Before we get to the topic at hand, a definition of programmatic advertising. We define it simply as “Automated advertising buying coupled with machine learning.” Digiday defines it as “ad buying what typically refers to the use of software to purchase digital advertising, as opposed to the traditional process that involves RFPs, human negotiations and manual insertion orders. It’s using machines to buy ads, basically.”
On the other hand, Marketing Land says programmatic advertising “helps automate the decision-making process of media buying by targeting specific audiences and demographics.”
In terms of the different types of programmatic advertising, according to the Interactive Advertising Bureau (IAB)—which is an industry organization geared toward ensuring standards across the advertising ecosystem—there are two types of programmatic buying (the process in which you’re buying advertising):
1. Programmatic Direct
Also known as Premium Programmatic Advertising, this is an automated technology-driven method used for buying, selling, or fulfilling advertising. It provides for an Automated Guarantee Systematic automation of sales process. No insertion order (IO) or master services agreement (MSA) covered within the partnership. Under programmatic direct deals, a publisher’s sales rep may negotiate an arrangement with an advertiser that includes top-tier inventory like home-page- takeover ads at a fixed price for a guaranteed number of impressions. It’s the equivalent of booking a hotel room directly through the hotel, rather than from an online retailer like Expedia. Programmatic Direct is a good choice for companies focused on brand safety, inventory control, premium placements etc.
2. Programmatic Real Time Bidding (RTB)
Two types of RTBs are Open Auction (audience targeting) and Private Marketplace Deals—which require a private marketplace and allow for fixed pricing and data overlays. A Private Marketplace (PMP) is an invitation-only RTB auction where one publisher or a select number of publishers invite a select number of buyers to bid on its inventory. Inventory purchased is transparent – the buyer knows exactly which site the ad will run on. With Private Marketplaces, the general premise is to skip the exchanges altogether. We are beginning to see more and more of this type of programmatic advertising being used every day.
Why does programmatic advertising matter?
The shift to programmatic tactics means a few things for marketers and the industry as a whole. In essence, it has validated and delivered against the need for data- driven, and accountable ROI-based media delivery. Additionally, it has enabled an efficient method for publishers to monetize core inventory.
That said, some advertisers have struggled with premium inventory falling outside of the standard programmatic categories and are still being required to fulfill unique and exclusive campaign needs.
Regardless, the entire programmatic category is seeing increased spending across the board due to its predictive yield and ROI for marketers and publishers alike, not to mention easy insertion processes and lower barriers to entry for most advertisers.
In a nutshell, programmatic advertising aligns media with brand lift metrics for real ROI and only spends money where it will be effective.