by Susan Kuchinskas

Ever find yourself confused with the term, “Programmatic Advertising?”

Even if you’ve been in the ad tech space for a few years, the concept of programmatic advertising may seem confusing. But you probably hear the term often in everyday communications with clients. Or maybe you have a partial understanding of what programmatic means. In any case, it helps to have a refresher.
Once and for all, let’s lock down the concept.

For the sake of conversation, you can think of the concept as similar to electronic stock trading. Instead of managing their campaigns manually, advertisers use a network of algorithms, data feeds, and bid management tools. Instead of purchasing ad units manually, companies can control their online advertising using technology. Everything has the potential to be automated and optimized around consumer behavior.

The rest of this guide will show you how it all works.

The programmatic players

Let’s talk acronyms and jargon. Here are the fundamental concepts that you’ll want to know.

Supply-side platforms, also known as SSPs, are electronic trading desks operated by media owners or groups of them – those with a supply of media to sell. Not all media owners operate them; some send their inventory to third-party platforms.

Demand-side platforms, or DSPs, are usually operated on behalf of advertisers – those with a demand for advertising. Some large media agencies have their own DSPs; others are provided by vendors. They often integrate with supply-side platforms.

Private marketplaces (no acronym needed, whew!) are usually operated by premium publishers that want to automate some of their transactions with a select group of advertisers. They’re not open to all advertisers.

Data management platforms, or DMPs, are large databases that are maintained by the owner of the data, usually an advertiser or brand. They contribute audience data that lets the advertiser target against multiple criteria.

Ad exchanges are like super-smart ad servers. They provide that electronic trading desk functionality where ad buyers and sellers can come together. They usually have many connections with a variety of publishers, advertisers and data vendors, including all of the above-mentioned players.

Advantages of programmatic

Automation can speed the ad-buying process and save a lot of time for media buyers and planners. In an ideal world, buyers can use the time saved to engage in higher-level tasks, such as coordinating with clients and publishers to create custom campaigns or placements.

Another advantage is that, because programmatic happens in real-time, campaigns can be optimized before they’re over. The advertiser may have thought that men 18 to 35 were the right audience, but real-time analytics may show that the best response is coming from men aged 24 to 30. The advertiser can change the bid to get a better ROI; if it has the capability, it can even change the ad creative to better appeal to the original target.

The downsides

Although programmatic buying can be more efficient both in terms of the media spend and in terms of the media team’s time, it can add costs, because every entity that engages in the transaction charges a fee.
There is also high potential for ad fraud, because transactions are machine-to-machine, instead of person-to-person. The Association of National Advertisers studied the digital buys of 49 advertisers and found that between 3 and 37 percent of supposed ad impressions were actually ads served to bots, and it found that programmatic buys attracted 73 percent more bots than direct buys.

Here to stay

The use of programmatic buying is growing. In 2015, it accounted for 55 percent of all digital display ads sold. Moreover, its use is growing, with broadcast and local TV ads, and native advertising now being transacted programmatically.

Any questions? Looking for more resources around programmatic advertising? Have a specific question? Whether you want to talk about emerging opportunities in the market or learn about the technology, check out the Pumpt blog frequently. Every week, we’ll share what’s new in the industry and introduce you to fundamental concepts in the market. We’ll also share career pointers for ad tech sales reps of all experience levels. We’re excited to help you grow in your career.