What is Programmatic Advertising?
An AdTeach Programmatic Essentials Series

Written by Ben Morrisroe

21 Feb, 2020


Both publishers and advertisers may find themselves struggling with the management of ad space. Manually negotiating the sale and purchase of ads is a time-consuming process, but programmatic advertising offers a smarter, faster alternative. Programmatic advertising automates the process of buying and selling digital marketing space, and it's a popular solution to save time for everyone. In the US, more than two-thirds of digital display advertising spending is programmatic. It's expected that 80% of the advertising process will be automatic by 2022, according to Adobe Think Tank.

At Publift, we are passionate about programmatic advertising. We show both publishers and advertisers how easy it can be to take advantage of programmatic advertising. The automated technology is combined with marketing expertise to deliver the best results.

What Is Programmatic Advertising?

Programmatic advertising is the process of automatically buying and selling digital advertising space. Previous to the availability of programmatic advertising, ordering, setting up, and reporting on ads all had to be carried out manually.

The process is streamlined through programmatic advertising, making it more effective and efficient. Any formats and channels can be accessed programmatically, thanks to programmatic platforms that have built up their ad inventory and database. For a quick overview of all that jargon, check out our ultimate programmatic advertising glossary for publishers.

Programmatic advertising vs digital advertising

Programmatic advertising might make use of automation, but it also requires precise targeting to be successful. Instead of taking the approach of much of digital advertising, which is to have a wide reach and hope that the correct audience can be found, programmatic advertising uses targeting tactics to segment the audience with real data. Programmatic advertising combines the best elements of tech advancements and human knowledge and expertise to make it easier to buy, place, and optimise ads.

Publift's case studies show you some excellent examples of programmatic advertising, plus you can see our broad range of clients too. Take a look at how clients such as Envato and OzBargain have benefited from using programmatic advertising, allowing the publishers to control what appears on their site and optimise their revenue from ads.

Why Programmatic Advertising Is Important for Advertisers

Programmatic advertising is useful for advertisers, as well as offering a great advantage to publishers. Thanks to programmatic advertising, publishers can access advertisers much more easily, and start making money without the hassle.

Before programmatic advertising, it was difficult for advertisers to access ad inventory. This meant that 60% of publisher ad space went unsold. Automation helped to solve the problem by making it much easier to understand and buy ad inventory. The process is more streamlined, and more relevant ads are served through targeting. Access to a large pool of publishers means advertisers can get a better return on their investment, while publishers can maximise their revenue too.

For advertisers, the benefits of programmatic advertising include its ability to scale, its real-time flexibility, its targeting capabilities, and its efficiency. Programmatic advertising allows advertisers to reach a large audience by purchasing ad space from any ad inventory available, rather than being limited as they might have been before. The flexibility of programmatic means advertisers can make real-time adjustments to ads based on their impressions, and they can take advantage of a broad range of targeting criteria. With superior targeting, an advertiser's budget can be put to better use and spent more efficiently.

Why Programmatic Advertising is Important for Publishers

For publishers, programmatic advertising makes it so much simpler to sell advertising space. Publishers are able to optimise their ad sales with automation tools that reduce the time investment required to find advertisers. Using programmatic advertising, publishers can communicate and collaborate with advertisers with ease, ensuring both the publisher and the advertiser benefit.

When visitors come to a publisher's site, they will be served with ads that are relevant to them because they are part of the target audience of the advertiser. Programmatic advertising gives you demand to access to a range of publishers, removing the need for back-and-forth phone calls, emails, or other slow forms of negotiation. It can lower costs and raise margins for publishers, helping them to earn more from their available ad space.

With the right tools, programmatic advertising protects publishers, can keep their readers in mind and host ads that are relevant to them. They can also access deals that bring them higher revenues and maximise revenue through different types of bidding, such as header bidding and exchange bidding.

We can expect programmatic advertising to continue to grow, which makes it important to keep up with. In November 2019, Zenith reported that 55% of all digital media was traded programmatically during the year. They predict that 69% of digital media will be programmatic in 2020. In the US, programmatic advertising accounts for 75% of advertising spend, while worldwide spending rose from 57.5 billion US dollars in 2017 to 84.9 billion in 2019.

How Programmatic Advertising Works

Understanding programmatic advertising is the first step to benefiting from it. Once you understand the basics, you can make use of everything that it has to offer. Programmatic advertising helps to connect publishers - those who have websites with ad space (ad inventory) to sell - and advertisers - those who want to buy that ad space to promote their brand.

When an advertiser wants to launch a digital campaign to promote their product or service, they contact their programmatic ad agency or trading desk. The agency uses a demand-side platform (DSP) to automate the process of buying ad impressions to meet the goal of the campaign.

A DSP allows advertisers and their agencies to purchase ad inventory from multiple publishers. The DSP ensures the ads are aimed at the right audience through the use of a data management platform (DMP), which manages audience data. This data is used to target the right audience, taking a variety of factors into account, such as location, demographics, user behaviour, and online activity.

