What Is Programmatic Advertising, and How Does It Work?

What Is Programmatic Advertising, and How Does It Work?

If you are a website publisher or online advertiser, you may wonder if programmatic advertising is your best solution.

To help, we have provided a detailed answer to the question, “What is programmatic advertising?” 

Programmatic advertising can increase a company’s revenue and return on investment (ROI) for marketing costs. Therefore, all digital advertisers and publishers should understand and consider using programmatic advertising. If programmatic media is new to you, this guide covers everything you need to know to get started.

  • What Is Programmatic Advertising?
  • How Does Programmatic Advertising Work?
  • Programmatic Advertising Platforms
  • Types Of Programmatic Advertising Auctioning
  • Benefits Of Programmatic Display Advertising
  • How To Do Programmatic Advertising

Programmatic advertising with Next Millennium helps you put the right ads in the right places.

What Is Programmatic Advertising?

Programmatic advertising is using technology to automate the buying, selling, and serving of online advertisements.

With programmatic advertising, advertisers and publishers use software, data, and algorithms to deliver ads to the right audiences at the optimal time and place. Because programmatic advertising is not always static, advertisers may buy digital ad space or a certain number of impressions (times a consumer will see an ad) instead of a specific ad space or network for a certain amount of time.

There are many processes involved in programmatic advertising. For example, programmatic ad buying refers to the programmed or automated buying of ads. In contrast, programmatic display marketing refers to the automated process of delivering display ads to websites and apps. Programmatic ads can also include rich media such as videos. Programmatic marketing uses data from the online behaviors and interests of people in the target audience to provide targeted ads. Most personalized banner ads you see online are programmatic display ads.

How Are Programmatic Ads Different From Other Digital Advertising?

Traditionally, advertisers would manually make bids for ad space. Automation is the crucial difference between programmatic ads and other types of digital marketing. Automation makes digital advertising more efficient than traditional marketing because ads can target specific individuals. The other key difference is that programmatic buying can occur across multiple platforms, giving advertisers a wider range of publishers to work with and audiences to reach.

How Does Programmatic Advertising Work?

When advertisers want to market a product or service, they create a marketing campaign that includes their goals and target audience. Then, the advertisers or a programmatic ad agency working on their behalf inputs that information into an online platform. This allows bids to automatically be sent to publishers when target audience members visit the publishers’ websites. 

If the advertiser wins the bid, their ad will be automatically optimized and inputted into the designated ad space for certain website visitors. All this automation is made possible by data and algorithms.

Programmatic advertising gives website publishers access to rich media and premium brands.

Programmatic Advertising Platforms

Online platforms facilitate the buying and selling of ads in an automated fashion, making the process efficient and scalable. There are different platforms for publishers and advertisers. Publishers sell ad space, so they are on the supply side. Advertisers buy ad space they need, so they are on the demand side. 

Supply-Side Platforms (SSP)

Supply-side platforms (SSPs) are also called sell-side platforms. They are software that helps publishers manage, sell, and optimize their ad inventory in real time. Some of the major SSPs for publishers include:

  • Google Ad Manager
  • Amazon Publisher Services
  • OpenX
  • Google AdMob
  • Yahoo Ad Tech
  • Verizon Media
  • Xandr (Microsoft)
  • SpotX
  • Teads

Demand-Side Platforms (DSP)

An advertiser uses a demand-side platform (DSP) to buy a programmatic ad. DSPs are software that allow for advertising management across many real-time bidding networks from a single interface. Here are some of the DSPs in the US:

  • Display & Video 360 (Google)
  • The Trade Desk
  • Amazon DSP
  • LiveRamp
  • Adobe Advertising Cloud DSP
  • StackAdapt
  • Amobee
  • Yahoo Ad Tech
  • TubeMogul
  • OneView (Roku)

Ad Exchangers

Ad exchangers facilitate the buying and selling of ad inventory across DSPs and SSPs. They help with making the advertising space more accessible and efficient for everyone. Some of the most popular SSPs and DSPs are also ad exchangers. 

Learn ethical ways to reduce ad blocking and increase the reach of your programmatic display advertising.

