Jargon Free Explanation of Programmatic Buying

I’ve talked a lot about digital advertising in the last few months however I’ve rather neglected the topic of programmatic buying, partly as the interesting developments in this area aren’t that easy to explain unless you understand the basics. So in this blog I’m going to explain the fundamentals of programmatic and then deep dive into various related topics in more detail in the New Year.

Programmatic trading like many topics around ad tech is heavily jargon and acronym laden. Simply put programmatic means automated and that’s all it is the automated trading of digital advertising – machines talking to machines. But what does that look like?

If you went back, say 20 years and you fancied a coffee you had about 7 choices; filter with our without milk and sugar or a cappuccino. Now Starbucks claim to have 80,000 coffee options (yeah really!) add to that the multiplier effect of all the other coffee shops on your high street and all the different types of barista style coffee machines you can buy at John Lewis’ and you are looking at millions of coffee choices.

Digital advertising has gone through a similar evolution. Less than 10 years ago if you wanted to plan a campaign; the media planner would select the appropriate sites based on where they thought your target audience went and decide on the placements within. The design agency would decide on the creative execution and formats. The campaign would then be trafficked. All you had to worry about as an advertiser was whether your ads appeared in the right places, the campaign hit its impression goals and response rates. Now within the Programmatic Marketplace there are thousands of ads, thousands of sites and millions of data points.

This graph is supposed to be a simplified view of programmatic, just focus on the fact that all this software and hardware enables advertisers to utilise data to target specific audiences or context on web & mobile pages. So instead of an advertiser buying inventory based on location and cost they can target audiences, using data.

For Example: A Supermarket wants to place ads for their BBQ food range, setting a maximum price of ￡2cpm and targeting all 25-50 year olds who normally shop in their store however these ads are only to go live when the temperature reaches 24 degrees. Using data from their customer loyalty databases and the Met Office, as soon as the temperature reaches 24C, the ads will start to appear automatically. When the target audience arrives at any site, where the publisher has opted into the auction and the supermarket has the winning bid. All this happens in real time too!

Real time bidding is one of the foundations of programmatic

A user goes to a site, the site’s ad server pings the SSP (Supply Side Platform, it helps to think of this as the repository for publisher inventory) to say an ad slot is available. The SSP sends a bid request to the DSP (Demand Side Platform where the ads sit, usually owned by an advertising agency). The DSP evaluates the ad slot based on the data available and the targeting criteria this triggers, bids are placed and the winning bid appears on the site. All of that occurs within 500 milliseconds.

The other foundation of programmatic is data; big data, meta-data whatever you want to call it. It’s that data that really makes programmatic trading powerful. Multiple layers of data are now available on each user which brands and agencies can take advantage of to enhance their buys. Publishers can also leverage this data to add value to their unsold or low cpm inventory as the data enhance the desirably of each impression therefore increasing the cpm’s possible.

More and more advertising budget is being traded programmatically. The graph below predicts that by 2017 - 3 billion dollars of ad revenue will be bought programmatically in the UK alone. Brands will move towards programmatically buying as it allows them the mechanism to add data to their ad acquisitions and optimise on the fly.

As a publisher ideally you should have access to this marketplace and if not you must consider it but it’s not just a case of jumping on the bandwagon, there are some advantages too:

• You may well gain incremental revenue from advertisers you have never taken before as your content would not have suggested that their target audience where present on your site.
• By setting a floor price you can manage your yield per placement, an option not always available with basic ad servers.
• If you are able to give data to DSPs then you can further optimise your yield.
• No campaign reconciliation is required saving resource and typically you will be paid within 45 days improving cash flow.

I believe all publishers should be able to tap into programmatic revenues and the benefits. However you do need a certain volume of inventory to plug into a SSP Ad exchange, typically 25 million impressions per month but they will consider 10 million or lower for the right brand or type of content. And you can protect your yield or/and our direct sales path however to do so you may need to create a private marketplace to do so.

If you are a large or medium sized publisher you are probably already engaged in the programmatic marketplace. However if you are a smaller publisher perhaps you should consider working collectively, perhaps via your trade body, to obtain proposals from a few SSP’s. Not only will you get a better deal if you go as a group and take them volume, the scale may give you better ad quality, ad safety and fill rates.

I hope this blog has clarified what programmatic buying is and why you should explore it as a publisher, I know we are in the run up to Christmas and this is my last blog of 2016 however do let me know your thoughts on this topic and please contact me if you'd like to discuss this topic or understand in more detail how to build programmatic into you digital strategy.

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