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Everything You Wanted to Know about the Programmatic Ad

Everything You Wanted to Know about the Programmatic Ad

Programmatic is another type of advertisement. What makes programmatic advertisement special is the automated process of buying and selling online advertising. This allows making transactions more efficient and effective by optimizing the process and consolidating the digital advertising efforts in one technology platform. While traditional advertising includes requests for proposals, quotes, tenders, and negotiations, programmatic buying uses algorithmic software to buy and sell online display space.

Machine learning is essential in any programmatic advertisement platform. Processing the number of different kinds of data helps enhance the probability of campaign success.

It allows optimizing campaigns in real-time by analyzing campaign inputs, user behavior, and dynamics of audiences that are most likely to convert are identified and targeted.

However, the ad buying process is not completely automated. As a rule, there is a marketers’ labor involved. They manually prepare insertion orders or ad tags. Nevertheless, without automatization, this process would be much longer.

Just a year ago,  the spending by marketers on programmatic ads in the U.S. reached the amount over $79.61 billion, and it keeps growing. It is expected that by 2022 expenditures will increase to nearly $95 billion.

Programmatic ecosystem

The programmatic ecosystem comprises the different technology platforms, available advertising deal types, methods of buying programmatic media and spans across a variety of ad formats.

All of the components communicate and interact with each other and create an ecosystem. This allows making the process of automated media transactions more facile.

As a rule, each programmatic platform is owned and operated by either a publisher, an advertiser, or an intermediary.

Let’s take a look at each component of the programmatic ad ecosystem.

SSPs and DSPs

SSP stands for the supply-side platform. As a rule, SSP belongs and is operated by an SSP service provider. Publishers (also referred to as the first-party) pay for the services to access the SSP platform and place inventory for the advertisers.

DSP stands for the demand-side platform. Advertisers (also known as the third-party)  use DSP to manage the process of programmatic media buying. Usually, the third-party requires to pay the fee to have access to the platform. The demand-side platform is owned by a DSP service provider.

DMPs and CDPs

DMP stands for a data management platform used as a third-party data repository. Those databases provide information about users for whom the advertisement is made. Since the era of third-party cookies is close to its end, most of the DMP would have to redesign their business model because they contradict the new privacy regulations.

CDP stands for customer data platforms. It creates, unifies, and stores customer data accessible to other marketing systems. Customer data is normally collected from multiple sources, cleansed, and merged to create a single customer profile. Since the first-party data is acquired with user consent, its use in programmatic advertising becomes more privacy-friendly and trustworthy.

Ad Networks and Ad Exchanges

Ad networks play the role of facilitating and amalgamating publisher ad inventory for convenient purchase. It is supposed to help both publishers and advertisers.

On the other hand, ad exchanges automate the process of buying and selling on an impression-by-impression basis through real-time bidding (RTB).

The main difference between Ad Networks and Ad Exchanges is that the last one doesn’t involve human interactions.

Programmatic Ad

Programmatic Deals

There are different kinds of offering and acquiring inventory in the programmatic ecosystem, and each of the ways has its benefits and flows. Generally, they can be divided into 2 types: real-time bidding (RTB) and programmatic direct.

RTB includes an auction for the inventory and can be subcategorized into open auction and private exchange. Meanwhile, Programmatic direct offers a fixed price and 1:1 relationship between a publisher and a marketer. Let’s take a closer look at each way of the programmatic deal.

Open auctions

Open auction has open access for everyone. That means that any marketer on the exchange, SSP, or ad network side can participate in the bid on any available inventory.

Although the publisher sets the floor price for an advertisement, marketers’ demand still determines the final price. In the end, the highest bid wins. Open auctions are considered the most convenient and cost-effective way of purchasing media and have the highest reach to the audience.

However, the inventory is not guaranteed, which means there can be certain risks.

Another risk is blind bidding. Publishers are not always acknowledged who was bidding the inventory. At the same time, the marketers can also not be aware of what kind of inventory they obtain. This has some risks for brand safety.

Private exchanges

Unlike an open auction, the marketers can participate in the private exchange exclusively with an invitation from the publishers. The marketers receive a time-sensitive deal ID. The publishers set up the floor price, and the highest marketer bid wins. The benefit of a private exchange over an open auction is transparency. Both sides are aware of what kind of inventory they get. Moreover, marketers have access to brand alignment, contextual placements, and better UX delivery.

Same as in open auctions, private exchange inventory is not guaranteed.

Preferred deals

Preferred deals are private, where publishers offer premium inventory to the marketer. The necessary condition is a pre-negotiated fixed eCPM price. As a rule, marketers pay to get the“first bids” on premium ad space. When an ad request is received, there is an option for the marketer to bid at the pre-negotiated fixed eCPM price in real-time before the inventory is sent to open auction. One of the main benefits of the preferred deals is the predictability of the revenue stream. Marketers have an opportunity to look at premium inventory without price fluctuations. At the same time, marketers are able to choose high targeted placements. Meanwhile, the publishers can sell the premium inventory at a more competitive price.

Same as in RTB, the inventory is not guaranteed in the preferred deals.

Programmatic guaranteed deals

As the name suggests, it is the way of a programmatic deal, which guarantees the inventory.

Both sides negotiate the price for a guaranteed volume of impressions and flight date. This kind of programmatic deal is transparent and brand-safe, as marketers know where their ad is published. Meanwhile, publishers can control what content is displayed on their app or site.

Adello’s point of view

Combining the programmatic deals makes cherry-picking possible and therefore allows to get the most out of the campaign in terms of performance and/or price. That is why Adello combines different types of programmatic deals.

Before defining which programmatic deal type to use, Adello would have to define the ad campaign goal. If the aim is to reach out to the new audience, learn their behavior, and open new opportunities to push your brand awareness – an open auction would be a suitable option.

Most of the traffic used by Adello is bought through the open auctions. Open exchanges have millions of different publishers that provide an opportunity to advertise the product to the mass. One of the main benefits Adello provides to its clients is a near real-time intermediate campaign reporting. Using Adello Direct reporting dashboard, advertisers can assess their campaign performance and re-adjust different targeting options, thus targeting a more precise audience. Adello Direct allows narrowing audiences based on their location, interests, demographic feature, etc.

If there is no inventory available through the open market and Adello doesn’t have to fulfill advertiser preference for a specific publisher, Adello chooses preferred deals. Such deals negotiate the preferred price but don’t require securing the inventory. That way, Adello can buy the traffic needed or fit to an agreed price or can pass it if there is a better matching inventory or price somewhere else.

However, some publishers sell only a part of their inventory on open markets or don’t sell there at all. If Adello needs to secure the inventory of those specific publishers, we use a private marketplace.

Programmatic guaranteed is the most favorable option for most publishers since they can sell a guaranteed amount of inventory for a fixed price. Adello uses this type of programmatic deal in 2 cases: 1) if the advertiser asks for a specific publisher, or 2) if inventory shows a good performance for a reasonable price.

Programmatic advertisement is a deep and quite exciting method of marketing. Knowing how programmatic works allows marketers to make more informed and assessed decisions. The information provided in the article is only a basic foundation of the programmatic ocean. Nevertheless, Adello is always glad to share valuable insides about marketing and answer your questions. In the future, we will provide deeper information that will help you to understand programmatic advertisements better.

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