Ever browsed online for a specific product, and then out of a sudden you see that product and similar ones being advertised everywhere around you. Ads in your news articles, weather app, social media feeds, and on random pages all show the same thing. Well, this isn't just a coincidence (but we all knew that already), it's the work of programmatic advertising.
For most affiliates, “programmatic” feels like a black box of complicated and intimidating acronyms like DSP, SSP, RTB, and others. But once you understand a few key components and how they all work together, it gets really simple!
We all use it more or less for our campaigns, but learning how programmatic ads work and how to use them optimally can be a huge benefit. Especially if you know how useful the knowledge can be for a serious performance marketer. Luckily for you, we are about to explain the basics and teach you what you need to know!
The Basics
Programmatic advertising is simply the automation of buying and selling digital ad space in real-time. So, let's compare the “old way” to programmatic ads.
- Old Way - You have to search for a specific website, get in touch with them, negotiate a price on ad space, send over the ads, get approved and run. Its slow and innfeicient.
- Programmatic ads - The system uses machine learning and algorithms to buy and sell ad inventory on a massive scale, impression by impression, in an instant.
Think of it like the stock market. In the old days, when trading, brokers would have to shout out each transaction, shuffle papers, make notes, and check if everything was right. Nowadays, a few clicks can do the same job as a dozen brokers could in a few seconds.
How It All Works
It all sounds way more complicated than it is. There are a few acronyms and definitions you need to learn, but other than that its simple. So lets get started!
- Advertisers
These are the brands and marketers (like you) who want to buy ad space to reach their target audience.
- Publishers
These are the website and platform owners, as well as app developers, who have ad space (inventory) to sell.
- Demand–Side Platform (DSP)
This is the primary tool advertisers use. Its a software platform that allows advertisers to manage their ad campaigns and buy ad inventory from various sources though one interface. Inside the DSP you set your targeting parameters, ideal audience, and let it do its work. Google Display and Video 360, Amazon Ads, Adobe Advertising Cloud, and others are all examples of this.
- Supply-Side Platform (SSP)
This is the tool that publishers use. Its a software solution that allows publishers to automatically manage and sell their ad invenotiry to the highest bidder. Maximizing their revenue.
- Ad Exchange
This is a digital marketplace that connects DSPs and SSPs. This is the auction house where the buying and selling actually occur.
- Real-Time Bidding
All of these systems work together in a process called Real-Time Bidding (RTB).
Here is how all of this works together in just a few milliseconds.
- You visit a website: A user clicks on a link to a popular news blog.
- Ad Request is sent: As the page loads, the publishers' SSP sends out an ad request to an ad exchange announcing that an impression is available. In this request, they also send info on the visitor, like general location, device, topic and niche, gender, age (or whatever data it has on the visitor)
- Auction begins: The ad exchange puts up the impression for sale.
- DSPs Analyze and Bid: Each DSP takes the info on the user, compares it to what their ideal person is and bids depending on that. Let’s say the user is interacting with a niche that is within the niche that the advertiser wants to push an ad to. The DSP will then submit a bid and if its the highest one, it will get shown.
- Winner is chosen: The ad exchange gives the win to the highest bidder.
- Ad is Served: The ad shows up on the user's screen
Types of Programmatic Deals
While Real-time bidding is the most common method, it's not the only way programmatic deals are done!
- Open Auction (RTB)
This is the public marketplace where deals are done. It offers the greatest scale but less control over where your ads appear. It's the most common one.
- Private Marketpalce (PMP)
This is an invite only auction. Its mostly for premium publishers that might create a PMP and invite a group of selected high-quality advertisers to bid on their inventory. Usually the inventory is much better, but the audience is limited.
- Preferred Deals
This is a direct deal where advertisers get a look at the inventory beforehand, and then they negotiate on a fixed price. If the advertiser declines, then the impression goes to the private or open auction instead.
- Programmatic Guaranteed
This is a version of the traditional direct buy. The advertiser agrees to buy a guaranteed number of impressions at a fixed price directly from the publisher.
Why It Matters to You
Knowing these things can be useful. You can reach billions of users across millions of websites and apps from a single platform.
It allows you to be precise with your targeting, find the right audience at a great price. With the right platform, you can target things like age, interest, geographic location, behavior, interests, and other things to pinpoint your ideal customer.
You also get real-time feedback on the performance of your campaigns. This can help you optimize and improve your targeting so you get better results and maximize your ROI.
The Challenges
- Ad Fraud
Because the system is so big and ocmpletely automated, its a prime target for bots and people that want to abuse the system in one way or the other. Some bots generate fake ad impressions, siphoning away your ad spend for no benefit. This is why working with reputable DSPs that have fraud detection is important.
- Brand Safety
One thing that can happen is that your ads appear on sites and places that you don’t want your brand associated with. This can be extremist content, hate speech, sexually explicit pages, or other inappropriate materials. Usually, there are options to limit this and avoid it, but it can always happen if you are not careful enough.
- Cost
The system is complex and there is always a middle man between the parties involved. This menas that a significant part of your ad spend will be going into various fees before it even reaches the publisher (sometimes over 50%). This is often called the “ad tech tax”.
- Post Cookie World
Various tech companies, the EU, and other legislators have decided that cookies are going to be phased out one way or another. This means that the reliable cookies are being replaced with less accurate ways of tracking that have less info on the visitors and are less useful to advertisers. This will likely increase prices and make ads less effective until there is a great replacement for them.
Conclusion
Programatic advertising is no longer a niche speciality. Its the fundamental way the digital ad world works. It is fast, efficient, precise, and works at a massive scale that could not be achieved otherwise.
For performance marketers, this means that they have a powerful toolkit for reaching the right user at the right moment. Even though some laws and legislations are working on making it a bit more difficult.
However, this is not a “set it and forget it” solution. Having success is about a strategic approach, managin risks like ad fraud and brand safety, and analyzing the data you get so you can make better decision when targeting audiences.
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