Before programmatic advertising, if an online advertiser wanted to secure an ad spot on a particular website, the only option was to contact the publisher directly. Then, a negotiation process would unfold where the advertiser and publisher would discuss bidding, price and volume.

For example, Tom’s surfboard company wants to place an ad on Mike’s solar panel site because Tom knows his customers are between 18-35 and interested in green energy. Well, Mike’s site may see that visitor demographic, but he also has a chunk of visitors who don’t necessarily meet those criteria. Regardless, Tom is paying for all of them to see his ad. As you might imagine, this isn’t the most effective use of Tom’s ad spend, nor does it provide the most relevant experience for Mike’s visitors. Additionally, securing this ad space could’ve taken days, weeks or even months.

Because of programmatic advertising, this process now takes just a few moments.

Simply put, programmatic advertising is the process of buying digital media in an automated way using machines. In this environment, the advertiser bids for a type of audience at any given time rather than a placement.

Why is Programmatic Advertising Effective?

Budget-friendly : Because campaigns can be more targeted and directly served to the right audience at the right time, every time, the likelihood that a user will act on your ad is much higher. Your ad spend is used more efficiently at a much lower cost.

Expanded reach : Advertisers have quick access to huge inventories of ad space, meaning you can reach more of your target audience than ever before.

Customer journey : There is the ability to reach users across multiple devices and channels (connected TV, online video, display, mobile/tablet, audio, social, native) all across the globe. 

Types of Programmatic

Real-time bidding (RTB) : Real-time bidding creates a space where advertisers can target a specific audience based on specific data about that audience. Also known as open auction, real-time bidding requires an advertiser, what’s called an SSP, a DSP and a publisher. 

An SSP or “supply-side platform” is an online tool that gives publishers the ability to manage and offer their ad inventory space to advertisers. SSP’s can help publishers decide how their inventory is sold and delivered while also helping them to receive the most revenue possible for their inventories.

A DSP or “demand-side platform” is an online tool that helps advertisers and agencies manage their media buying from creating bids, to tracking ad performance and completing optimizations. Over the years, DSPs have become more sophisticated in their capabilities, including video metrics and better tracking.

In a real-time bidding scenario, advertisers set the max they’re willing to pay for an impression on the DSP side so that when a website user enters the page, the advertiser with the highest bid gets the ad placement. Then the results of the ad placement are communicated back to the DSP and SSP. 

Private Marketplace (PMP) : This is where exclusive, invite-only auctions take place. A group or a premium publisher offers private inventory ad space to a select group of advertisers who can only gain access by being invited. The highest bid still wins the impression.

Automated Guaranteed : Sometimes also referred to as “programmatic direct”, this method guarantees advertisers a certain number of impressions. These are often for home page or other top-tier placements. Programmatic direct is touted as one of the more transparent, high-quality types of advertising though it’s also more of a manual process and therefore takes more time. It also usually costs more and isn’t considered to be as targeted as some of the other types. However, this method has grown steadily in popularity over the last few years.