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What is programmatic advertising?

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What is programmatic advertising & how is it different from display advertising?

Is programmatic the same as display advertising?

The first time I ever came across the term programmatic I asked the head of PPC at the company I worked for what it was. He explained; “It’s just a fancy term for display ads”. Holding onto this definition for a few years, I had a new found confidence that I could talk to my clients about programmatic. After some time though I stopped using the term as I thought it sounded like pointless industry jargon. 

While perusing the job market I saw that every company who was looking to hire an account director must have experience running programmatic campaigns.

Having done more research on my own while applying for jobs I came to the same conclusion as my former PPC; that programmatic is just display advertising. It wasn’t until I met with the director of a large agency who said “I see you’ve worked in programmatic advertising, so you know your DSP’s from your SSP’s”, nervously I said yes, hoping there would be no follow up questions. 

This led me to the point of deciding I need to understand what programmatic is and how it is different to Google display advertising.

What is programmatic advertising?

Any kind of display advertising either physical or digital conforms to roughly the same idea. A publisher has an audience (such as a magazine, website or highway with traffic) and an advertiser who is seeking to get exposure to that audience. Programmatic is the process of choosing which publishers will show which advertisers ads.

For the purpose of ease let’s look at 4 imaginary businesses all based in the same town.

  1. Steve’s Skate Ramps.
  2. Jessica’s Street and Fitness Wear.
  3. David’s Hardware & Power Tools.
  4. Tina’s Tennis lessons. 

And some imaginary publishers.

  1. Healthy Habits: A site dedicated to getting people out of the house and exercising.
  2. DIY Projects: Tutorials on easy to build DIY projects.
  3. Skate Scope: Online Skateboard magazine.
  4. Local news.

Each advertiser (or media buyer) wants to gain exposure in front of some of these publishers’ audiences, but not all.

Steve: Wants to advertise on Skate Scope because he wants skaters to buy his ramps, but he also wants to sell his ramp blueprints to DIY enthusiasts on DIY Projects.

Jessica:  Is looking to target a wide range of audiences and wants to advertise on every site except DIY projects.

David: Is only interested in DIY projects as he assumes users who are looking for projects will need materials and tools.

Tina: Wants to advertise on Healthy Habits to encourage users to take up tennis but also in the local news as she is affiliated with the local club.

How Display Advertising Works

The business wanting to advertise is aiming to get access to their audience at the cheapest price, whereas the publisher is looking to get the maximum from their inventory (spaces for advertisements to occupy). Programmatic is the process of allocating those advertisements to the publishers inventory, in real time when the publishers page loads. This does still however sound exactly the same as the Google Display Advertising, and in some regards it is.

What is a Demand Side Platform (DSP)?

A DSP or demand side platform is where advertisers go to choose the audiences and placement types they wish to target and provide the creative. DSP’s are the interface where advertisers set their bid range to dictate how much they are willing to pay for an impression. 

Google Ads is a DSP, however Google Ads will only allow you to access their Google display network. 

What is a Supply Side Platform (SSP)?

An SSP or supply side platform is what publishers would use to list their inventory. The goal of an SSP is to create as much revenue for the publisher as possible. It is advantageous for an SSP to be able to accept bids from multiple DSP’s in order to increase competition therefore increasing bids.

Google Adsense is Google’s SSP, though it does connect with other DSP’s. The sites that use Adsense are what make up the Google display network.

 

Example of how programmatic works:

Knowing that DSP’s represent the buyer, SSP’s represent the seller and the exchange is the marketplace where the purchase is being made, let’s look at our example from earlier. First we need to understand our buyers budget for impressions. 

Steve: The primary audience is skaters so he sets a bid of $2.50, and his secondary audience is DIY which sets at $1.20. 

Jessica: Jessica is split testing sports vs street wear and sets bids for $1.80 for both Skate Scope and Healthy Habits. She also puts in a secondary bid of 0.75c for the local news site.

David: Top priority for David is DIY Projects so he bids at $2.00.

Tina: Bids $2.00 for Healthy Habits as her primary placement and 0.50c for the local news.

How Programmatic Advertising Works

This example would mean that these sites would show the following advertisers ads:

Healthy Habits: Tina’s Tennis Lessons

DIY Projects: David’s Hardware & Power Tools

Skate Scoping: Steve’s Skate Ramps

Local News: Jessica’s Street & Fitness Wear

 

In theory, DSP’s should only be bidding the minimum requirement to beat a competitor’s bid meaning each business would have paid:

Steve: $1.81

Jessica: $0.51

David: $1.21

Tina: $1.81

 

So far we have been assuming that every DSP has access to every SSP but that is not always the case.

How do DSP’s and SSP’s work together?

Both DSP’s and SSP’s connect to exchanges where ads are bought and sold. An exchange is like the marketplace, where the DSP’s who are acting on behalf of the buyers meet to bid for the inventory space being sold by the SSP’s. Real time bidding takes place, where the SSP will run the available impression through multiple ad exchanges to see which DSP is presenting the highest bid for that inventory slot. The highest bid will then be instantly displayed on the publisher’s site. 

 

Programmatic exchanges

 

This example shows each DSP and SSP being connected to multiple exchanges. What you can also see is that because DSP3 does not connect to an exchange that SSP2 does, David’s ad does not show, meaning Steve’s Ad can win the auction unopposed.

 

Key terms to remember:

Inventory: A place where an ad can be shown. 

Demand side platform (DSP): The software which businesses who want to advertise use to provide their creative and set bids. 

Supply side platform (SSP): Where publishers/websites list their inventory.

Exchange: The Marketplace where SSP’s hold auctions for DSP’s to bid on.

Real time bidding: The process of bidding that happens in an exchange when a page loads.

 

Is programmatic advertising the same as display advertising.

Traditional display advertising done through Google Ads is a form of programmatic advertising with limited capabilities. Programmatic as a whole is a far larger and more complex process. 

 

Any business can benefit from display advertising as a cheap way to reach a large target audience. Wynne Digital is certified by Google to run Google Ads campaigns, get in touch if you would like to explore your display/programmatic options.

 

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