Programmatic advertising has become essential in today’s advertising. It appeared as a way for advertisers to automate the ad buying process and optimize campaign performance. In a few words, programmatic ads easily and efficiently connect advertisers and publishers. Let’s shed some light on the inner processes of the complex system behind programmatic advertising. We’ll discuss its main elements, tools and how they work.
What are programmatic ads?
Programmatic advertising is an automated process of media buying and selling through multiple ad networks in real time. Programmatic advertising platforms use algorithms to analyze large amounts of user data, connect advertisers with publishers and help them buy or sell ad slots efficiently. Thanks to programmatic platforms, advertisers can run their campaigns globally across multiple channels and devices using many ad formats, with precise targeting and real-time optimization.
To understand how programmatic works, it’s important to get to know the key elements of the programmatic advertising process.
What DSPs, SSPs and DMPs are
Key participants of the programmatic advertising process include advertisers – brands, agencies or individuals – who look for ad slots and publishers – owners of websites or apps – who provide ad slots. They interact via programmatic platforms: Demand-Side Platforms (DSPs) for advertisers and Supply-Side Platforms (SSPs) for publishers.
Demand-side platforms, or DSPs, are platforms used by the buying side – advertisers – to purchase ad slots from multiple sources, launch, manage and optimize programmatic ad campaigns. Supply-side platforms, or SSPs, are platforms that publishers use to manage their ad slots and maximize revenue by offering their available slots to advertisers. DSPs help lower costs, improve efficiency and centralize ad performance data. SSPs automate ad selling. Thanks to SSPs, publishers can connect to ad exchanges and auction their available ad slots.
Between DSPs and SSPs sit Data Management Platforms (DMPs). DMPs collect and analyze user data to segment audiences for better targeting. A DMP helps you make more informed decisions and better optimize advertising campaigns.
What ad exchanges are
An ad exchange is a digital marketplace where advertisers and publishers meet to buy and sell ad slots in real time. In the programmatic advertising system, ad exchanges sit between DSPs and SSPs. That’s where real-time auctions take place.
Ways to launch programmatic ad campaigns
Programmatic advertising offers 4 ways to launch ad campaigns.
Real-Time Bidding
RTB, or open auction, is the most commonly used type of programmatic advertising. Due to its popularity it sometimes used as a synonym to programmatic in general. It works on an auction basis and is open to all advertisers and publishers. Demand determines the final cost of the ad slot – the highest bid gets the ad space.
Private Marketplace
A private marketplace (PMP or private auction) is a real-time auction with a limited audience of advertisers selected by a certain publisher. This type of auction allows publishers to offer premium ad slots to exclusive partners.
Programmatic Guaranteed
Programmatic Guaranteed doesn’t follow the bidding process. Advertisers negotiate the price for ad placements directly with publishers, like in traditional media buying. Once they agree on a fixed price, the advertiser has to buy the ad slot. This type is still programmatic because it reduces the amount of manual work.
Preferred Deals
Preferred deals also involve direct negotiations between advertisers and publishers. They also have to agree on a fixed price, yet advertisers don’t have to buy the ad slot they have agreed upon. If the advertiser denies, the publisher can sell it in auctions.
How programmatic ads are bought
To better understand how programmatic works, let’s take a look at the open auction process. Buying ad placements via real-time bidding has five main steps:
- A user visits a website.
- A DMP collects information about this user and sends it to an ad exchange.
- A publisher uses a SSP to send information on available ad spaces to an ad exchange or DSPs.
- A DSP bids on available ad slots in real time based on the advertiser’s requirements.
- The highest bid gets the ad slot.
Pricing of programmatic ads
The cost of programmatic impressions depends on many different factors, for example, targeting options, devices, time or the year, etc. Typically, programmatic deals are priced on a cost-per-mille basis (cost of an ad per 1,000 ad impressions) and on average cost around $0.50 to $2.
Why programmatic advertising is effective
Programmatic advertising saves time for publishers and advertisers due to automation of the media-buying process, but it’s not the only benefit of programmatic ads. First of all, it provides access to a lot of advertising networks at once and a broader selection of suitable offers. Also, programmatic advertising is a highly data-driven advertising method. Analyzed user data helps deliver highly targeted ads to relevant audience segments and increase revenue. What is more, real-time analytics of programmatic campaigns help advertisers craft ads and optimize them to reach better results. Thanks to these aspects, programmatic often delivers higher ROI than other advertising methods.
Wrap Up
Programmatic advertising is quickly gaining popularity as a convenient and effective way of advertising. Modern programmatic platforms provide user-friendly interfaces to make programmatic advertising available for everyone. We also do our best to help advertisers reveal the benefits of programmatic ads. If you need assistance with choosing and setting up accounts for programmatic campaigns, feel free to contact our team. We have a lot of experience with programmatic platforms and share our expertise through support and training.
