Programmatic Advertising Primer for Smart Marketers

This article was originally published on Ervin & Smith's blog.

According to Magna Global, an advertising intelligence firm, $178 billion was spent globally on digital advertising (display, search, video, social) in 2016. $19 billion of that was purchased through programmatic and automated digital media transactions.

Because programmatic advertising is involves several players and new digital marketing terms, we’re providing this programmatic advertising guide to help marketers get the most from their programmatic ad buys.

Media Buying Basics for Digital Advertisers

Much of digital marketing rests on the ability of marketers to target specific audiences based on their browsing habits and demographics. Digital media buys can range in complexity from simple (direct buys) to complex (programmatic advertising).

Simple

A brand contacts a publisher directly to purchase a banner ad on the publisher’s website. The brand would select the publisher based on what the brand knows about their target audience and what they know about the publisher’s readership. This media buy would transpire between a Media Buyer (person), an Ad Sales Representative (person) and, possibly, a technical staff person to handle the scheduling and placement of the ad on the website.

Common

A brand contacts an agency to manage the brand’s ad network (say, Google AdWords) account. In this scenario, the agency would research possible placements and tactics where the brand can reach their target audience. This media buy would transpire between a Media Buyer (person) and the Ad Network (software platform).

Complex

A brand or agency contacts a programmatic advertising provider, which will leverage data to automate the decision-making process of media buying. In this scenario, the brand or agency would supply the programmatic service with information about the audience they want to reach. Then, programmatic ads will be placed through an automated ad buying process that involves several stakeholders.

A Closer Look at Programmatic Advertising

The key benefits of programmatic advertising are the gains in efficiency and reach they offer digital marketers. This is accomplished through leveraging data and accessing the “long tail of the internet” — sites that draw relatively small but attractive audiences, such as blogs for new moms or forums for food truck enthusiasts.

Programmatic ads on smaller sites cost a fraction of what they do on well-known publishers’ sites, like ESPN, CNN and Forbes, which typically deal directly with advertisers. Programmatic advertising funnels money to these smaller sites through a complex system of agencies and third-party networks, which resemble a stock exchange.

Image credit: rapidtvnews.com

Players in the Programmatic Ad Ecosystem

Agency Trading Desks (ATD): a trading system developed by large agency holding companies to pool available data from all agency buys and increase the efficiency and scale in buying digital advertising.

Demand-Side Platforms (DSP): an intermediary that serves agencies by accessing ad inventory through ad exchanges or networks, determine the best inventory for reaching the target audience, place the buys and report the performance data back to the agency.

Supply-Side Platforms (SSP): an intermediary that serves publishers by enabling them to programmatically sell their ad inventory using data augmentation and real-time bidding.

Ad Exchange: a neutral party of computer systems where media is traded much like stocks. Sellers (SSPs) designate pools of impressions to be sold in the exchange while buyers (DSPs) go into the system to purchase ad inventory, which is then automatically fed through ad servers.

Ad Network: a platform that allows agencies or DSPs to place text, display and video ads on multiple websites through one tool. The ad network manages the delivery of ads (called ad serving) and optimizes the placements based on historical performance data.

Types of Bidding Available with Programmatic Ad Buys

Real-Time Bidding (RTB): a programmatic ad buying option that enables advertisers to buy display ad impressions through real-time auctions that occur in the time it takes a webpage to load. These auctions are facilitated by either an ad exchange or a SSP.

Header Bidding: a programmatic buying option that enables publishers to offer inventory to multiple ad exchanges simultaneously before making calls to their ad servers (mostly Google’s DoubleClick for Publishers, DFP). The technology was developed by ad tech companies to help them compete with Google’s DFP, which was previously winning most ad auctions.

Image credit: Ari Paparo

To utilize header bidding, publishers need to insert a special piece of code into the header of their web pages. This header tag then sends out an ad request before the body loads. This timing is key, as Google's DFP is triggered only once the body of a web page loads. So, essentially, header bidding allowed smaller ad tech companies to get a “jump” on Google’s DFP.

In April 2016, Google granted outside ad exchanges access to its own AdX “Dynamic Allocation” product. This move essentially removes the need for header bidding, and many in the ad industry thinks its use will decline.

See the Definitive Guide to the Digital Ad Ecosystem from MarketingLand.com for more in-depth information about all aspects of digital advertising.

Safeguard Your Programmatic Ad Buy

Programmatic ad buys tend to have a greater rate of fraud, especially for video campaigns that offer higher CPMs (read greater monetary incentives for criminals). The Russian ‘Methbot’ ad scam, which was first discovered in October 2016, generated up to 300 million fake "video impressions" daily. This enabled the bot to siphon more than $180 million (to date) from the online ad industry, according to researchers.

According to the 2016 Bot Baseline Report published by White Ops and the Association of National Advertisers (ANA), programmatic display ads had 14 percent more fraudulent traffic and programmatic video ads had 73 percent more fraudulent traffic than the study average.

Advertising industry stakeholders can work to reduce ad fraud by using a combination of anti-fraud technologies and proactive policies. White Ops and ANA recommend that brands and their agencies take the following steps to prevent ad fraud:

• Be aware and understand the programmatic supply chain (You’ve already accomplished this by reading this blog post. Congrats!).
• Request sourced traffic and inventory transparency (especially programmatic video buys that tend to have higher CPM and higher fraud levels).
• Include language on non-human traffic in terms and conditions. White Ops and ANA provide a sample terms and conditions. You should consult with your own counsel to develop specific provisions that best serve your company’s individual interests.
• Use third-party monitoring to ensure compliance with anti-fraud policies. TAG provides a list of fraud detection vendors.
• Announce your anti-fraud policies to all external partners.
• Support the Trustworthy Accountability Group (TAG).