By now, you’ve undoubtedly heard about programmatic advertising, how it doing for the ad world what the automated assembly line did for the automobile manufacturing industry. Last year when programmatic first burst on the scene, the IAB reported that approximately 20 percent of all digital advertising was sold by one machine talking to another but more recent statistics place the percentage north of 40 percent and growing.
For all you old-school ad executives out there, embracing programmatic is no longer an option since the field of advertising has evolved to incorporate not only the creative aspects of campaign development, but also requires an understanding of the nitty-gritty Ad Tech world – the mechanism by which brand messages are delivered to interested consumers on mobile and desktop. According to a recent report by Magna Global, the programmatic ad market is forecast to grow from $12 billion in 2013 to more than $32 billion in 2017, so it’s definitely here to stay.
While you may have grown tired of reading story after story about how programmatic is redefining the way ads are purchased online (yadda, yadda yadda) it’s finally time to better understand how it works, what’s happening behind the scenes and why companies like AOL, RocketFuel, Turn, Rubicon and Criteo are banking on its growth as a category.
Rather than bore you with a lengthy description of programmatic advertising, all you really need to know is this – programmatic refers to utilizing algorithms to automate the purchase, segmentation, delivery and optimization of display and video ads online. The process utilizes an online ad auction-like technology called Real-Time-Bidding (RTB) that helps match website publisher ad inventory with brand advertisers and analyzes campaigns, all through the use of computers.
According to Joe Zawadzki, CEO of MediaMath, programmatic is “the use of technology to automate processes and the use of math to improve results. It is the future of marketing, available now.”
The Mobile Prerogative
With such a convoluted ad stack, expertly detailed in the most recent Mobile Lumascape, there are several layers and routes to get brands and publishers to work together. Let’s say that a publisher has a lot of ad inventory to sell (ad spaces) and wants to do it quickly and efficiently to the highest bidder from brands and agencies. Publishers would work with supply-side platforms (SSPs like PubMatic, Nexage, Inneractive) to offer their inventory on the bidding market. On the flipside of the coin, demand-side platforms (DSPs like Byyd, Human Demand, mMedia, TAPAD and RadiumOne) give brands and agencies access to easily access and purchase publisher ad inventory off multiple ad exchanges at once through an aggregated platform. Still following?
Okay, so then how does this work with mobile since so many people are playing up how mobile will change everything and even eMarketer just released stats that US adults will spend an average of 2 hours 51 minutes per day with mobile devices this year?
Well, there are some inherent differences between mobile and desktop. While mobile and desktop DSPs both offer access to large amounts of inventory and provide more transparency for advertisers, mobile as a platform poses significant challenges. Since there is no universal cookie for mobile, the same tracking mechanisms for online won’t quite work in a mobile environment. The future of advertising will unify all channels and devices to give brands a complete picture of consumers.
Lastly, here are some handy definitions that you should know:
- Ad exchange: An open online advertising marketplace that lets publishers and advertisers connect (think of a stock exchange). The inventory offered in an exchange isn’t necessarily premium inventory – it’s whatever the publisher wants to make available.
- Ad networks: A closed advertising marketplace where the network owner disintermediates the publisher by sourcing and selling/reselling ad inventory to buyers (though sometimes publishers can also create their own ad networks).
- SSP: The supply-side platform enables publishers to “plug into” the ad exchanges to make their inventory available. Through SSPs, publishers hope to gain the highest eCPM for their inventory, as opposed to selling it at low-cost remnant prices.
- DSP: The demand-side platform allows advertisers and ad agencies to more easily access and efficiently buy ad inventory off an exchange because the DSP aggregates inventory from multiple ad exchanges. DSPs eliminate the need for another cumbersome buying step, the request for proposal (RFP) process.
- RTB: Real-time bidding enables ad buyers to bid for each and every ad impression – based on campaign goals, audience profiles, and cost thresholds – which when won is instantly served on the publisher’s site. The fulfillment technology enabling these dynamic transactions is called a “bidder” and can be built into any of the above platforms.
- DMP: The newest introduction to the alphabet soup, a data management platform helps all parties involved in the buying and selling of ad inventory to manage their data, facilitate the usage of third-party data, enhance their understanding of all this data, pass back data, or port custom audience data to a platform for even better targeting.