When a person who falls within the target audience of the advertiser lands on a publisher's website, the website will send an ad request to the supply-side platform (SSP). An SSP is used by a publisher to sell ads, with the aim of maximising the value the publisher receives from an impression. The SSP runs an auction among its buyers, and the DSP is connected in. 

The DSP uses the data that it receives to evaluate the ad and match it with their data and target parameters. This is used to decide a bidding price for the first impression. Held within the SSP or ad exchange in real-time, the process is often referred to as Real-time Bidding. Although this sounds like a long process, it takes just 100 milliseconds to complete the bidding. After the impression has been sold, it is sent to the publisher's website to be displayed. The process repeats whenever a user lands on the website or refreshes.

Real-time bidding is just one method of bidding for ad inventory in programmatic advertising. There is also programmatic direct and non-guaranteed PMP to be aware of and consider.

Programmatic direct is, as the name implies, a more direct method of automatic bidding. It involves the advertiser or advertising agency negotiating directly with the publisher. There is no bidding involved in this type of programmatic advertising, and it helps to prevent fraudulent ad spaces.

Non-guaranteed PMP is an invite-only model. It works in the same way as real-time bidding, but publishers have more control over who they want to advertise on their website. Publishers get to decide which advertisers they invite to advertise on their websites.

Publift makes programmatic advertising easy for publishers with the Fuse platform and related tools. Whether you have a single site or a major publishing network, we can help to lift your revenue using programmatic advertising. With an average 55% growth in net revenue in six months of using Fuse, we help our clients to get results. Fuse is an all-in-one solution that can help publishers to do it all, and you also benefit from our knowledge and expertise. Publishers get the benefit of established partnerships and networks to maximise results, while also offering flexibility and keeping control of what appears on your site.

Programmatic Platforms and Auctions

Programmatic platforms are platforms like Publift that help with programmatic advertising. There are various platforms available for publishers to find the right services and get access to the right advertisers that match their needs. Programmatic advertising platforms form part of the complete system that is required for the programmatic advertising process. Each part of the system works together to serve both publishers and advertisers and ensure they both benefit. Some of the types of platforms are named above, including Demand Side Platform (DSP) and Supply Side Platform (SSP), Data Management Platform (DMP), and Ad Exchange.

Let's take a look at each type of programmatic platform to get a better idea of what each one does, and who it's for.

Supply Side Platform (SSP)

An SSP holds the publisher's inventory. The publisher submits a webpage as a source for an advertisement, and after all is agreed on the Ad Exchange, they will put a pixel code on their page to track visitor behaviour. The code delivers anonymous data about visitors and the actions that they take. The SSP is programmed to maximise the value that publishers receive from an impression of an ad (an impression being an instance of the ad being shown to someone).

An SSP allows publishers to filter ads by the advertiser and other criteria, as well as set different rates for ad spaces to define the cost.

Demand Side Platform (DSP)

A DSP is a type of programmatic platform for the advertiser side of the process. Advertisers make their bids to a DSP, and the platform makes the decisions for them. A DSP stores user-profiles and third party data and combines with information with bids from advertisers. The DSP makes the decision about which ad to serve where when visitors land on webpages. It must consider the bid made, with the highest bidder winning, the content of the ad, and the cost to the advertiser.

The pixel that publishers include on their website provides data so that audience segments can be created, sending the information to the DSP. The DSP has advertisers ready to make their bids automatically so that the best ad can be shown to the correct audience. Advertisers benefit from accurate placement of the ad, while publishers benefit from the highest bidder winning.

When the DSP and Ad Exchange have made a decision about which ad to match to which webpage, this is communicated to the SSP.

Data Management Platform (DMP)

Having the right data is vital in programmatic marketing. A DMP is an independent platform that collects. Manages, analyses, and activates data. The platform provides comprehensive user profiles to advertisers so that the data can be used in a programmatic algorithm to match the most visitor most likely to convert to the best ad. 

Ad Exchange

The ad exchange is where the DSP and SSP come together for ads to be bought and sold. Some ad exchange systems combine DSP, SSP, and DMP in one so that everything is provided for both publishers and advertisers. However, it is worth noting that some combination platforms might not offer the functionality that singular platforms offer. They may offer a range of basic functions but won't necessarily allow advanced settings and control.

