Shift to Programmatic Is Picking Up Speed
The ongoing shift from traditional ways of buying display advertising to programmatic buying through a demand-side platform (DSP) is picking up speed.
I was reading AdExchanger Research’s The State of Programmatic Media (Q2 2014)and was thrilled to see that programmatic buying for display is continuing to increase at a fast pace, with two-thirds of marketers noting that they plan to manage at least 40 percent of their total digital budget programmatically over the next 12 months. And they plan to spend a larger portion of their programmatic budgets on private marketplaces and programmatic guaranteed buys.
Marketers indicated that they plan to allocate about half (51 percent) of their programmatic budget on open ad exchanges, 33 percent on private marketplaces, and 16 percent on programmatic guaranteed buy types in the next 12 months. (This is up from current allocation of 61 percent for open exchanges, 29 percent for private marketplaces, and 10 percent programmatic guaranteed today).
What does this mean for display advertisers? It makes their lives a lot easier.
Managing all display buy types programmatically through one DSP gives the advertiser centralized campaign and creative management, tracking, performance and attribution reporting, and transparency into media costs, vendor fees, ad exchanges, and ad inventory.
Here is an overview of the common ways that display ads are bought and sold and how they are supported programmatically through a DSP.
First, What Is Programmatic?
- Programmatic just means that the buying and selling process is automated (little or no human intervention), making it easier for advertisers and publishers to transact. Media is purchased and optimized through platform algorithms using available data (audience, device, time, geography, inventory source, category, etc.).
- Programmatic buying for display includes open ad exchanges, private exchanges, private marketplaces, and programmatic guaranteed.
- Real-time bidding (RTB), on the other hand, specifically refers to the automated buying on ad exchanges in an auction environment in real time at the impression level.
- Programmatic includes broader use cases, for example, where the price is fixed (premium guaranteed, private marketplace) and the process is automated but there is no bidding in an auction environment.
How Display Ads Are Bought and Sold
- Guaranteed Premium – An advertiser buys premium ad placements directly from the publisher’s sales team. (Think of a premium placement on MSN Money, Yahoo homepage, or CNN.) The buy is guaranteed or reserved (fixed pricing, impressions, campaign dates).
- Ad Network – An advertiser buys indirectly from an ad network and interacts with the ad networks sales team. The ad network aggregates publisher ad inventory and packages it up to sell by audience, contextual category/vertical, or buying option (CPM, CPC, CPA). (Think of the Microsoft Media Network, Yahoo network, Advertising.com.) The ad inventory is nonguaranteed or unreserved and is sold in an auction environment.
- Ad Exchange via a DSP – An ad exchange is an ad marketplace for buying and selling ads via a DSP (Google Ad Exchange, Facebook Exchange). Publisher inventory is sold in an auction environment to advertisers. The DSP enables advertisers to buy media and audiences through RTB on the ad exchanges and optimizes the campaigns on behalf of the advertiser. The ad inventory is nonguaranteed or unreserved and is sold in an auction environment.
Ongoing Shift to DSP as Central for All Programmatic Display Buying
The DSP is increasingly becoming central to all types of display buying and selling. DSPs like Adobe Media Optimizer are investing in programmatic capabilities beyond buying on open ad exchanges to more broadly meet the demands of advertisers and publishers for all types of display buying.
Here are the different ways that advertisers are buying display programmatically through their DSP:
- Guaranteed Direct – Buying of guaranteed premium ad placements is automated through the DSP (RFP process, campaign trafficking, reserving of ad inventory) and negotiated one-to-one between the advertiser and publisher. This method offers guaranteed or reserved inventory (impressions, campaign dates) and fixed pricing.
- Private Marketplace (PMP) – The publisher or ad network makes its inventory available in an exchange environment with pre negotiated fixed pricing in a one-to-one relationship with the advertiser. Advertiser has a ”first look” and first option to buy the publishers ad inventory, audience, etc. This method offers nonguaranteed or unreserved inventory but fixed pricing.
- Private Exchange – Participation is restricted to select advertisers. Invited advertisers bid on the publishers or networks ad inventory in one-to-few publisher-to-advertiser relationships. This method (sometimes called an invitation-only exchange) involves nonguaranteed or unreserved inventory and an auction.
- Open Exchange – In an open auction-based ad marketplace, publishers sell their ad inventory on an ad exchange. Advertisers buy ad inventory on the ad exchanges through their DSP and bid on individual user impressions in real time based on what is known about them. All buyers can participate, with no direct relationships. This method involves nonguaranteed or unreserved inventory and an auction.
The Shift Is Reliant on Premium Publishers
For these channels to grow, display advertisers must rely on publishers to make their inventory available through these channels. Premium publishers were formerly hesitant to sell their inventory programmatically. A few years ago, RTB and programmatic were believed by many to be for poor quality or junk ad inventory. Premium publishers were concerned that their ad inventory would be devalued in an auction environment and had concerns about brand safety and undesirable advertisers appearing on their site
Premium publishers are now more comfortable with these options that give them more control over their ad inventory and the advertisers that can access it.
Expect the shift to programmatic display buying and DSPs to continue.