Programmatic Advertising

To understand programmatic advertising, you first need to go back in history and understand what used to happen before programmatic advertising.

Now, in any digital marketing transaction where you see an ad on any online digital asset, whether it’s a website or an app, there are usually at least two parties involved.

One is an advertiser and one is a publisher.

Advertiser: An advertiser is a company who wants to promote their products and services and want to show their Ads. (Examples it can be Nike or ABC furniture).

Now, these companies primarily want to promote their products and reach out to people and show them their ads. So, they need ad spaces so they buy ad spaces.

Publishers: Publishers on the other hand are the companies who have websites and Apps and they can sell Ad Spaces on their websites where they can accommodate Ads from these Advertisers. (Examples can be like BBC.com). They have a website or an app, which can show ads and how ad slots are available on their digital properties.

Now these Publishers sell Ad slots.

Ad Slots: An Ad slot is a place holder where an ad can be shown, and this Ad slot is called an Inventory. Because that is where the Advertisers by and Publishers sell.

Now, before programmatic advertising, what used to happen is if an advertiser is willing to show an ad on a particular website, they used to do with the human interference, a person from this advertiser would walk or have a contact with one of the publishers. He’s willing to show an ad and they will negotiate on a price and have a contract or an insertion order. That’s how advertisers would buy inventory on publisher’s websites.

                         Advertisers                                                            Publishers

But with the rise of websites, there’s millions of websites which start every day. It became difficult for the advertisers to keep up, to keep track of all the websites they might be interested in showing ads on.

Now, with the rise in this problem where the advertisers were not able to keep track of all the publishers, where they would have ended, it was very difficult for them to have a contract with all the publishers separately.

Now this gave rise to Ad Networks Now what this Ad Networks did they club together and talk to each of the publishers separately whether small of big and club this together, the inventory where they have contacts with the publishers and they can show ads on their websites and pay them for this. This process is called MONITIZATION.

Now what this Advertisers did is that they started contacting directly with the Ad Networks, where they will get access to lot of websites. All together with just one contacts with ad network.

Now the most used Ad network is Google Display Network.

So all the websites who have partnered with Google ads, an ad network is called Google Display Network.

So in this scenario, advertisers like Apple will go to Google Display Network and have a campaign where they can have access to a lot of publishers, where they can show ads.

Now, this solution of ad networks somehow reduced the work for advertisers as well as it served  for smaller publishers who were not in a position to negotiate directly with an advertiser because they had less traffic so that they could show less number of impressions.

And advertisers will not go to each of the publisher, small publishers, to monetize their inventory.

So, these problems were solved by the ad networks.

But with the rise of ad networks, there were a lot of ad networks again, so it again became difficult for advertisers to keep track of all the ad networks together.

So with this problem there was a rise of Ad Exchanges. So what this Ad Exchanges did was similar to what Ad networks did publishers.

This lead to all the Ad Networks together added to Ad Exchanges  as well as some big publishers that inventory in ad exchanges where an advertiser can come and they can run a campaign and have access to all these ad networks and publishers.

Now, with the new emerging ecosystem, the system started to look like something like this.

There was an advertiser, there were publishers who directly wanted to sell their inventory, our ad slots to advertisers or some of them through ad networks.

Now, with the rise of ad exchanges, there was because ad exchange is a high tech, data driven platform.

It’s a software which was to be plugged in by advertisers as well as publishers. But they couldn’t directly connect with these ad exchanges. So they needed an intermediate product to be connected to these where on advertiser site, these ad exchanges provided some software called DSP (Demand Side Platforms).

which is again a software which helps advertisers to create a campaign ad buy inventory from ad exchanges. Now this is called Demand Side Platforms, as there is a demand for Inventory and there is a demand for Ads slots, these guys buy add slots from the Advertisers side.

Now from the Publishers side there is platform called Supply Side Platform (SSP) because they have a supply of ad inventory.

