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For publishers, the traditional process of selling advertising involves a lot of negotiation, insertion orders (IOs), and RFPs. It’s extremely complex. Making traditional ad buying and selling work requires a large sales and operations team. Even with a fully-staffed and equipped team, direct media buying and selling often fall flat.

Programmatic advertising is the answer to many of those problems. Some would even say it revolutionized the ad buying and selling process. 

But this relatively new process in the ad economy brings challenges along with the benefits. For those who are new to the programmatic advertising industry, there can be some confusion. 

In this post, we break down the advantages and challenges of programmatic advertising. But first, let’s define what we’re talking about.

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Programmatic Advertising

Read the full guide and stop wasting revenue on programmatic done wrong. 

What Is Programmatic Advertising?

Programmatic advertising is the traditional ad buying and selling process — digitized and mostly automated. Programmatic, in general, serves to automate and facilitate some aspects of the traditional IO process. 

Programmatic typically alleviates the need (particularly if it is through open ad exchange buying) to communicate directly with individual publishers, manually generate IOs, send assets or tags, and deal with invoicing. 

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How it Works

In general, the first step will be when an advertiser sets up their ad campaign using a Demand Side Platform (DSP). This allows the advertiser to target the desired inventory and audience

Then, the DSP will purchase inventory that matches the advertiser’s requirements via Supply Side Platforms (SSPs) or Exchanges. 

The flow of money through each of these platforms moves as follows: 

Payment begins from the Agency or Advertiser first, who pays DSP for the inventory they want to target. Then the DSP pays the SSP or Exchange as they win bids on available inventory. And finally, the SSP pays the Publisher for winning ads that are placed on the publisher’s properties. 

In 2021, programmatic advertising accounts for an estimated 88 percent of all ad dollars spent on display ads in the United States. That’s more than $81 billion.

That is programmatic advertising in a nutshell, but there are many different types of programmatic advertising. We dive into a few of the specifics below:

Programmatic Guaranteed

Programmatic guaranteed is a lot like traditional insertion order (IO) ad buys, but it is mostly automated. The budget for regular programmatic advertising is not guaranteed, but programmatic guaranteed does exactly what the name suggests it will — it guarantees the budget. Publishers and buyers negotiate over ad inventory that the publisher has guaranteed for a specific buyer. Thus the billing and invoicing will still be handled manually, but much of the ad delivery is still done through automated means.

Programmatic Preferred

With programmatic preferred, publishers agree to provide specific buyers preferential access to their inventory, but that access is not reserved — or guaranteed — only for that buyer. 

Private Programmatic Marketplaces

Private marketplaces (PMPs) are similar to open exchanges, but they’re a lot less “open.” These programmatic PMPs allow a limited set of buyers (or just one buyer) to have access to the inventory of an exclusive set of publishers.

Open Programmatic Exchanges

In the world of programmatic advertising, an open ad exchange is less of a type of programmatic advertising and more of a venue in which programmatic ad buying and selling can occur. An open exchange provides an aggregate of publishers’ inventory opportunities to buyers, who can purchase ad impressions programmatically. Unlike programmatic preferred and guaranteed, buyers all have an equal shot at the available inventory. 

Advantages of Programmatic Guaranteed Advertising

Programmatic guaranteed is one of the most sought after categories of programmatic advertising for publishers. That’s because it offers some clear advantages over traditional programmatic ad buys, particularly the fact that budgets are guaranteed. But with those advantages come some challenges. Let’s take a look at the advantages first.

All the Convenience of Automation

The big selling point of programmatic advertising is that it is automated. While traditional programmatic exchanges are also automated, programmatic guaranteed gives a publisher a little more peace of mind about the expected budget.

The advantage of automation is even more clear when you compare programmatic guaranteed with traditional IO buys. With programmatic guaranteed, you don’t have the time-wasting, back-and-forth paperwork of IOs. The automated system takes care of all of those details for you.

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Programmatic Guaranteed Is Flexible

Many publishers like the assurances that come with IO ad buys. That’s understandable. However, the convenience of programmatic often muddies the waters when both publishers and buyers are considering which strategy is right for them.

Programmatic guaranteed meets these two strategies in the middle. A programmatic guaranteed deal is highly similar to an IO buy, but it happens programmatically. 

Seamless Integration

With programmatic guaranteed, the payment process is easy. The money goes through supply-side platforms (SSPs) and demand-side platforms (DSPs), and there’s no accounting work needed after the process is done. When everything goes right with programmatic guaranteed, ad dollars flow through the system seamlessly.

