”, a consumer. The advertiser that is willing to pay the most then gets to place their ad on the site and you see the creative and hopefully click on it or remember it and then purchase their product. There are other ways of buying programmatically that aren’t just RTB — but we will cover that in another article. For now remember that Prog isn’t only RTB, but RTB is a major part of Prog!

What about Ad Exchanges? Ad Exchanges connect DSPs and SSPs allowing the auction process to occur and allow for the winner to serve their creative for a specific impression opportunity. I like to think of an Ad Exchanges as an auction house like Christies for example, buyers and sellers come together and Christies facilitates the bidding — well same thing here — DSPs and SSPs come together and the Ad Exchange allows the auction to happen, for every impression on a site and then the winning advertiser (or agency) participating in that auction gets to put their ad on the site for the user to see.

You will also see an ad server mentioned, this is basically where the creative lives — the last thing publishers want is to slow down their website loading by receiving a huge file every time a creative needs to serve on their site or even host all their advertisers creatives themselves. In order to make things faster and easier for all parties involved, advertisers will place their creatives in an ad server, and once the auction is won the DSP will call on the Ad Server to show the creative on to the Publisher’s website.

Key points:

  • Demand-Side Platforms (DSPs) enable advertisers to buy ad impressions and help determine how much to bid for each impression opportunity.
  • Supply-Side Platforms (SSPs) enable publishers to offer inventory and help maximize how much their inventory sells for.
  • Ad Exchanges connect DSPs and SSPs and facilitate the auction process to determine who gets to serve in each impression opportunity.
  • Ad Servers place the winning ad in the corresponding inventory slot.
  • Data Providers enhance the ecosystem by offering additional pieces of information to better inform each transaction. Things like the context or topic of the page where the ad would serve, pre-built third-party audiences, lookalike audience building, hyper-local targeting, fraud detection and prevention, and first-party data onboarding.