Programmatic Advertising 101: Full Breakdown

Advertising is constantly evolving. Advertising started on billboards, newspapers, and flyers. With the introduction of the digital age, advertising has an even larger playground. Keep reading to get the full scoop on programmatic advertising 101!

The world of digital marketing is always changing. Computers and mobile devices let marketers reach a wider audience than ever before. Automation allows businesses’ advertising to continue after everyone has left the office.

Here’s a little programmatic advertising 101: it’s one of today’s biggest digital marketing technologies.

Have you visited a website and noticed the interesting advertisements on a website? You can find them on the sidebars or sprinkled throughout the content of the site. They usually include products or services you’ve recently looked at on another site.

This is the product of programmatic advertising.

Programmatic advertising automates the digital advertising process. But it does a lot more than help advertisers find places to display their ads.

Here’s a beginner’s guide to programmatic advertising 101.

In simple terms, programmatic advertising automates the digital advertising process. A website publisher (seller) is selling space on their site for advertisers (buyers) to display ads. The advertisers are the buyers and will bid and pay to display their ads on a particular site.

There are a few different types of programmatic advertising. All of them work to help automate the buying and selling of ad space.

Before programmatic advertising, people would have to hop on their computers to buy and sell digital ads. Automating this process means Artificial Intelligence and algorithms work around the clock to buy and sell digital ad space. You can see this process of advertising across video, mobile, display, and social platforms.

This automated process reduces human error and improves the effectiveness of the advertisement. AI technology uses algorithms to collect demographic and behavioral data to target audiences.

Other benefits include better pricing, budgeting, and reporting. It’s an easier cheaper and easier option than having publishers work to sell advertising space on their websites.

And that’s programmatic advertising 101 in the simplest of terms. Let’s dive a little deeper so you can see how programmatic advertising works.

Many web pages have a publisher who auctions an ad impression. This ad impression is a space where advertisers can display their advertisements.

An ad marketplace auctions the impression where advertisers compete and bid for the ad space. The advertiser who bids the highest gets to buy the ad impression.

Once the advertiser buys the space they send their advertisement to the website. The website then shows the ad to the viewer and prospective customer.

The ad pops up on the webpage when the page loads. The viewer can click on the ad and can convert into a customer by buying the product or service. The advertiser then makes a profit and a new customer.

As soon as you click on a webpage, the entire process starts and completes within a fraction of a second. It repeats itself every time you visit a website. Of course, this is referring to sites that use advertising.

This particular process is real-time bidding or RTB. RTB is only one type of programmatic advertising. There’s a lot more to programmatic advertising 101 than RTB.

So far you have a basic understanding of how programmatic advertising works. Before we dive any deeper, let’s go over what tools publishers and advertisers use in programmatic advertising. These tools work together to automate the process of buying and selling digital ad space.

The Ad Exchange

An ad exchange is a digital space where advertisers and publishers meet. Publishers and advertisers auction, bid, sell and buy ad inventory. Think of it as a trading floor but instead of selling stocks, it’s digital display inventory.

Demand-Side Platform or DSP

Managing ad placements and purchases used to be a messy process. Publishers and advertisers would have to work manually with salespeople and other parties to buy and sell digital display space. Automation and DSPs help fix this problem.

A demand-side platform, also known as a DSP, is a software tool that lets advertisers to automatically buy ad inventory.

An advertiser will sign up for a DSP that’s connected to an ad exchange. It uses RTB to match advertisers with the right auction for their advertisement. The DSP will send a signal, enter the auction, and bid on the ad space.

The DSP is the primary tool used by advertisers looking for ad inventory.

DSP works on both desktop and mobile ad inventory.

Supply-Side Platform or SSP

On the other side of the ad exchange are the publishers. They use a supply-side platform to auction and manage their ad inventories.

Before SSPs, publishers would hire salespeople to reach out to advertisers and sell ad space. This was a much slower process. With SSPs, the process uses automation to improve the efficiency and speed of ad space sales.

The SSP connects and shares available ad inventory to the ad exchange. Through real-time bidding, advertisers bid on the ad space which automatically sells to the highest bidder.

The SSP can connect to multiple ad exchanges. This boosts the publisher’s exposure and improves their chances of finding a high bidder. A publisher has better control their ad space through the SSP by setting minimum prices and selling to certain channels and buyers.

The Difference Between DSP & SSP

Both DSPs and SSPs connect to the ad exchange. The DSP is a tool for advertisers to automate the bidding and buying process while the SSP is a tool for publishers to sell available ad space.

A DSP hunts for the cheapest available ad space to save advertisers money. The SSP tries to sell publishers’ ad space for the highest price possible.

Data Management Platform or DMP

Above, we mentioned that programmatic advertising technology can collect behavioral and demographic data. It also can track a user’s video viewing hours, online and offline shopping, and the user’s interests.

The system that manages this is a data management platform or DMP. It collects, stores, and sorts all this information.

