What is Programmatic Advertising: The Comprehensive Guide

What is Programmatic Advertising: The Comprehensive Guide

September 24, 2018

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Many believe programmatic advertising to be the savior of the media buying industry. But will programmatic advertising really save AdTech? In this article, we'll dig deeper into this question, understand exactly what programmatic is, and discover the best ways to utilize the targeting capabilities of this technology.

Despite the fact that all major ad networks have developed their own programmatic solutions over the last few years, many small and medium businesses don't quite understand how it functions, and are suspicious about this programmatic advertising hype.

What is Programmatic Advertising

IAB defines programmatic as the technology which automates media buying. The entire process of buying and selling ad inventories is done in real time via an automated bidding. Advertisers place their bids for displaying a specific advertisement to a specific user.

Programmatic allows buyers and sellers to agree upon the price per impression before it actually occurs. This distinguishable aspect of the technology is known as a guaranteed impression. Brands looking to reach a wider audience can bid for real-time impressions.

Programmatic Advertising = Programmatic Ad Buying?

While programmatic advertising refers to the phenomenon in general, "programmatic ad buying" is a term that advertisers use to describe the process of automatic purchases of ad space. Programmatic ad buying eliminates duplicate traffic and human error while giving maximum transparency and optimization opportunities.

Brand advertisers & agencies can also benefit from automated media planning through DSPs or ad exchanges with a completely transparent price. The programmatic ad buying process has never been easier: they set up geos, audiences, time of the day, and evaluate what's performing best mid-campaign to narrow down their targeting options & pay only for effective impressions. This is completely different from ad buying in 2010, where you negotiated the price with multiple ad networks, agreed to buy a certain amount of impressions and then ran a very limited amount of ads without a chance of optimization.

Programmatic ad buying skyrockets advertiser's chances to get quality traffic at a fair price, without the need to pay a huge cut to the intermediaries.

Components of Programmatic Advertising

The programmatic advertising ecosystem consists of multiple elements. We will mention some of them further in the article and give a short explanation now:

  • Ad Server is a software that hosts ad creatives in various formats including video and native and stores data about them. With HTTP, ad server ensures the delivery of ads to different digital platforms, websites, and mobile apps. Here are the most important metrics to look at in your ad server.
  • SSP (supply-side platform), as indicated before, is a platform that assists publishers in selling and managing their ad spaces (inventory) programmatically. It also collects the data on publisher's audiences to optimize ad delivery.
  • DSP (demand-side platform) helps advertisers in purchasing an unlimited amount of targeted traffic programmatically from SSPs by connecting them to multiple ad exchanges.
  • Ad Exchanges are marketplaces connecting DSPs and SSPs. Their main goal is to help advertisers buy ads from multiple publishers automatically via an auction.
  • Ad Networks are companies that resell traffic from publishers to advertisers.
  • Ad Verification Providers are platforms that ensure the quality of traffic and targeting. These third-party vendors also check whether the ads are placed appropriately on the publishers websites.

How Programmatic Advertising Works

Programmatic connects Supply Side Platform (SSPs) to Demand Side Platforms (DSPs). Publishers use SSPs to monetize their inventory and transfer data about their visitors to these platforms. The inventory is then sent to DSPs (ad exchanges) where advertisers are bidding on the available ad spaces. DSPs get all the necessary data about publishers audiences (age, GEO, device types, search histories, etc), render ads and then deliver them back to SSPs.

Programmatic is all about speed. The whole process from bidding to actual ad delivery takes around 100 milliseconds, which is 30 times less than a blink of an eye.

How does RTB works?

Benefits of Programmatic Advertising

Programmatic helps advertisers access ad inventory directly, without the need to hire ad agencies. It also provides a much wider range of targeting options, which are not available if you buy ad spaces manually. The bids are arranged individually, for each user accessing the publisher's website, which makes targeting a lot more precise and helps companies reach the right users, at the right time and place.

The whole concept of programmatic advertising boils down to one simple idea — remove the middlemen (agencies) from the process and make programmatic ad buying cheaper and more effective.

In the world of programmatic, advertisers only pay for the impressions they receive, without the need to pre-negotiate a price of a given ad unit with a particular publisher. The number of impressions they can purchase is flexible and so is the budget, which makes the technology lucrative even for SMBs. Ad spaces can also be purchased from various publishers within a single campaign.

Programmatic vs RTB: What is the Difference?

While many businesses misguidedly believe programmatic ad buying and RTB (real-time bidding) are the same things, RTB is only a part of programmatic marketing. RTB platforms are essentially auction marketplaces, which allow advertisers to bid for a certain impression in real time.