Challenges of Programmatic Guaranteed Advertising

There are plenty of advantages of programmatic guaranteed, but both publishers and buyers need to consider the disadvantages, too. Here are a few.

Possible Technical Difficulties

Programmatic advertising is ad technology, and adopting new technology can leave publishers and buyers facing technical difficulties. 

For example, certain ad formats don’t work with programmatic guaranteed. The same goes for certain tags. And if an ad campaign has been set up incorrectly, you can be left with a campaign that isn’t running or isn’t performing.

A detailed advertising campaign kickoff discussions and alignment between publishers, agencies and buyers can solve a lot of the technical difficulties before they occur, but all parties involved in programmatic guaranteed still face this risk.

There’s Always a Middle Man

No matter how you approach programmatic guaranteed advertising, there is, by definition, a middle man. And the middle man always takes a cut. Both agencies and ad tech platforms take a fee out of the publisher’s ad dollar in programmatic guaranteed deals.

In the end, that means that publishers are getting less out of each dollar than they would with a traditional IO buy.

Guaranteed Doesn’t Mean 100% Guaranteed

Programmatic guaranteed offers more budget and ad spend guarantees than traditional programmatic, but these deals can still be canceled. While traditional IO ad buys can also be canceled, it’s a lot less common. Nothing is as guaranteed as a physical IO.

Advantages of Programmatic Advertising

Now, let’s take a closer look at programmatic advertising in general. As opposed to programmatic guaranteed, programmatic advertising offers no budget guarantees to publishers and no inventory guarantees to buyers. But the advantages and challenges of programmatic advertising go deeper than that — especially when they are compared to direct media buying, too. 

Let’s start with the advantages of programmatic.

More Ad Sale Volume

Because the majority of U.S. digital ad dollars are spent on programmatic advertising, any publisher who isn’t getting involved is missing out on a huge base of potential advertisers. 

Efficiency Gains with Programmatic Advertising

Many of the benefits of programmatic advertising are basically talking about the same thing: increased efficiency and flexibility. Programmatic allows an advertiser to, more or less, buy any inventory available on any publisher property. This is especially useful if they are trying to reach specific users (e.g. someone that they know either via purchase or other data). The scale and efficiency factor with which programmatic advertising allows this is unmatched.

Challenges of Programmatic Advertising

Unfortunately, there is no perfect ad tech solution that suits all publishers or all buyers. Each type of ad monetization method comes with its own challenges, and programmatic advertising is no exception.

Here are some of the disadvantages of programmatic advertising:

Budget Not Guaranteed to Publisher

In programmatic advertising, the control of the ad budget is in the hands of the ad agency or trading desk. And that translates to a buy that is not guaranteed for publishers.

Advertisers may have their ad dollars working in multiple environments at once — private deals with multiple partners and buying on open exchanges are just two examples. And agencies like having the power to rearrange ad budgets on the fly, potentially snatching revenue away from publishers at the last minute. This often happens because advertisers are tracking their own metrics, and optimizing those metrics, that they don’t necessarily share with a publisher and programmatic advertising platform.

Click and Impression Fraud

While the industry has made efforts to stop click fraud and impression fraud, there is still a lot of work to do. When bots slip through and inflate ad revenue for one publisher, all publishers suffer from reduced confidence in the industry. 

In addition, malvertising can hurt user experience and engagement metrics, while also costing publishers revenue.

From a publisher perspective, you'll want to choose an SSP that has good safeguards against malware and bad ads. On the flip side, as an advertiser you’ll be on the lookout to minimize potential fraud.

Declining Trust in the Industry

Problems with ad fraud lead to reduced overall trust in programmatic advertising. That translates to reduced ad spend. In 2018, ExchangeWire reported that 41 percent of advertisers told the publication that they were losing trust in programmatic ads. And many said they were cutting their digital ad budgets as a result.

Making Programmatic Advertising Better for Publishers

What if you could have the best of both worlds? What if there was a monetization partner who could balance all the best benefits of programmatic with the guaranteed revenue of insertion orders. 

At Playwire, we work hard to make that a reality for our publishers. With our Revenue Amplification Managed by Professionals (RAMP) platform, we combine all the automation and predictive analytics opportunities of programmatic advertising with a human touch.

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The result is the highest eCPMs in the industry. Interested in learning more? Contact Playwire by calling 1-561-206-4621 or reaching out online.

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