A DMP will often work alongside a DSP or SSP. The DMP collects data that will help the advertiser target their ads to specific audiences. It helps the DSP find the most valuable ad space for the advertiser and buy it for as cheap as possible.

Today, you’ll find most DSPs consist of a DMP solution. This offers advertisers an all-in-one solution that cuts out the need for a 3rd party to manage data. The other big benefit of a DMP is the options for programmatic targeting.

Advertisers use programmatic targeting to find the best audiences for their ads. There are 5 different ways advertisers can use programmatic targeting.

1. Contextual targeting uses the context of a site to display ads. You’ll see ads that are similar or related to the subject of the website.
2. Keyword targeting uses keywords to match ads with websites. For example, an ad selling running shoes will want to find a website that uses keywords like “running,” “shoes,” or “sports.”
3. Data targeting uses a user’s cookies to learn about the user visiting the site. Rather than showing ads that relate to the site’s content, the ads relate to the user’s interests and previously visited sites.
4. Geo-targeting is a location-based targeting that shows ads relevant to a particular location. A business that serves only the Albuquerque area will want to show ads to that area.
5. Retargeting focuses on converting the 98% of site visitors who haven’t converted yet. Sites place cookies on a user’s computer to later target ads to that user. It’s an efficient way to engage users that have visited a site.

There are several types of programmatic advertising. Each one has its advantages for publishers and advertisers.

Real-Time Bidding or RTB

The example above shows the process of real-time bidding. It’s a very efficient process for advertisers.

By using ad exchanges and other technology, advertisers can quickly find impressions that will be most valuable and useful. The AI ad technology pulls behavioral and demographic data to find the best users for advertisers to target. Once found, the ad tech will place bids based on the value of the impressions to the advertiser.

The entire real-time bidding process happens as a page is loading. It’s a fast and efficient way to buy space and display ads.

Open Auction

Publishers who are open to anyone advertising on their website will auction ad impressions in an open auction. It’s open to all publishers and advertisers. Publishers can set a minimum price on their ad inventory and let advertisers bid for it.

This is a traditional form of programmatic advertising and the most popular. Open auction is another name for real-time bidding.

Direct Programmatic Advertising

Advertisers have to watch out for fraudulent ad spaces in the ad marketplace. Even with the best tech, accidents happen and advertisers will lose cash. But there is a solution.

Direct programming allows advertisers to work directly with website publishers. This improves transparency between both parties and reduces the chance for fraud.

This is a guaranteed buy where a publisher directly sells ad space to an advertiser. There is a fixed price on the ad inventory. This automated process also prevents price fluctuations.

The advantage of direct programmatic advertising is it’s more transparent. It gives advertisers the option of buying more inventory directly from the publisher. The publisher also gets to regulate the price of their ad inventory.

You may hear this form of programmatic advertising called programmatic guaranteed and guaranteed buy.

Private Auction

Advertisers who receive an invitation from the publisher can participate in a private auction. It’s a programmatic ad that the publisher controls. It’s also known as a private marketplace or PMP programmatic.

The publisher sets a minimum cost that the advertisers negotiate for. The advertiser with the highest bid wins the ad space. It’s a safe space for both publishers and advertisers to negotiate.

Preferred Deal

Publishers with a smaller group of buyers will use a preferred deal form of programmatic advertising. A preferred deal skips the auctions. This allows publishers to sell their ad impressions to their preferred group of advertisers.

Advertisers get to preview fresh inventory. There are continuous volume and very little price fluctuations. This allows publishers to control their revenue.

Despite the efficiency and accuracy of programmatic technology, there are some businesses who hesitate to try it. This wouldn’t be a complete guide to programmatic advertising 101 without sharing the potential disadvantages.

These disadvantages include brand safety, fraudulent ads, and viewability. While there is a risk, it’s shrinking as programmatic technology continues to improve.

There are some cons to programmatic advertising but many believe the advantages outweigh the concerns.

This technology is continually improving to make programmatic advertising simpler, faster, and safer. Right now, it’s a cost-effective solution. Advertisers can change their cost per mille (CPM) in real-time.

As programmatic advertising technology improves, advertisers can boost their key performance indicators or KPIs. This improves campaign performance and return on investment.

If an advertiser needs to reach a large audience, programmatic advertising is a scalable solution. It reaches multiple sites and exchanges in a quick and efficient manner.

Programmatic advertising is easy to use. Once you understand how it works, you can let the automation side of it save you time. This lets advertisers and businesses to focus on marketing strategies and campaigns.

Finally, advertisers can learn more about their target audience. Programmatic tools can collect demographic and behavioral data on users that interact with the advertiser’s brand. This helps businesses create engaging marketing campaigns that target the right people.

Do you want to target your marketing campaigns to the right audiences while saving your business time and money? Programmatic advertising is the solution.

Programmatic technology ensures your business’s ads find the most affordable and valuable ad space. It gathers data about your target audience to help you improve your marketing campaigns and boost your ROI.

Want to learn more? Let’s get in touch. We will help you find the right programmatic advertising solutions for your business.