Welcome to the high-speed trading desk for automated digital advertising placement

Marketers spent more then $3.37 billion on programmatic advertising last year. eMarketer is estimating the programmatic advertising will top $9 billion by 2017. Research studies by the Association of National Advertisers and Forrester indicated that only 23% of marketers said they used and understood programmatic advertising and that 26% indicated they understood the concept but needed to learn more about how to apply it to campaigns.

Kantar Media defines programmatic advertising as using technology to automate the buying and selling of digital advertising. “Programmatic” has different meanings to different people depending on which side — buyer or seller — of the transaction you are on.

The term is founded on an auction concept of buying and selling digital ad space inventory on ad exchanges and networks. Through this automated process, buyers bid for online ad impression through real-time auctions that occur in the time it takes for a webpage to load.

The Interactive Advertising Bureau (IAB) has identified 4 types of programmatic advertising transactions:

Automated guaranteed – refers to reserved inventory at a fixed price between one seller and one buyer. This can also be referred to as “Programmatic guaranteed.”

Unreserved fixed rate – unreserved inventory at a fixed price between one seller and one buyer. This is also known as “Preferred deals or Private access.”

Invitation-only auction – unreserved inventory available at auction prices between one seller and a few buyers. This is also referred to as “Private marketplace or Private auction.”

Open auction – unreserved inventory, available at auction prices between one seller and all buyers. This is referred to as “Real-Time Bidding (RTB) or Open exchange.”

These four types of transactions, based on two criteria, determine how the price is set and what type of inventory is transactedThe process of programmatic advertising

In its simplest form the process works like this: in the time it takes for an ad impression to load in a user’s web browser, information about the page it is on and the user viewing history is passed to an ad exchange, which auctions it off to the advertiser willing to pay the highest price. The winning bidder’s ad is then loaded into the web page.

Advertisers use demand side platforms (DSP) software to purchase advertising in an automated process. DSPs allow advertisers to purchase impressions across a wide range of publisher’s sites, but target specific users based on the geo-location and the users’ previous browsing behavior.

Publishers use supply side platforms (SSP) to connect their impression inventory to ad exchanges, DSPs, and ad networks all at once. This allows the publishers to offer their inventory to a large audience and achieve the highest rate possible for the ad impression.

If all of this reminds you of a stock exchange high-speed trading desk, you are correct, which is not surprising because most of these platforms are funded by venture capitalists, private equity firms, and publicly traded advertising and media companies.

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