Auction and Buy/Sell Types

  • Header Bidding - a technique where publishers offer inventory to multiple ad exchanges simultaneously before going to ad servers. Using this technique, publishers can increase their income by increasing the competition.
  • Exchange Bidding - a server-side process involving a unified auction where exchange networks and SSP's bid on ad inventory. This is often regarded as Google's answer to header bidding.
  • First Price Auction - advertisers bid for an impression with the highest big winning and paying the publisher. The highest bidder determines the price of the impression.
  • Second Price Auction - the runner-up sets the price of an impression in a second price auction. The bidder with the highest bid still wins, but only pays a cent more than the runner-up advertiser bids.
  • Open Auction - Ad Exchange matches buyers and sellers on this public marketplace, seeking the highest bid
  • Private Marketplace - private marketplace (PMP) deals allow publishers to limit their ad inventory to a select pool of advertisers. They have the chance to bid in a small auction before the inventory is released to the open auction. A negotiated minimum price is set, but buyers can bid on as many impressions as they want.
  • Real-Time Bidding (RTB) - real-time auctions that take just milliseconds to complete, often carried out by supply side platforms or ad exchanges.
  • Programmatic Guaranteed/Direct - the direct sale of reserved ad inventory where automation replaces the manual insertion order process. The publisher can regulate the price of inventory, and buyers can directly buy premium inventory in a transparent process.
  • Preferred Deal - bypasses auctions to provide advertisers exclusive access to inventory.

The different types of auction available for programmatic advertising offer various advantages to publishers. In addition to auction methods, direct methods of sale and purchase are also available, which can allow for even more control over the process.

Programmatic Advertising Trends

What's next for programmatic advertising?

Just like anything else, programmatic advertising is evolving and changing. Different trends emerge as the field develops, so it's definitely worth paying attention to what's happening with programmatic. Technologies such as machine learning and artificial intelligence are having an impact on everything, and programmatic marketing is no different. As well as technology, trends in programmatic advertising are influenced by best practices, changing attitudes, and trends in other areas.

Artificial Intelligence (AI)

Artificial intelligence and machine learning can be used to collect and analyse large amounts of data. These technologies can be used to find patterns and predict results, as well as suggest the next best action based on available data. AI improves speed and scalability in marketing, all while providing valuable insights. Artificial intelligence can be used to analyse customer behaviour in real-time along multiple data points. As AI continues to develop, it will be able to combine the mapping of ad viewing metrics with user data so that ads can be placed more accurately. More effective ad placements result in lower costs.

The Evolution of Personalisation

Personalisation is a theme that has emerged in marketing, and it's no different in programmatic advertising. Customisation makes it possible for advertisers to offer highly relevant and personalised ads to their targeted groups, which is also beneficial for publishers.

Using the huge amounts of data that are now available, it's possible to create dynamic ad experiences with ads that change to suit the behaviour, demographics, and preferences of the user. Programmatic adtech can be used to optimise ads and to measure it in real-time, as well as make improvements. It can be combined with the power of artificial intelligence, which provides the necessary data and insights to deliver more precise messaging to the right users. One example is the campaign that Mindshare ran for AirAsia, using programmatic tech to serve thousands of ads based on users' last searched for destination.

Dynamic creative optimisation is one option for customising advertising. It allows the combination of data and creativity, using live analytics, real-time testing, and creative optimisation to serve hyper-relevant ads to users. This benefits advertisers and publishers, ensuring publishers can show their site's users only the most relevant ads. DCO understands who the viewer is and chooses the best creative combination to deliver the right message for each user.

Preventing Ad Fraud

Digital ad fraud is a problem that the marketing industry is battling against. Estimates for the amount of money lost to ad fraud range from US$6.5 billion to US$19 billion, according to eMarketer. There are several solutions being used in programmatic advertising to help prevent fraud, including blockchain and an initiative called ads.txt. Blockchain helps to solve the problem by cutting out middlemen, as well as removing domain spoofing, and verifying publishers to ensure they are legitimate.

Preventing the unauthorised reselling of ad inventory is also an option to avoid ad fraud. This can be carried out using ads.txt, an initiative launched by the Interactive Advertising Bureau Tech Lab. The text file, which is placed on a publisher's site, lists all of the vendors authorised to sell their inventory.

Publift also helps publishers to get rid of dodgy ads with an industry-first Google Chrome extension. Adwizard gives publishers the ability to manage the ads that appear on their site and protect their brand. Important ad information can be seen in real-time, and programmatic ad units can be blocked with just one click when Adwizard is used together with the Fuze platform.

The Influence of Privacy Awareness

People are becoming increasingly aware of issues surrounding privacy online. There have also been various changes in the law around the world, which influence both advertisers and publishers. These changes are affecting programmatic advertising and the marketing industry in general.

Some examples of major legislation changes include the EU's GDPR (General Data Protection Regulation and the California Consumer Privacy Act. Advertisers and publishers need to consider issues such as the use of tracking cookies and ensure that they are following any regulations that apply to them. The primary consideration in many situations is the need to gain consent for the collection, storage, and use of data from users.

Don't miss out on the benefits that programmatic advertising can bring you as a publisher. When you understand how it works and what it can do for you, you can start lifting your revenue by gaining control over what happens to your ad inventory. Publift makes it easy to fill as much of your available ad inventory as possible, with the flexibility to maximise your return on your content. Fuse is an award-winning platform that quickly grew to be a favourite among Australian publishers. Our network is expanding in the USA and around the world to provide a more global reach too.

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