The Ultimate Guide to Programmatic Advertising

Posted by Shantha Kumar on Nov 22, 2019 6:02:57 PM

Programmatic_BlogWhat is Programmatic Advertising?

Programmatic advertising is the process of automating the purchase and sale of ad inventory in real-time through an automated bidding system. Generally used by brands or agencies, programmatic advertising allows buyers to purchase ad impressions on publisher sites or from apps through a streamlined ecosystem. In this Ultimate Guide to Programmatic Advertising we will cover the following topics:

  • The Basics!
  • Types of Programmatic Media Buying
  • Top Programmatic Advertising Channels
  • Advantages of Programmatic Advertising
  • Examples of Programmatic Advertising
  • Programmatic Advertising within the context of India

The Basics of Programmatic Advertising!

For many agencies and brands, programmatic advertising has become the popular and preferred way of running ad campaigns. There is some confusion and mystery surrounding the concept of programmatic advertising and it’s ecosystems, but once you understand the different types of channels and methods of buying, it’s fairly straightforward. The AdTech space isn’t as complex as it is made out to be!

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A traditional or offline advertising model is inefficient as a manual process between the buyers i.e, advertisers and brands, and the sellers i.e, publishers tends to be long drawn, time consuming, and expensive as a result of the inefficiencies. Let’s also not forget the paperwork, the back and forth of pitching proposals and the negotiation. With an automated system, like a modern programmatic advertising ecosystem, advertisers can quickly achieve their goals, calculate their Return on Investment and execute multiple campaigns simultaneously with ease.

There are different components working together in a programmatic advertising ecosystem:

  • Programmatic advertising uses a program to purchase ad slots on publisher's platforms whether it is websites or apps.
  • Then artificial intelligence powered algorithms understand users based on factors such as behavior, demographic data, cookie data, and other criteria to determine which ads should be shown to each user.
  • Advertisers will use a demand-side platform or DSP to facilitate the process of ad buying and then a data management platform or DMP to utilize third-party user data. The more sample space you work with, the more accurately you can target your ads. Some brands even merge first and third-party user data to strengthen their ad targeting.
  • Finally, the Publishers use a supply-side platform or SSP to manage their ad inventories. These SSPs will take the final decision to serve ads depending on the bids. What are bids you ask? We will cover that in the next section!

Types of Programmatic Media Buying

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The beauty of programmatic advertising is that buyers, brands, advertisers don’t have to work on a one-on-one basis with publishers to serve ads. There are different types of ad delivery and that depends on the type of programmatic deal chosen. Here are a few types of Programmatic Media buying, and the rules that are associated with each type:

  1. Real-Time Bidding (RTB) 
    Real-time bidding has become synonymous with programmatic media buying because it’s the most popular type of media buying. Real-time bidding is similar to an open auction or an open marketplace. The ad slots are open to everyone, and sold in an auction format where the highest bidder gets the ad slot. As the name suggests, the whole process is done in real-time and advertisers have the freedom to choose ad slots as and when they are made available.
    In this format, yes, the highest bidder does get the slot, but they don’t have to pay their bid amount to get the slot. Real-time bidding follows a type of auction known as the second-price auction. Here, the highest bidder is charge only USD 0.01 more than the second-highest bidder for the slot. The second highest bidder is charged slightly more than the third-highest, and so on.
  2. Private Marketplace (PMP)
    The private marketplace works in a similar function as the Real-Time Bidding, except for the fact that it is only available to advertisers on an invite-only basis. This is generally done by publishers who want to set aside premium ad inventory for a select group of advertisers. Many demand-side platforms have their own Private Marketplaces that are accessible exclusively to the DSP users or customers.
    This type of Programmatic Media buying allows advertisers to accurately measure the ROI for their ad campaigns and they also know which websites their ads are being served on. This also works out in favour of publishers who get to sell their premium ad spaces to high paying advertisers.
  3. Preferred Deals
    A preferred deal allows advertisers to choose the ad inventory at a fixed price even before it is made available on private marketplaces followed by an open auction. Also known as spot buying, preferred deals happen when the advertiser and publisher both agree on the pricing, targeting and other factors beforehand.
    Advertisers are given a sneak peek into the publisher’s ad inventory, however they are not forced to make any purchase. They can use a DSP to understand their audience and determine whether to purchase the ad impression or not.
  4. Programmatic Guaranteed
    This is the traditional approach of media buying where the advertiser and publisher negotiate the terms on a one-one-basis. Unlike the other types of programmatic media buying, there is no bidding process here. The inventory is sold directly to the advertiser after a negotiation. In the Programmatic Guaranteed format of media buying, advertisers have the freedom to choose ad inventories, pricing, audience targeting and frequency capping.

CTA1 (1)In Part 2 of the Ultimate Guide to Programmatic Advertising, we will cover:

  • Top Programmatic Advertising Channels
  • Advantages of Programmatic Advertising
  • Examples of Programmatic Advertising
  • Programmatic Advertising within the context of India

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Topics: Digital Advertising, programmatic advertising

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