If you have had any contact with the digital advertising world lately, you have likely heard the term “programmatic media.” This has become an increasingly “buzzy” term over the past year. The term is widely used to refer to media that is purchased through “real-time-bidding” (RTB) via the use of Ad Exchanges. Although this method has become considerably popular, there is still some confusion.
To lay the foundation for this topic, it is important to understand some of the fundamentals of digital advertising. For starters, websites will have various types of advertising space that they will sell to advertisers, just like with traditional media. The websites, (also known as publishers) will make projections regarding how much inventory (user traffic, also called impressions) they will have over a certain period of time. Based on those projections, the publisher will then sell contracts for that inventory to advertisers. The publishers will typically sell less then their projected inventory to ensure full delivery of their contracted impression volume. The publishers will typically have a surplus of impression inventory for three main reasons:
1. By design, to ensure full delivery of the contracted impressions, and not run a deficit.
2. The projected impression caluclations were too conservative.
3. Unexpected traffic. For instance, if the publisher is a news site, and a significant world even occurs, the site could have more traffic then expected.
Regardless of the reason, the publisher is going to, almost always have surplus inventory to deal with. That is when the publisher will typically turn to an Ad Exchange.
An Ad Exchange works very much like a stock market. Advertisers will bid on remnant inventory from publishers at auction. Advertisers from all over, will pre-set their bids for a particular type of inventory, audience, region, demographic, etc. When an impression that fits their criteria becomes available, the bid will be submitted automatically. If that advertiser wins that bid, their ad will be sent to that website to be viewed by that user. This entire process happens in mere milliseconds, while the page is loading.
There are many benefits of programmatic media, which has attributed to its popularity. One of the most significant benefits is that it searches for a specific criteria and only delivers ads to users who fit that criteria. Brands have been able to layer a significant amount of data from data providers such as BlueKai, eXalate and others, in order to deliver highly targeted ads. For advertisers, this means that they can target the user regardless of what website they might be on. For instance, the advertiser can find a highly qualified user on www.momandpopfishingblog.com (which might have a $1.00 CPM) and pay significantly less than finding that same user on ww.CNN.com (which might have a $10.00 CPM). If the objective is to get in front of the eyeballs of the user, then programmatic media buying allows for a much more targeted and inexpensive approach.
Additionally, just like there are many stock exchanges, there are also hundreds of Ad Exchanges. This can make it difficult for advertisers to manage. However, just like services like eTrade, and Sharebuilder (which allow users to buy and sell across many different stock exchanges), advertisers can use a Demand Side Platform (DSP) to manage bids across all Ad Exchanges. Through these DSPs, advertisers can control the bids, frequencies, criteria, and even the actual creative assets that will be delivered to the user.
Much like the way online stock trading changed the investment market, programmatic media has changed the way digital advertising is bought and sold. It may still be a while before we see the end of the mega-deals discussed over three martini lunches. However, according to eMarketer, $3.6 Billion was spend on “real-time-bidding” in 2013 (Shields, 2013). Major players such as Yahoo!, Google, MSN, and others, have already moved portions of their premium inventory to Ad Exchanges of their very own.
Shields, M. (2013, November 3). Programmatic Ad Buying for Dummies | Adweek. Retrieved March 20, 2014, from http://www.adweek.com/news-gallery/programmatic-dummies-153590#intro