Advertisers set up the campaign, targeting and competing for an ad impression with automated bids. The highest bid wins the auction and gets the placement on the webpage, which is then loaded immediately.

The user data is communicated in real-time from the browser to an ad exchange, which enables more specific targeting and directly influences the outcome of the auction. This means that not only is the ad with the highest bid shown, but also the one that meets all the targeting parameters and thus will be most relevant to the user.

Such auction occurs within mere milliseconds, while the webpage is loading.

Is RTB the only way to get traffic programmatically?

RTB is the major, but NOT the only way to buy traffic programmatically. Alternatively, there are 3 more programmatic buying methods:

  • Fixed-price programmatic, where fixed-price inventory can be bought after prior negotiation with a publisher programmatically through an API, without bidding.
  • Preferred Deals enables advertisers to get their desired inventory with a fixed price without bidding for it on the open market.
  • Private Marketplace (PMP) works similarly to an open RTB auction - it is determined in real time, based on the amount of money advertisers are willing to pay and then the highest bid gets the impression. This marketplace usually offers exclusive traffic to more well-known websites, and you need to be invited to take part.

Advantages of Programmatic Advertising

EMarketer's report estimates that global ad spending on programmatic is at $273 billion in 2018. That accounts for 84% of all digital display spending.



Programmatic has brought much more transparency to the online advertising industry. The technology ensures that advertisers get exactly the traffic they pay for, and their ads are seen by the right people at the right time. Programmatic also allows marketers to collect a lot more data on their target audiences and to make smarter business decisions on their spendings.

Let's sum up the major pros of programmatic for your digital revenue:

  1. Efficiency

    Buying ads automatically is efficient - with the human factor eliminated, you can spend more time on creatives and texts while boring media buying operations will be done by the machine.

  2. Advanced Reporting

    With the amount of actionable data that programmatic provides, reporting is also extremely clear. You can customize it to your most important KPIs and access any data in real-time.

  3. Performance Optimization

    With a better handle of your ad operations, you can link the ad result with exposure. Epom ad server provides data-based eCPM, eCTR, I2C optimization which saves up to 5 hours weekly.

  4. Inventory Quality

    Spreading the same inventory across a wider range of publishers, advertisers can quickly react to the needs of their consumers. Programmatic advertising allows you to scale campaigns quickly, allocate greater budgets in the best-performing inventory, making campaigns extremely flexible to the ever-changing market conditions.

  5. Price Optimization

    With a fair price for every impression in an open auction, advertisers get exactly what they pay for. Later they can manage their inventory, cutting off traffic sources that aren't driving ROI and focusing on the ones that do.

Read also: A guide to Native Advertising

Throwbacks of Programmatic Advertising

Programmatic is extremely overpromising technology that was created to allow marketers to automate impressions across all channels. However, the online advertising ecosystem is not perfect and when a single link of the advertising chain is rusty, it affects everyone.

Ad Fraud

Programmatic started the severe fraud issue across the digital advertising ecosystem. The annual Bot Baseline report revealed that the economic losses due to bot fraud are estimated to reach $6.5 billion worldwide in 2017. In 2018, the number will be even higher.

Programmatic also helps advertisers to optimize their media budgets by preventing fraudulent traffic. The technology utilizes machine learning algorithms to identify and avoid potential fraud.

In terms of viewability, programmatic ads deliver it at a rate of 44-55%.

Brand Safety

There are websites where you would prefer your ads not to be shown. In programmatic advertising with RTB you are buying THE AUDIENCE, not the confirmed list of websites. So your creative can potentially be shown next to very unreliable content. You can blacklist scam websites to stop this from happening again but prepare for the fact that you will need to update them regularly as scammers change their domains quickly. The blacklisting option is available in DSP.

Note! Low-quality websites often provide cheap traffic, which agencies wouldn't blacklist if you won't ask them to as it can drive up the cost of the buy.

Discrepancy

Programmatic ad tags don't deliver 100% fill rate: although a publisher's tag will request an ad when a user visits their page, the creative can't always be shown when requested. Discrepancy is the difference between the stats of the publisher and the advertiser, such as ad requests, clicks, impressions, conversions.

Read more about ad discrepancy here.

Before the launch of your ad campaign, clarify all the necessary information about the targeting, type of the code, and which tools are used to check traffic and then run the test campaign. Be sure to check stats once every 2-3 days so that you see the positive or negative performance dynamics before the end of the month. Or use White Label DSP to eliminate any discrepancy.

Here's a small chart showing how businesses react to programmatic advertising.

Which clan are you in? We hope this article will help you gain confidence & help you with starting to advertise programmatically.


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