Programmatic advertising is a way to buy and optimize digital campaigns automatically.
"Programmatic" can often be used as a catch-all term for online display and video advertising outside of the Google Display Network (GDN), YouTube, and social media platforms. Programmatic is differentiated by open, real-time exchanges between advertisers and publishers, as opposed to a closed ad network with predetermined bids.
The overall benefits of programmatic advertising for clients are similar to the GDN; programmatic ads are great for reaching users across the internet, increasing brand awareness, and leveraging remarketing lists to move users down the sales funnel or recapture previous customers.
Through the variety of platforms encompassed within programmatic advertising, we are able to reach more websites than the GDN covers, and we can use a wide variety of extremely granular third-party audience lists.
Key terms in programmatic advertising
There's a lot of jargon in the programmatic industry. This section covers the most important terms to understand the programmatic landscape.
DSP (Demand-side platform)
A DSP is software that enables ad buyers to identify available advertising inventory and purchase ad space through automation. DSPs can target the most valuable advertising real estate based on the user viewing the ad, the website placement, and other factors (such as geography and time of day), with much of this information coming from third-party data providers.
DSPs are also used for reporting on programmatic ad performance.
SSP (Supply-side platform)
An SSP is software that enables publishers to sell their digital advertising inventory. SSPs allow publishers to set floor prices and bundle inventory for private marketplaces
SSPs interact with ad exchanges to reach DSPs interested in their inventory.
An ad exchange is the computerized marketplace for the buying and selling of ad space, connecting DSPs and SSPs.
Ad networks bundle inventory from different publishers and sell them to advertisers. The GDN (Google Display Network) is an ad network, as it directly connects advertisers to publishers, rather than going through an open exchange.
Ad servers are platforms that distribute ads to end-devices (e.g., computers, phones, connected TVs, etc.) and capture performance metrics (e.g., clicks).
Agency trading desk
An agency trading desk is a trading system developed by large agency holding companies for more efficient programmatic purchases. Agency trading desks access several DSPs and data management platforms (DMPs) to reach a larger inventory and improve data streams.
RTB (Real-time bidding)
RTB is the main method that DSPs use to purchase ad space. Advertisers bid on ad inventory. The highest bidder wins the auction, and their ad is served.
RTB takes real-time factors into account when bidding on inventory, so advertisers are easily able to alter bids based on who is viewing the ad, when and where the ad is served, the size or format of the ad, and other bidding factors.
Bid requests are sent out by SSPs, signaling to DSPs that they have an impression for sale along with details about that impression.
Bid responses come from DSPs to respond to a bid request signal sent by an SSP. This response occurs in real time.
Programmatic direct is the automation of ad buys directly between publishers and advertisers for fixed budget campaigns. Programmatic Direct inventory is sold and guaranteed; it does not use real-time bidding.
CPM (Cost per mille)
CPM is the cost of 1,000 impressions. This is how programmatic ad prices are reported. Note the difference between CPM and CPC—in programmatic, you are paying for impressions, not clicks.
Viewability is the metric used to track ad impressions that were actually seen by a person.
Reach is the number of unique people exposed to your advertising.
Frequency is the number of times each individual has seen your advertisement. In most programmatic advertising, frequency can be limited to avoid overwhelming users. "Frequency capping" limits how many times a person can be showed an ad in a specific period of time.
DMP (Data management platform)
A data management platform is software that collects, stores, and sorts data. Buyers and sellers use this data to inform their transactions. DMPs are used to store first-party advertiser data, such as website visitors and customer lists. DMPs also integrate with third-party data providers to create lookalike audiences from first-party data.
Cookies are tracking codes placed on websites to pass user information to advertisers and third-party data providers. These cookies are then "mapped" to each other to gather more information about the user and their history across the Internet, creating a digital identity for the user.
This information is then used when bidding on ad impressions.
CTV or Connected TV
Connected TV refers to any TV screen that can be connected to the Internet and stream digital video. Examples include Smart TVs, Roku, Apple TV, etc. Programmatic ads allow companies to advertise on these televisions, bridging the gap between traditional advertising and digital advertising.