Programmatic Advertising uses cloud-based software platforms called Demand Side Platforms (DSP) to purchase digital advertising. In the past, advertisers hired media buyers who submitted Request for Proposals (RFPs), negotiated price, and manual bought insertion orders. Now with Programmatic Advertising, all we have to do is use machines to buy ads.
Programmatic is one of the main ways we use technology to buy and sell online media; and by online media, I mean the banner and video ads you have probably seen on Yahoo! Sports or Forbes.com. It is used in a lot of ways and gets associated with a lot of things and often people think it is only sold in a format known as real-time bidding, or RTB, or as the open auction.
For us at Watts Media, Programmatic is the tool we use to buy online inventory for our clients via the exchange, programmatic direct, and everything in between. Through our platforms, we are able to aggregate media buying data from Google Ads, Facebook Ads, Spotify ads, Roku, Hulu, The Gazette and many other advertising mediums outside of Programmatic. This ultimately allows us to give our clients a high-level view of our monthly and yearly media buying strategies while providing us the ability to develop periodic reports on performance. This allows us to create synergy between our media buying strategies, SEO strategies, and Social Media strategies because we aggregate all of our campaigns at a high level and then drill down the small details that matter in our weekly workflow.
What is Real-Time Bidding?
Real-Time Bidding (RTB) is an auction between computers that facilitates the buying and selling of ad impressions within the amount of time it takes a webpage to load. This allows advertisers to compete to serve targeted banner and video ads to their selected audience. These auctions are typically facilitated in an ad exchange or a supply-side platform that helps connect advertisers with publishers.
If we look at history, we will see that in the past a marketer would buy, for example, all the impressions on the homepage of Yahoo. This means every user that visits that page would see their ad regardless of what they are interested in. One user could be recently interested in traveling to Europe, while another could be really into CrossFit and clean eating. Now what RTB does is provide an environment where marketers can show a different ad to a specific audience, based on the individual user’s data. As results, the guy interested in luxury adventure travel could see an ad from The Broadmoor Hotel in Colorado while the CrossFit girl in her 20’s might see an ad from Under Armor or a local major CrossFit gym.
Simply put, RTB provides us the ability to send the right ad, to the right person, at the right time. Using this data, we can effectively increase the efficiency of deciding where advertising dollars should go, which ultimately gives marketers a much better Return on Ad Spend (ROAS).
How Does Real-Time Bidding Work?
Most of the time, an ad is served based on the cookies attached to the user’s device which helps tell the history of the user’s browsing activity. Targeting users based on their browsing history is a tried-and-true practice that has its downsides but is overall a more effective strategy than targeting a large pool of users we know nothing about (like traditional cable or out-of-home advertising does).
On top of cookie-based data, advertisers can use technology that considers cookies alongside information about the webpage users are visiting to make a buying decision. There are really five factors that go into figuring out how much an advertiser will be willing to pay to serve an ad, and they are: the URL of the page the user is visiting, the content category of the page, the location of the ad on the page, the user’s geographic location, and the cookies on the user’s browser.
Without a doubt, Real-Time Bidding is more cost effective than the other forms of programmatic advertising, but that comes with a downside. As we all know, cheaper isn’t always better. Out of the three forms of programmatic advertising, RTB provides the least amount of precision for publishers and advertisers because we are primarily targeting people based on their cookie history.
With that said, RTB is easily the largest category of the three because it is cheaper, more accurate than most advertising opportunities, and billions on billions of impressions are served through this type of programmatic every day. Since this is considered the open market, just like Google Ads and Facebook are considered an open market, there are thousands upon thousands of advertisers competing to win the RTB auction inventory.
What are Private Marketplaces?
A Private Marketplace (PMP) refers to an RTB auction environment where Private Marketplace Deals (PMD) occur on an invite-only basis. They are still real-time bidding auctions, but the main difference is high caliber publishers set aside certain ad inventory then offer their packages by inviting a select number of premier advertisers to buy their inventory.
The inventory is bought at the impression level without the aid of exchanges and Supply Side Platforms (SSP), effectively cutting out the middlemen and allowing publishers and buyers to create a one-to-one transaction through the private marketplace.
This is beneficial to the publisher because they have a more effective channel to monetize their inventory at a higher rate and they can easily create rules around who can and cannot purchase impressions. On the other side of the equations, PMPs are beneficial to the advertiser because they can access premium sites for a cheaper price than they would receive with programmatic direct and they know exactly what sites their ads will be seen on. Since advertisers are paying more, they normally receive preferential treatment to supply which helps them get in front of their target audience before their competitors.
How does a Private Marketplace Work?
To access a Private Marketplace, you will need a buying platform, or Demand Side Platform (DSP), that connects directly to the desired publishers’ source of inventory. Through the right DSP, an Insertion Order (IO) facilitates the deal by spelling out how much the buyer is willing to pay and for how long the ads will run.
Typically, the CPM is not fixed as it is in programmatic direct. Usually, advertisers set their maximum bid and the private marketplace facilitates the auction with only those advertisers participating in the auction. There are three common deal types between advertisers and publishers including first-look, pre-negotiated, and second price rates; we will talk about these in subsequent content.
PMPs are attractive because they use technology to eliminate the need for buying inventory directly from multiple publishers and multiple ad sales reps, like what you find in a traditional advertising environment, and because they give greater transparency and control over your ad inventory.
What is Programmatic Direct?
Programmatic Direct differs from PMP deals because guaranteed inventory is directly sold to advertisers through a digital RFP system which means it requires little human intervention to run. With that said, Programmatic Direct is a more manual process upfront than PMP deals because deals are made on an individual basis and we still have to negotiate with publishers for guaranteed ad space.
Programmatic Direct is one of the best choices for a brand that is focused on the integrity of their brand safety because the relationship allows them to know exactly where their ads will appear while the other options may not always be so clear.
How does Programmatic Direct Work?
Programmatic Direct deals occur on a one-to-one basis between the advertiser’s media buyer and the publisher’s sales rep who negotiate the deal without technology facilitating an auction like in PMP and RTB. This provides advertisers the opportunity to purchase inventory on a fixed CPM, which gives them a predetermined price and serve rate before the campaign takes flight.
To summarize, I want to give you a metaphor that helped me understand and conceptualize the difference between Open RTB, PMPs, and Programmatic Direct. Here it is:
The open Real-Time Bidding market has thousands of advertisers competing to show up on the millions of websites available on the exchange. This framework makes it difficult for the buyers looking for a very specific target audience. Think of it like a farmer’s market where thousands of farmers, artists, and craftsman negotiate with thousands of buyers in real time. As a buyer, you are looking for the perfect Palisade Peach that is big, juicy, and ripe. You can find good ones in the open market, but the probability of finding the perfect peach isn’t great.
So instead you buy a ticket to get into the VIP section of the farmers market where the top-of-the-line peach farmers are and where the cheapest peach costs $6. You can now buy the best peaches available, but you will still have to compete with all the other buyers to find the exact one you want. In this VIP section, your odds of achieving your goal are higher. This is how you can view PMPs.
But, that isn’t good enough and you would prefer the perfect peach, and you know exactly which farmer sells them. So you go to that farmer’s booth and negotiate a deal to pay $11 for each perfect peach and he will deliver it to your house so you can skip the farmer’s market and all of the taxing negotiation that goes along with it. This is how you can think of Programmatic Direct.