Three Questions to Better Understand Programmatic Technology

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Nothing is making a greater impact on the way media is bought and sold today than programmatic. In fact, the share of programmatic spend in US digital media (display-related) transactions, when looking at both RTB and NRTB, will expand from 38% in 2012 to 53% this year and to 83% by 2017, according to Magna Global. The numbers tell a story of tremendous growth, and beyond all the hype surrounding programmatic, its advantages are truly game-changers.  But recognizing the appeal of programmatic is just the first step in understanding what programmatic is and how it can best suit the needs of a campaign.

Simply put, programmatic makes it easier to buy and sell digital media by automating as much of the elaborate – sometimes 40 steps – process as possible. Real-time bidding (RTB) on the open exchange is the most common notion of programmatic, but it’s not the only type. As brands continue to adopt this new form of technology, comprehending the role of each facet of programmatic and how it can best suit a campaign’s needs is vital to maximizing the impact the technology can have.

The following three simple yes-or-no questions demonstrate how to differentiate between the most common forms of programmatic buying and selling: RTB vs. Fixed price, Open Exchange vs. Private Marketplace, and Programmatic Direct vs. Preferred Deal.

Question 1: Is the inventory being auctioned?

[NO]

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This is Fixed Price. Fixed Price can be further classified as one of two forms, Programmatic Guaranteed and Preferred Deal, depending on whether or not inventory is guaranteed.

[YES]

This is Real-Time Bidding (RTB). RTB allows bidding by a variety of sources on each individual impression at the precise time of serving. When the highest bid wins, the ad is served—within 200 milliseconds a publisher loads a page and fills an ad either from direct sales or programmatically. RTB can be further classified as Private Marketplace or Open Exchange, depending on if the auction is public.

Question 2: Is the inventory guaranteed?

[YES]

This is Programmatic Direct. Programmatic Direct typically bypasses programmatic vendors, with publishers providing a platform for buyers to log in and purchase their inventory directly, often with a set rate card. This simplest form of programmatic automates the purchase process to eliminate negotiation of the media placements, pricing, and contracting/invoicing. Programmatic Direct provides impressions at the highest ad server priority, delivering directly sold inventory through an automated platform.

[NO]

This is Preferred Deal. Preferred Deal utilizes a Demand Side Platform (DSP) to allow an advertiser and publisher to agree on a set price for inventory. Preferred Deal provides a publisher’s impressions at a higher priority in the ad server than those on the secondary market or those being auctioned. Preferred Deal allows buyers to select inventory specified by a publisher for higher priority sale, and a Deal ID facilitates the process further by providing the technology for exchanges to know which inventory to prioritize for that buyer.

Question 3: Is the auction public?

[NO]

This is Private Marketplace. A Private Marketplace enables publishers to allow only buyers with permission to bid on impressions. Inventory is available only to select buyers and not open to bidders through DSPs or ad networks. Private Marketplaces can utilize Deal IDs to prioritize inventory for a buyer.

[YES]

This is Open Exchange. An Open Exchange is a public auction allowing any buyer to bid on impressions. Significant portions of impressions live on Open Exchanges, attracting many industry players. An AdExchanger survey revealed that 61% of programmatic budgets are spent on Open Exchanges utilizing RTB.

The Open Exchange brings together buyers/advertisers who are looking for ad space to display their message and publishers/websites who have ad inventory to monetize. Supply Side Platforms (SSPs) allow websites to provide Exchanges with inventory that has not been sold directly to advertisers, and buyers bid on that aggregated inventory on the Exchange through Demand Side Platforms (DSPs). The highest bid wins the auction, and the winning bidder’s ad creative is served in that impression. With exchanges aggregating millions of impressions a minute, advertisers utilize Data Management Platforms (DMPs) to process audience-targeting data and instruct DSPs to bid on specific impressions.

Programmatic technology comes in many shapes, sizes and forms. And its evolution will continue as it becomes more engrained in the media buying and selling process. As the technology continues to iterate, understanding the fundamentals is the best foundation for understanding the technology as a whole. While programmatic can seem both complicated and convoluted, asking a few simple questions to differentiate the various components can be the first step to better understanding the technology and how it can work for you.

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