Types Of Programmatic Advertising Auctioning

There are many ways that the buying and selling of programmatic digital advertising occurs. Each has its own specific applications, which will be discussed below: 

  • Real-Time Bidding (RTB)
  • Header Bidding
  • First Price Auction
  • Second Price Auction
  • Private Marketplace
  • Programmatic Guaranteed/Direct
  • Preferred Deal

Real-Time Bidding (RTB)

With programmatic advertising, bidding occurs in real time. Thanks to technology, it all happens within seconds. Real-time bidding (RTB) usually occurs in a public ad exchange marketplace that is open to all advertisers. Publishers submit ad requests, and advertisers bid on them using cost-per-thousand ad impressions (CPM).

Header Bidding

Header bidding refers to offering ad space to multiple ad exchanges simultaneously through SSPs. It increases competition among advertisers, which means publishers can earn more for each ad request. Google’s version of header bidding is called open bidding, formerly exchange bidding.

First Price Auction

This is a traditional style of auction where the highest bidder wins. Advertisers bid on ad requests using CPMs, and the highest bidder pays the price they bid to the publisher. RTB and header bidding often use first price auctions.

Second Price Auction

In second price auctions, the advertiser with the highest bid still wins. However, they only have to pay a cent more than the second-highest bid. While second price auctions used to be more common, they are falling out of style in favor of first price auctions.

Explore the economics of first place and second place auctions from the supply and demand sides.

Private Marketplace

Private marketplaces operate similarly to public marketplaces, but they are only open to invited advertisers. This can be beneficial for publishers because it gives them more control over who can advertise on their websites. It’s beneficial for advertisers because there is usually less competition than in a public marketplace. 

Programmatic Guaranteed/Direct

Programmatic guaranteed, programmatic direct, and direct insertion order (IO) are all terms that refer to deals made directly between advertisers and publishers. These deals have a set price and a set or guaranteed number of impressions. Both parties must agree to these terms. Over half of all programmatic deals made are programmatic direct because they allow for efficient, targeted ads with clear expectations about cost and volume for buyers and sellers.

Preferred Deal

Preferred deals are also deals made directly between advertisers and publishers. While preferred deals have a set price for the buyer, the publisher does not have to provide a specific number of impressions. Instead, the advertiser pays for an advertising spot before it is sent to the marketplace for auctioning. Preferred deals allow advertisers to snag the exact advertising spots they want without relying on the algorithms of the marketplace.

Benefits Of Programmatic Display Advertising

Now that you can answer the question, “What are programmatic ads?” let’s explore their benefits. Programmatic display banners and ads are better than traditional digital ads because they are more efficient. Programmatic ads rely on data for their creation and ad placement. They often undergo AI-assisted optimization after their creation as well.

  • More audience engagement: This benefits both the publishers and the advertisers
  • Better targeting: Ads are most successful when they reach their target audience.
  • Improved ROI: More efficient ads can increase conversions.

Because of all of the above benefits, programmatic media buying and selling allows publishers to charge more for ad space and advertisers to earn more revenue from ads. Everybody wins. 

How To Do Programmatic Advertising

Understanding programmatic advertising opens up a whole new world to publishers and advertisers. The first step is selecting the right SSP or DSP platform for your company. Advertisers will then set up programmatic advertising campaigns on their DSP, while publishers will put their ad inventory on their SSP. Through the platforms, programmatic ads can be optimized, monitored, and adjusted as needed to maximize performance. 

Some publishers and advertisers may have the misconception that automation means less work, but it’s not that simple. Effective programmatic advertising requires collecting the right data, choosing the best software, and understanding how to leverage technology to reach your goals.

At Next Millennium, we are experts in programmatic advertising. Let us do the heavy lifting when you launch your next digital marketing campaign!

Next Millennium: The Best Programmatic Advertising Solution For Advertisers And Publishers

Next Millennium is committed to changing how advertisers and publishers connect through digital advertising. We act as the middle person between advertisers and publishers to facilitate

programmatic advertising across multiple platforms.

When you choose us for your digital marketing needs, you get exclusive access to premium brands, leading industry technologies, and proactive customer support.

See how we used programmatic marketing to help the toy company Hasbro increase its ad click-through rates by 237%.

Josh Isaac