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Jan 09
Programmatic Advertising 101

Programmatic advertising 101: A guide to programmatic advertising

By 2019, 83.6 percent of US digital display ad dollars will transact programmatically. For what is programmatic, we define programmatic buying as the act of bidding on digital advertising inventory and doing so in real-time. Each one of these points is vital to understanding what is programmatic and the programmatic media buying process. To start the guide, we’ll go over what is programmatic, the programmatic advertising definition, and programmatic advertising 101.

What is programmatic? The definition

Programmatic technology, in short, is the automated process of buying digital media—often through a process called real-time bidding. Programmatic advertising enables marketers and advertisers to gain greater control, efficient pricing, budget transparency, and better opportunities for optimizations and reporting than any other method of buying digital media.

Programmatic advertising 101

We mentioned earlier that programmatic buying is comprised of two distinct touchpoints, the inventory and the bidding.

What is programmatic: Digital advertising inventory

With the growth of ad marketplaces and networks, advertisers can leverage programmatic buying to bid on and procure digital media. All of this is done without having to pre-negotiate a price with a publisher or online outlet, sign up for a minimum number of impressions or a minimum budget, or generate an insertion order.

Advertisers can buy digital media across publishers, (i.e. a 300×250 IAB standard ad unit on Yahoo! or a 15-second pre-roll video on YouTube), on-demand, and to the extent that they require in order to satisfy a specific campaign objective.

When a consumer loads a web page with available space for an ad impression, the publisher of the page puts up the ad impression for auction in an ad marketplace. The ad marketplace then runs an auction among advertisers interested in the opportunity to serve an ad to that consumer. Dozens of advertisers may simultaneously compete in such a sale.

Ultimately, only one of them wins the auction and earns the right to serve an ad to the consumer on a web page. Best of all, the process of buying and selling digital advertising inventory happens within milliseconds of the website loading and doesn’t require anyone reviewing the sale in real-time.

What is programmatic: Real-time bidding (RTB)

As mentioned earlier, the programmatic buying process is two-fold. Imagine you had the opportunity to buy an ad spot, on any website, without going through the advertising sales department (praise be). With programmatic media buying, advertisers no longer need to buy digital media from an inventory source (i.e., a web publisher) in advance. Instead, they bid for it on demand in an ad marketplace and network.

With RTB, advertisers have access to several tens of billions of daily opportunities to bid and buy digital media on ad marketplaces. The marketplaces make these opportunities available via auctions, similar to the stock market, and an entire ad auction takes place in a couple of hundred milliseconds.

What is programmatic? Here’s how RTB works:

  1. The user visits a web page with an open placement for a display ad. This is the beginning of the RTB auction lifecycle.
  2. An ad exchange or SSP announces the available bids to the bid manager. This is where your creative types & sizes and targeting strategies come into play.
  3. The bid manager evaluates the advertiser’s targeting and bids it matches. The auction then takes place for the open ad inventory, and in the instance that an advertiser is using Choozle to run programmatic ads, we will facilitate the bid in the RTB auction—if it’s a match—to the open ad placement. Advertisers always win inventory at the lowest possible CPM, but the base bid acts as a foot in the door to these live auctions.
  4. Finally, the winning advertiser serves the ad (and wins the impression). All of this takes place while a user is waiting for a web page to load, AKA, under 200 milliseconds!

Advertisers participate in real-time bidding (RTB) within ad marketplaces and respond with their auction bids within the blink of an eye. The short duration of these auctions is essential for speedy webpage downloads and an improved experience for the consumer.

How real-time bidding works graphic

Why use programmatic advertising?

The real value of programmatic buying for digital marketers is the ability to target their desired audience with digital media campaigns quickly, efficiently, and cost-effectively. As far as we’re considered, that’s a win-win-win.

If you have additional questions about our guide to programmatic advertising, please reach out to our team!

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