What is Programmatic Buying?
Programmatic Buying (sometimes also referred to as Programmatic Advertising or Programmatic Marketing) refers to the eco-system that enables automated way of buying digital ad inventory in categories such as mobile, display, video, social and now native. A by product of automation of the buying process is that it enables leverage of analytic data for better targeted ad serving resulting in better performance. Programmatic Advertising systems (such as DSPs, Ad Exchanges and SSPs) use techniques such as look alike and behavioural modelling in order to better target ads.
Major Components of Programmatic Buying
- Real Time Bidding (or RTB): This is a critical standard which defines the buying method or the protocol that defines how the auction of the ad inventory happens (go to this page to see a video that shows how RTB works in detail). This creates the standard for all of the systems in the above eco-system to talk to each other. The RTB standard is defined and maintained by IAB.
- Programmatic Direct: Is a buying method that enables advertisers to buy a fixed number of impressions in a guaranteed manner directly from publishers without an auction. These are usually premium ad inventories that publishers are unwilling to sell via open auctions. In United States, Programmatic Direct constituted only 8% of the volume through programmatic buying in 2015. This is expected to grow to 42% in 2016.
- Demand Side Platform (or DSP): This is a software platform that automates the process of buying ad inventory from Ad Exchanges according to RTB or Programmatic Direct. The Media Agency creates a digital media plan for the advertiser’s campaign which contains some spend on Programmatic Advertising which is then given to the Programmatic Specialist Agency to execute. The Programmatic Specialist Agency sets up and runs the campaign on a DSP.
- Ad Exchanges: Are like brokers that run auctions for digital ad inventories from various publishers one impression at a time (via RTB). The biggest benefit for the advertiser’s is that Ad Exchanges represent large pools of available inventory that the advertiser can buy quickly without having to manually deal with a number of publishers.
- Supply Side Server (or SSP): SSPs manage a publisher’s sources of contracted indirect demand such as ad networks or multiple Ad Exchanges. Increasingly, the SSPs and Ad Exchanges are merging into a single solution as distinctions between these 2 were needed only in the earlier stages of Programmatic Buying.
- Ad Server: Ads displayed online on various mediums like desktop website, mobile website, apps etc are stored and are loaded from ad servers on the websites, apps etc when requested through a URL load.
Benefits of Programmatic Advertising
- Automated Media Buying: No more human intervention required. Media buying can now be simply carried out in an automated fashion by software tools that enables technology to be leveraged by human intuition and intelligence.
- Better Targeting: Programmatic Advertising enables better targeting as these parameters can be applied at the level of each ad impression using a complex algorithm involving multiple variables.
- Cost Effective: The improvement in targeting above along with increases choices (the same user can be targeted across cheaper ad inventory) increases the ROI hence making Programmatic Buying much more cost effective as compared to the alternatives.
- Scale: It has access to a number of ad exchanges that have very large scale of inventory.
Issues with Programmatic Advertising
A number of times, publishers need to be able to mask their domains for legitimate reasons such as to avoid cannibalisation of the direct sales channel (that gives them higher CPMs) by the Programmatic Advertising route. This masking feature is sometimes used by bad actors who try to pass off their poor quality inventory as premium.
Ad Exchanges and DSPs are building better technology to identify and block these cases. In addition, the programmatic eco system has integrated with tools such as DoubleVerify to ensure brand safety from an advertiser perspective.