To have programmatic advertising explained clearly, it must be broken down into separate components: buying and selling. Programmatic advertising, which uses technology to automate digital marketing campaigns, involves various technologies and companies that all play a specific role in the buying and selling of these ads. Exploring the programmatic ecosystem will illuminate the possibilities of digital marketing for your brand.
We’ll use the graphic above to break down each part of the programmatic ecosystem. Beginning on the left side of the graphic, we have the “Sell Side”, which includes publishers and website owners who are selling advertising space on their sites. They are ultimately selling this ad space to buyers from the “Buy Side”, which refers to both advertisers and agencies.
The Sell Side
Publishers have a few different options when it comes to where and how to sell their ad space to the buy side, including on the open marketplace, programmatic direct, site direct, and private marketplaces.
Ideally, a publisher – like ESPN for example – sells all of its ad space directly to advertisers. Within this site direct selling method, a sales rep would work with advertisers on custom content creation and sponsorships. Examples may include promotional spots and custom advertising surrounding events like March Madness or the Super Bowl, which are purchased directly from the publisher.
Sell Side Platform (SSP)
Each publisher that wishes to make their inventory available programmatically must integrate works with a technology called a sell side platform (an SSP). The SSP connects the website to programmatic buyers via DSPs. Some SSPs sell a variety of channel placements, whereas other SSPs may specialize in one channel, such as native or video only.
Programmatic Direct Marketplaces
After ESPN sells their site direct inventory to an advertiser, such as Toyota, they might sell it via programmatic direct. In this case, the advertiser, Toyota, might come to ESPN asking to purchase $100,000 worth of inventory. ESPN and Toyota would then negotiate a flat CPM for this inventory, and Toyota would use their own DSP to decide which impressions to buy from ESPN.
If there is any inventory that goes unsold from site direct (in this case, ESPN’s website ad inventory), the programmatic direct advertisers will have the first opportunity to purchase ad inventory. Because these placements have a static CPM, the site knows exactly how much revenue they will deliver through this type of buy.
After Programmatic Direct, any remaining inventory goes into the private marketplace (PMPs), which is a premium, invite-only option for advertisers. In a PMP, only a small group of advertisers have to bid against one another in order to buy a publisher’s inventory.
A private marketplace gives advertisers an advantage with “first look access” before the inventory flows to the open exchanges. PMP inventory also provides advertisers access to specific premium ad placements, such as a homepage 300×600 unit.
With the wealth of inventory that’s available on publisher websites, there is a chance it won’t be all sold directly. Any unsold inventory then falls into the open marketplace, which is where the DSPs will bid against each other on behalf of their advertisers, and the highest bidder will win the ad placement. This is the point where the user will see the “winning” ad on the website they are visiting.
The Buy Side
On the right side of the graphic, we have the “buy side” of the programmatic ecosystem. This includes advertisers and agencies who are buying digital ad space from publishers on the sell side.
Demand Side Platform (DSP)
The demand side platform (DSP) is technology that automates the purchasing of impressions in the programmatic ecosystem. Both agencies and advertisers can utilize a DSP to purchase ad space to reach their target audience for their campaign.
A trading desk, such as AUDIENCEX’s tdX, has access to multiple DSPs, meaning they can activate campaigns across different DSPs in order to match their digital goals. AUDIENCEX has access to 12 DSPs, and works with our advertiser partners to purchase the inventory from any of those platforms.
Data Management Platform
Data management platforms (DMPs) are platforms that collect and organize data from any source, including 1st, 2nd and 3rd party data. This data is used to build audiences and targeted campaigns.
Data Sources: First, Second, and Third-Party Data
DSPs rely on a variety of data sources in order to power audience-targeted campaigns.
First-party data is data that is owned by the advertiser, and is generally collected using pixels that tracks anonymous website activity. Another valuable source of first party data is a CRM list provided by the advertiser. Through the use of a third party match company like LiveRamp, CRM data can be ingested, and a custom data segment is sent to the DSP to target against with the advertiser’s ads.
Second-party data is when a company sells an advertiser their own first-party data. A great example of second party data is Spotify. If we purchase Spotify inventory via a private marketplace (PMP), and the advertiser wants to reach users who listen to country music, Spotify will sell their second party data with their inventory. Because Spotify users have to sign in to listen, they already have this data from its users. Spotify knows exactly which users listen to country music, what age bracket they fall into, etc.
Third-party data comes from large data aggregators like Oracle, eXelate, and Lotame, and sell audience segments based on demographics, behaviors, and interests exhibited online or off-line. For example, an advertiser could test against an audience segment for people who are in-market for a pickup truck, or people who like to shop at Target, or moms with preschoolers. Each of those are examples of pre-built third-party data segments which are already preloaded into the DSP.
In a nutshell, programmatic advertising allows advertisers to effectively reach their target audiences online by testing against a variety of audience segments and targeting tactics.
Programmatic Advertising with AUDIENCEX
Working with a trading desk like AUDIENCEX can help you get the most out of your programmatic ad campaigns across various digital channels. Let us know what your goals are for your campaign, and we’ll help you identify the right strategies and platforms for you. We’ll then find the ideal ad space for your content, place your ads, provide in-depth reporting, and help you optimize your campaign, all with the help of our world-class technology. Contact us, or fill out the form below for a comprehensive one sheet outlining the inner workings of the programmatic landscape.
Looking for an even deeper dive into programmatic advertising? Visit our YouTube Channel to watch our webinar: Introduction to Programmatic Advertising.
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