With all the rapid changes happening in the digital advertising space, especially around the exploding growth of computer-driven programmatic advertising.“Programmatic” ad buying typically refers to the use of software to purchase digital advertising, as opposed to the traditional process that involves RFPs, human negotiations and manual insertion orders. It’s using machines to buy ads, basically.
What is Programmatic Advertising?
Programmatic advertising is exactly what it sounds like. It is automated buying and selling of digital advertising through centralized computer-driven ad exchanges and related databases and management platforms. It is designed to largely replace the old-school human powered aspects to buying and selling advertising through agencies and ad networks, with the goal of driving more efficiency and transparency to both advertisers and publishers. The advertisements can run the full gamut, including digital display, video, mobile, social or other ad creatives and placements. According to Business Insider, in the last several years, programmatic advertising has quickly grown to a $15BN industry today. This represents over 53% of all digital advertising in 2015, and is forecasted to grow to 65% by 2020. So, you better learn this stuff, as it is taking over, and fast!
Who are the Key Players in the Programmatic Ecosystem?
At the center of the ecosystem are the ad exchanges (like DoubleClick, App Nexus, Rubicon, PubMatic, OpenX, Mopub, Smaato and AdTech). These are platforms where advertisers can set up ad campaigns to buy impressions and publishers can offer up inventory to be sold. This computer-driven system replaces the need for human driven ad networks or sales teams.
Wrapping around the ad exchanges are three key players: (i) the data management platforms, or DMPs (like Adobe, X Plus One, Blue Kai, Aggregate Knowledge Knotice, Core Audience and nPario), who collect and store all the internet user data in one central database; (ii) the Demand Side Platforms, or DSPs (like DoubleClick, MediaMath, DataXu, Rocketfuel, App Nexus and Marin Software), who enable marketers to bid on and buy ads from ad exchanges, including all campaign analytics; and (iii) the Supply Side Platforms, or SSPs (like OpenX, PubMatic, Rubicon Project, App Nexus, and Right Media), who enable publishers to offer inventry for sale through the ad exchanges, including all revenue analytics. In addition, the huge sites like Google, Yahoo, AOL, Microsoft and Facebook have set up their own programmatic ecosystems, as well.
Why Does Programmatic Matter?
Efficiency. Before programmatic ad buying, digital ads were bought and sold by human ad buyers and salespeople, who can be expensive and unreliable. Programmatic advertising technology promises to make the ad buying system more efficient, and therefore cheaper, by removing humans from the process wherever possible. Humans get sick, need to sleep and come to work hungover. Machines do not.
So robots are replacing people?
Yes and no. Technology is being used to replace some of the more menial tasks that humans have historically had to handle, like sending insertion orders to publishers and dealing with ad tags, but they’re still required to optimize campaigns and to plan strategies. Programmatic technology will probably mean there are fewer ad buyers in the world, but it could also allow both marketers and sellers to spend more of their time planning sophisticated, customized campaigns instead of getting bogged down in bureaucracy.
Is programmatic buying is the same as real-time bidding, then?
No, it’s not. Real-time bidding is a type of programmatic ad buying, but it isn’t the only one. RTB refers to the purchase of ads through real-time auctions, but programmatic software also allows advertisers to buy guaranteed ad impressions in advance from specific publisher sites. This method of buying is often referred to as “programmatic direct.”
Is programmatic “the future of ad buying”?
Probably, yes. It’s impossible to tell what portion of advertising is now traded programatically, but it’s definitely on the rise. Some agencies now say they’re eager to buy as much media as possible through programmatic channels, and some major brands have even built out in-house teams to handle their programmatic ad buying as they spend more of their marketing budgets that way. At the moment, it’s mainly online ads that are traded programatically, but increasingly media companies and agencies are exploring ways to sell “traditional” media this way, including TV spots and out-of-home ads.