What is Programmatic Ad Buying and How Does It Work?

Anyone who is in the business, or looking to get into the business of online advertising , must know the answer to the question "what i...

Anyone who is in the business, or looking to get into the business of online advertising, must know the answer to the question "what is programmatic buying?" The buying part is pretty obvious. Programmatic refers to computer programs or algorithms that automatically do things. In the context of online advertising, programmatic buying means that you are purchasing ads using software, application, or platform that automates the ad buying process.

What is Programmatic Ad Buying

How Does Programmatic Ad Buying Work?

So what do you think, what is programmatic buying and its main advantages? The key thing about programmatic advertising buying is that it is computer-driven automation of the buying process. In the past, advertising was a very manual process. Advertisers would create ads and then negotiate with the media (TV, radio, etc.) to place their ads, so people would see them. In today’s digital world, advertising is different. There is still some manual effort involved, but much of the work is done by computer algorithms and systems.

An advertiser uses a digital media platform (DMP) to manage the information that defines the target audience they need to send their ads to. The DMP has many other functions, but for the purposes of ad buying, it is used to provide information to the DSP or Demand-Side Platform, which is where the actual purchasing of the advertising will take place.

Digital advertising is mostly sold at auctions, and the majority of the auctions are open auctions, where anyone can bid on the items. There are other types of auctions, which we will mention later. The ad auctions are managed by Ad Exchanges. The advertising placements are called inventory. This inventory has specific characteristics like domain, app, category, viewer group, and many other data points defining the individual ad audience or viewers. 

All of this information is provided to the Ad Exchanges from the Supply-Side Platform (SSP) and is used to generate the auctions. The SSP is the system/platform that gathers all the ad impression information from the content publishers and communicates it to the Ad Exchanges.

Once an auction is placed, the DSP will bid on auctions that are relevant to what the buyers want. As with any auction, the highest bidder wins. At the completion of an auction, the ad information is transmitted back to the content publisher, the ad content is put into position (ad-position), and finally presented to the viewer and the impression is recorded.

What are the Benefits of Programmatic Ad Buying?

The biggest benefit of having this process controlled by computers (programmatic) is speed. The entire process described above happens in milliseconds. For all intents and purposes, this process is real-time. The audience (ad viewers) does not even realize that this process is taking place.

With the dominance of CTV and on-demand content, programmatic ad buying is a must. Being able to instantly assess the data points that define a viewer is just not possible with manual processes. Another major benefit is the utilization of addressable advertising. While this is not directly related to programmatic buying and is a different topic, it is heavily leveraged. The huge amount of data that is available about audiences and even down to specific viewers has been a boon to advertisers.

The usage of programmatic buying allows the advertiser to focus more of their efforts on data analysis. The aforementioned extremely large amount of data (aka Big Data) requires a lot of work to assess. The benefit of analyzing all this data is that advertisers can very precisely define their target audiences and provide detailed information about them to the DSP. This, in turn, allows them to have excellent control over the ad placement process and management of their ad campaigns. 

What Advertisers Do if Everything is Automated?

Even with the programmatic ad buying process, advertisers still have a lot of work to do. We’ve already talked about how they have a lot of data to analyze to ensure that their ads are targeted to the proper audiences. Most advertising is sold via auctions, but there are still other methods of procuring advertising. There are private auctions, which work similarly to the open auctions, but are limited to bidders that have been specifically invited. Private auctions are usually managed directly by the content publishers. There are also preferred and guaranteed deals, where the publishers and advertisers negotiate directly on pricing for ad impressions. All of these types of deals require much more manual effort on the part of the advertisers but still can be managed programmatically.

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TechGlobeX: What is Programmatic Ad Buying and How Does It Work?
What is Programmatic Ad Buying and How Does It Work?
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