Todays topic is a real doozy, so buckle up and get your thinking caps on. We'll start simple, with
What is Programmatic Advertising?
Programmatic advertising is the automated buying and selling of ad inventory (for example, space on websites or on YouTube videos) in real-time through complex algorithms. It eliminates the need for old school ad deals where one company would specifically sell another ad space. It makes placing ads more efficient, cost-effective, and targeted, with the right users seeing the right ads at the right times to create conversions. This is all done with the subcategory of technology called Ad-tech.
What is Ad-tech?
Ad-tech is a catch-all term for the various technologies, tools, and platforms that enable all digital, and therefore programmatic, advertising. It encompasses a wide range of solutions, such as demand-side platforms (DSPs), supply-side platforms (SSPs), and ad exchanges which collectively empower advertisers and publishers to optimize their campaigns and drive superior results.
The improvement of ad-tech is what has enabled the complex system of programmatic advertising we have today. It provides the infrastructure and tools necessary, and allows us to utilize data to match advertisers' targeting criteria with available impressions, enabling real-time auctions. This approach makes sure that ads are delivered to relevant audiences, increasing the likelihood conversions.
SSPs, DSPs, and Ad Exchanges
You saw me mention these three components of todays subject earlier, but I'll go into a little more depth on them than just the names, as they are fundamental to understanding how programmatic works. Before I do that though, I'll specify exactly what publisher and advertiser mean in this context, as it was a confusing point for me at first.
- Publisher: Anywhere that has digital ad space to sell.
- Advertiser: Anyone looking for a place to put their ads.
- SSP (Supply-Side Platform): SSPs enable ad publishers to manage and monetize their ad inventory. They connect publishers with multiple ad exchanges and demand-side platforms, allowing them to make their inventory available for programmatic buying. SSPs provide all kinds of tools to help publishers optimize the selling of their space.
- DSP (Demand-Side Platform): DSPs are the counterpart to SSPs. They provide a space for advertisers to purchase ad inventory from multiple publishers and ad exchanges. DSPs offer targeting capabilities, audience insights, and management tools, which let advertisers optimize every aspect of their purchasing.
- Ad Exchange: Ad exchanges are the marketplace where publishers make their inventory available for advertisers to bid on. They facilitate the automated buying and selling of ad impressions through auctions. Ad exchanges integrate with SSPs and DSPs, to allow for more automation and seamless transactions.
Why do publishers bother with programmatic?
Programmatic advertising offers significant benefits for publishers, that makes the added complexity worth it:
- Increased Revenue: Programmatic advertising enables publishers to monetize their inventory better by connecting them with more advertisers. This competition for ad space often leads to higher ad placement prices, and therefore more revenue for the publisher.
- Targeted Ad Placement: Because better targeting is a main feature of programmatic advertising, users see ads that are more relevant to them, which makes the customer experience much better. Additionally, the better targeting further increases placement prices.
- Automation: The automation inherent to the programmatic ad process saves publishers significant amounts of time finding advertisers, negotiating prices, and actually publishing ads. This means that the publisher can repurpose employees, optimize websites, and run their business more smoothly.
Problems for Advertisers
While the advantages of programmatic are obvious for advertisers (better and easier ad placement,) there are some disadvantages and risks that come with it.
- Ad Fraud: The automated nature of programmatic advertising can make it susceptible to ad fraud. This happens when a publisher takes advantage of systems to trick the programmatic system into giving them more credit than they deserve.
- Brand Safety: Due to the automated nature of programmatic ads, advertisers don't know exactly where their ads will show up. This means that there is a risk of ads being displayed next to not brand-safe content. While there are systems in place to prevent this, companies do have to somewhat monitor this themselves.
- Data Quality and Privacy: Programmatic advertisings reliance on data for targeting makes it vulnerable to cases where bad data is provided. Advertisers need to be careful about how they get their data, and must stay conscious of privacy concerns as they do so.
- Transparency and Attribution: Programmatic advertising involves multiple steps, from DSPs to ad exchanges to SSPs, tracking exactly what did well where becomes a challenge for advertisers.
