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The basics of Programmatic 101

Starting with the basics of Programmatic 101. Getting familiar with the basics of programmatic we start with the definition. What is programmatic? Is a system of automatic rules where there are different processes and transactions involved with buying ad spaces on websites or apps. Before programmatic, you used to negotiate directly with the publishers a specific cost of CPM (Cost per Thousand Impressions) based on the number of impressions you wanted to achieve. You would send them a contract or purchase order with the information, creatives, and the landing page to be used. Now, there’s a whole world of software and tools behind programmatic media buying making this a lot easier and more scalable. Programmatic’s core is using real-time bidding (RTB). It consists of bidding for the ad place against other buyers looking for the same user in front of the screen at that same time. Nowadays with programmatic, there are multiple ways of buying media besides buying the ad spaces from a particular site. You can also buy specific categories, keywords, audiences, and specific users that belong to your database.


Let’s get acquainted

It starts off with the publishers making their inventory of impressions available for the public to purchase through a supply side platform connected to ad exchange. These ad exchanges connect to different Supply Side Platforms(SSP). Some famous SSPs are Rubicon, Ad Manager and Pubmatic. On the demand side of the programmatic media buying we have the Demand Side Platforms(DSP). Some examples are Display & Video 360, Xander (formerly known as AppNexus) and The Trade Desk. Their job is to make the connection with the SSPs for the people who are on the trading desk working the DSPs. Trading Desks are used by ad agencies to have their own control over programmatic buying for their clients. Is mostly composed of different platforms used by programmatic specialists to make the media buy recommendation and implementation of all programmatic campaigns.Trading desks can be part of an ad agency or single out entity. Once you have your target audience and CPM on the backend of the DSP the search for available impressions begins. Based on the target audience it selects a couple of impressions from different ad exchanges that match your criteria. If your CPM matches with the price the publisher is looking for and it outbids the rest, you have your impression. Remember this is a real time auction process where you are bidding with other buyers for that ad space.

Let’s say the CPM for that buying is starting at $0.50. Your bid is $0.60 and another buyer bids $0.50. You will win that bid for sure, but depending on what platform you are and the type of price auction that platform uses you’ll have to pay $0.60, this is called first price auction,  or just one cent more from the starting bid, you will pay $0.51 for the CPM for a second price auction.

Programmatic is here

And it’s here to stay. Advertisers are investing more and more money into programmatic advertising each year. Programmatic arrived around the year 2000 and it’s only been better and more efficient for media buying and achieving client’s goals. More advertisers are getting into the hype and looking for trading desks and agencies that can provide this service. Want to find out if programmatic is right for you? Read more about programmatic here.

Want to know how really programmatic is growing each year? Here are some graphs from eMarketer showing the growth of ad spending year by year and by media channel (digital vs. traditional).