The conventional guide to programmatic advertising

James Haslam

Aug 28, 2017

There are many terms for it - programmatic advertising, programmatic ad buying, programmatic media buying, or just plain programmatic. What they stand for are the purchase and sale of advertising space by algorithm - in other words, machines buying ads.

Programmatic software automates the buying, placement, and (importantly) optimization of media inventory through a bidding system. Automation facilitates the process, allowing it to occur in real time. Once set up, there’s nothing that a single person needs to do, other than watch impressions increase.

eMarketer predicts that programmatic ad spending will make up 84 percent of total U.S. display ad spend by 2019 (or $45.94bn), and it’s become an increasingly larger force in the ad buying market. So how does it work? Let’s take a top-level look at programmatic, and highlight the key features and benefits it creates.

What does programmatic allow you to do?

The traditional media buying process involves a lot of manual labour. With requests-for-proposals (RFPs), negotiations and manual insertions of the orders (IOs). By today’s standards, if it was still all handled by people, it would be slow and inefficient. Added to this, when ads are purchased in bulk, advertisers have little control over their inventory and placement. This means there’s potential for them to miss the right audiences.

Programmatic allows you to target the types of audience you want. Identifiers including device type, user geolocation, and activation of certain in-app user events can all be used to inform the type of user you’re looking for. You can also use programmatic buying to choose the partners you want to work with, and the specific inventory as well. By using programmatic you’re optimizing the bidding process, in theory paying only for the best users.

Programmatic advertising ultimately brings efficiency to the process. It used to be that digital ad space was sold by human ad buyers and salespeople, which creates extra layers of inefficiencies when compared to computation. Programmatic advertising tech promises to make the ad buying system quicker, and therefore cheaper, by removing people from the laborious and repetitive parts of process where possible.

People are still involved, handling less menial and repetitive tasks, such as strategizing and analysis for further optimization - as well as for communications with ongoing customers.

What’s different with RTB?

Programmatic media buying can be categorized into different types: RTB or Open auction, Private Marketplace (PMP), and Programmatic Direct. In fact, that’s kind of the trouble of how all-encompassing the phrase ‘programmatic’ is. Often, people become confused between these categories: so let’s look at the most popular one first, RTB.

RTB - or real time bidding - is the purchase of ads through auctions. These auctions determine who gets to buy a specific impression, and they happen in the time it takes for a single page to load.

It works this quickly because, during load time, user information is passed to an ad exchange, which then facilitates an auction and selling the impression to the highest bidder. Hence, it really is ‘real time’ bidding.

Take, for example, a mobile game where the player views an ad between levels. In that moment, the mobile SSP runs an auction for all advertisers interested in showing an ad to that player. The advertisers make their bid, and in a split-second the highest bidder is chosen, so that ad gets served to the player.

The differentiation may be slight, but it’s important to understand that RTB is a decision process within programmatic. Not all programmatic advertising uses real time bidding.

What about PMPs and Programmatic Direct?

Private Marketplace (or PMPs) are an invite-only marketplace that let certain publishers reserve specific ad inventory packages. Later, they can sell them to a chosen buyer (or group of buyers) through a private auction mechanism.

PMPs are generally preferred by advertisers who want to gain access to premium inventories before they’re made openly available for everyone.

For advertisers, PMPs offer a closer relationship with publishers, giving them greater transparency to track and control ad inventory. Meanwhile, programmatic technology removes the need to directly buy with multiple publishers.

As for Programmatic Direct, it’s is an automated buying process where you can buy guaranteed inventory without an auction.

This route is preferred by companies who want to focus on premium placement and on brand safety.

That covers all on programmatic, for now. If you're looking for more content take a look at our glossary - we have programmatic and RTB defined, just for you.