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January 10, 2021

What is Programmatic Advertising?

CAASie herself

Welcome to the CAASie learning experience, where I choose a fun subject and explain it to you as if you were a dog, but because you were really good, they moved you up to human being status.

This quick lesson is about Programmatic Advertising.

Why? Because I made a very special little web app that could be considered a demand-side-platform for programmatic advertising, and it would be nice (for me) if more people understood what that means.

So, let’s start at the beginning…

Cool, what is it?

The word programmatic simply means relating to or having a program. So programmatic advertising is, well, advertising that is performed using a program.

That’s disappointing isn’t it? This extremely complicated, innovative tech terminology boiled down to “it’s in the name”. Well I’m sorry to disappoint but it really is this simple:

Programmatic advertising is the process of buying and selling ad inventory using a computer program or algorithm.

If you are comfortable with the word “algorithm”, you can skip on right ahead to “How does it work?”. But for those who find the word a little bit intimidating I’ll start with how programmatic advertising is used.

So, how is it used?

Scaling everything right back to bare minimum, when purchasing advertising space, you have a seller and a buyer.

Fun example time!

Yellow Polka Dot, the swimwear Magazine, wants to sell their ad inventory – e.g. a full-page ad at the front of the magazine. Their sales team would reach out to consumers who might be interested.

On the other side, Itsy Bitsy, with their cute new bikini range, might be looking for avenues to get their product to market. Their marketing team will do a dance with Yellow Polka Dot’s sales team to find out what is available and form an agreement.

Lucky for both parties, there was both supply and demand.

Unfortunately, sellers are often left with remnant inventory – spaces they are unable to fill. Even though Yellow Polka Dot heavily discount their remnant inventory, it isn’t always enough to fill up every slot.

Having seen the gap in the market, some charming new companies began to aggregate and offer the unsold or remnant inventory to media consumers – like Itsy Bitsy’s marketing team. What this did, aside from increasing Yellow Polka Dot’s sales, was make it easier for Itsy Bitsy to find specific media and target the right audiences at the right time.

Programmatic advertising does exactly that. It enables the buyer to use one platform to find, target, and purchase ad inventory.

Although it is still used in conjunction with a traditional sales team, programmatic advertising is no longer used exclusively for the purpose of selling the remnant inventory and, in some cases, it may be the primary sales tool. Welcome to the digital age, am I right?

So now that you know how it is used, let’s dig into how it works.

How does it work?

Where traditional advertising has a buyer and a seller, programmatic advertising has a demand-side platform and a supply-side platform.

Three is my favourite number, so I’ll break the process into three parts:

  1. A supply-side platform connects to the seller. It communicates to a demand-side platform that the seller has ad inventory available.
  2. The demand-side platform connects to the buyer. It listens to the supply-side platform and allows the buyer to purchase the inventory.
  3. The demand-side platform communicates the purchase of inventory back to the supply-side platform which, in turn, informs the seller.

Although it may seem like a long-winded process, it is entirely automated and can be almost instantaneous.

The seller will typically have another program (a content management system) that ensures an ad is displayed at the right time. Thankfully, the buyer doesn’t need to carry out any additional steps – simply make a payment as if purchasing any other product online.

Unless you want to deep dive into the technology and types of algorithms available, that’s about all you really need to know. I’ll let you choose whether to remember it as three simple steps or exactly 69 words.

One other important feature is the application of real time bidding. Let’s have a super speedy look at that.

How does real-time bidding fit in?

You’ll recognise real-time bidding from platforms such as Google’s Ad Words, and a bunch of other digital advertising.

It’s a relatively straight-forward concept:

- Ad slots are set up to be auctioned off to the highest bidder.
- As the name suggests, the bidding happens in real time, meaning that the highest bidder at any given point in time will win.
- In most cases, you are given the ability to choose your demographic, location, time of day, or all of the above. It gives you flexibility in who sees your ad and how much of your campaign budget is put towards it.

Because programmatic advertising is virtually instant, real-time bidding can be applied to just about any digital media, including billboards and other out-of-home displays.

It’s a popular option because it’s a win-win situation for everyone.

Sellers get increased reach and become more accessible to everyday consumers. They can fill up their vacancies or even prioritise bidding to maximise their profits.

Buyers gain a lot of flexibility with regards to their campaign budgets and don’t need to commit to minimum length contracts. They also have more control over the audience that sees their ads and can more easily maximise their return on investment. All-in-all, it can be a much more affordable option if you want to run highly targeted, short or sporadic campaigns.

Quick access for buyer and easy sales for sellers are already a good enough reason to go programmatic, but if you add real-time bidding to the mix it’s even more enticing.

Let's wrap it up.

Learning point no. 1:  Programmatic advertising is buying and selling ad space using a computer program.

Learning point no. 2:  It works because the inventory is all stuffed into one place to be bought and sold with ease.

Learning point no. 3:  The “program” in programmatic comes from algorithms (or magic) behind what is referred to as a demand-side platform (for buyers) and supply-side platform (for sellers). The platforms talk to each other to facilitate sales.

Learning point no. 4:  Real-time bidding takes programmatic advertising from “That makes sense” to a “huh, that’s a kind of cool”, and if used correctly can benefit every party involved.

CAASie herself
These are my own public thoughts, ideas, and musings. Feel free to enjoy them with me. I don't bite.
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