In this ecosystem Advertisers would connect with DSP’s and from the publisher’s side Ad networks and publishers would directly connect to SSP’s and they in turn connect with Ad exchanges.

Now the thing here is all the ad buying and selling would happen is ad exchanges like a marketplace, so if you know trading its similar to the trading platform where people will buy and sell stocks.

(Example: One of the biggest example of Ad exchange would be AdX, it’s a Google Product and it’s a shortform for Google Ad Exchange)

Now if you look at the above picture an Advertisers who is running a campaign will use a Software to book their campaigns and buy ad slots. From the Publishers side they connect to SSP’s which is again a Software or a program where they sell these.

So all the ad buying and selling process is done through Software, this advertisers does not need to have a contact with the publisher. So all the transactions of add buying and selling is controlled by the Central Ad Exchange.

That is why this more of the evolution of the ad buying and selling process, which is done completely by software, is called programmatic advertising now.

By now, you should be able to understand programmatic advertising is an ad buying mode.

It’s a mode how advertisers buy, and publishers sell inventory and it’s done through programs. That’s why its called Programmatic Advertising.

Modes how advertisers and publishers transact this ad inventory.

1.  ONE to ONE (Programmatic Guaranteed advertising (PGA)

(Example: Nike wants to show ads on BBC.com), in this case advertisers will run a campaign and they will set up a campaign in DSP and ask using software ask for a proposal from BBC that we need to show 1000 ads on your website for a particular period of time. Now BBC will get a notification from the publishers side and they will start buying and selling ads.

Now in this case you have to remember that one advertiser is running ads or campaigns on ONE publisher.

2. Private Market Place (PMP)

Lets say BBC has their home page but they do not want to show ads for smaller advertisers on their home page. So lets say they have a policy only these top five advertisers like Apple, Samsung, Oracle, HP, Dell can advertise on their home page.

So in that case, either the advertiser, Apple, Samsung or these companies will approach the publisher, which is BBC dot com, and ask them, can we advertise on your homepage or BBC dot com can create a proposal and send it to these top 5 advertisers.

3. Real Time Bidding/Open Auction (one to all)

Here the publisher can sell the inventory to any one, say like they have an inventory because the publisher has different ad units on his website. They can choose and create a package of certain ad units and say anyone can buy this inventory using programmatic advertising.

Lets say I go to BBC and there is a Ad slot, here the BBC will send a request to Ad exchange that there is a user on my website and does any of the advertisers connected to this ad exchange want to by this slot.

Now all the advertisers who are willing to buy will bid and who ever pays the highest will buy the impression and all this happens in real time. (that’s why its called real time bidding)

So programmatic advertising is data driven buying and selling of ad slots using real time bidding.

Now we know that how programmatic ecosystem looks like there is an ad exchange where the buying and selling of ad slots takes place, which is connected. Publishers are connected to ad exchange using software called SSPs or supply side platforms, and advertisers are connected to ad exchange using DSP is now an advertiser.

So, in this kind of scenario it’s important to understand for advertisers that among this all inventory, what is important for us, Nike will not go and show that ads on all the websites connected to ad exchanges.

So, in this kind of scenario, there was a rise of products which have audience data.

When I say audience data, they track audience behaviour across multiple websites and apps and flagged them as, let’s say this person has been researching about car.

So these products where all the audience data is stored is called DMP (Data Management Platform)

(Oracle Blue Kai)

So in our case, let’s say Nike is advertising, they will only probably ask Oracle to give them data about audiences who have been looking for shoes in the last 30 days or seven days.

Now when the DMP’s provide data to Nike about all the people who are looking for shoes, now Nike in their DSP’s run a campaign in such a way that only their campaign should be visible in any of their websites. When one of these users who is looking for shows is available on the website and that how DMP’s help advertisers and it can be used on the publishers’ side as well.

So this is an ideal programmatic ecosystem and it shows you how different parties are involved in a programmatic advertising ecosystem.