Programmatic Advertising: What Publishers and Advertisers Need to Know

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How is online advertising done in 2021? Programmatically. 

It’s true. Advertising industry experts estimate that advertisers will spend $81 billion buying display ads programmatically in 2021. That’s 88% of all the money advertisers will spend on display ads in the United States this year.

For both advertisers and publishers, programmatic advertising is where the money is. And almost everyone is engaged in programmatic ad buying or selling. But here’s the problem: everyone may be doing it, but very few people are doing it right. That means publishers and advertisers are missing revenue opportunities or even wasting revenue on programmatic done wrong.

That’s why the programmatic advertising experts at Playwire have put together this comprehensive guide to programmatic advertising for publishers and advertisers. For more information, keep reading. And for help managing and maximizing your programmatic ad buying and selling efforts, get in touch with Playwire today.

81 billion (1)

 

Table of Contents

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Definition of Programmatic Advertising

Let’s start with the basics: what is programmatic advertising? It’s a highly complex process that can be summed up rather simply — it’s digital advertising, mostly automated.

Programmatic advertising doesn’t take humans completely out of the advertising equation, but it does reduce the need for people who directly purchase ads or sell ad inventory. With programmatic, there’s less negotiation, no insertion orders (IOs) and no requests for proposals (RFPs). However, even mid-sized programmatic ad campaigns and inventory sales require a human touch to manage them in a way that maximizes revenue.

How Programmatic Advertising Works: The Basics

The programmatic sale and purchase of ad inventory happens in real time. The moment a user lands on a publisher’s site and becomes an “impression,” a flurry of data and information flows through various servers and platforms to deliver a properly targeted ad that checks all the boxes for the advertiser and the publisher.

Here’s a brief overview of how programmatic advertising works:

1) A user visits a publisher’s website, on that website page is an ad unit.

2) First- or third-party data about that user feeds information into the publisher’s supply-side platform (SSP), where the impression is put up for auction.

3) Through demand-side platforms (DSPs), advertisers’ pre-set campaign criteria drive automatic bids for the impression and the publisher’s available inventory.

4) The impression and inventory slot go to the highest bidder.

5) The advertiser’s ad flows through various ad servers to display on the publisher’s site for the user to see and potentially engage with.

That’s the programmatic advertising process in a nutshell. It all happens in less than a second.

Programmatic Buys vs. IO Buys

On the publisher or advertiser side, it’s easy to see that programmatic is really different from traditional IO ad buys. Here are a few of the key differences:

Way Less Paperwork with Programmatic

In programmatic advertising, there is simply no time to waste on paperwork. Everything has to happen instantaneously. IOs, on the other hand, are contracts and orders that require input from the publisher and advertiser, signatures and filing. Even if you don’t print out an IO, you still have it somewhere in PDF form well before the ad in question ever goes live.

IO Buys Are More Guaranteed

The traditional IO buy is as close to guaranteed revenue as you can get in advertising. IOs can certainly be canceled — Interactive Advertising Bureau rules allow anyone to get out of regular media within 48 hours and 30 days for custom media — but they are direct buys between particular publishers and advertisers. 

Meanwhile, programmatic deals are far more free-form. While they happen automatically, advertisers select target audiences, inventory types, platforms and particular publishers, and they can change those selections whenever they like. 

In fact, advertisers and ad agencies like to have their budgets working in multiple programmatic platforms, as well as other ad buying platforms, at one time, and they routinely change up their strategies to chase ROI that is even a fraction of a percentage point higher.

Some of the most prominent demand-side platforms (DSPs) that ad buyers use to buy programmatic ads include the following:

Ad Dollars Change Hands More with Programmatic

In programmatic advertising, ad dollars make a few pit stops between the advertiser and the publisher. At each stop, someone else takes a cut. The programmatic platform, the DSP, the SSP and the ad mediation partner all get paid as ad dollars flow through the system. 

This is the price publishers and advertisers pay for increased efficiency and access to more ad dollars and inventory. But compared to IO buys, which can be as simple as an agreement between one advertiser and one publisher, programmatic advertising can put less money per buy in publishers’ hands.

Programmatic Advertising Types

Since its inception, programmatic advertising has grown and evolved into several programmatic advertising types. Each type offers something a little different to publishers and advertisers. Besides standard programmatic buys, you may encounter the following as you buy or sell ad inventory programmatically:

  • Programmatic guaranteed
  • Programmatic preferred
  • Private programmatic marketplaces
  • Open programmatic exchanges

Below, we take a closer look at each of these types of programmatic advertising.

Programmatic Guaranteed

If you’re yearning for the guaranteed budgets of IO buys but need the automation of programmatic, programmatic guaranteed might be your solution. This type of programmatic advertising allows buyers to purchase ad inventory directly from particular publishers. Ahead of time, the advertiser has agreed to buy a specific number of impressions. The publisher will deliver that exact number of impressions for an agreed-upon price.

The automated ad delivery and selection process is still more or less the same in programmatic guaranteed and standard programmatic buys. The key difference is that the publisher gets a guaranteed budget and the advertiser gets guaranteed access to inventory from specific publishers. This high level of budget promise makes programmatic guaranteed the holy grail of ad sales methods for publishers.

Programmatic Preferred

It isn’t guaranteed, but programmatic preferred is exclusive. In this type of programmatic advertising, publishers agree to give particular ad buyers preferential access to their inventory for a previously selected and agreed-upon price. 

Preferences aren’t perfect. For advertisers, getting preferential access may be nice, but it is not a guarantee of access to a particular publisher’s inventory. On the flip side, publishers don’t get any guarantees from advertisers that they will actually buy the inventory they’re getting to take the first look at. 

Under this model, if inventory fails to sell in the preferential access stage, it typically makes its way to the open auction of standard programmatic. 

Private Programmatic Marketplaces

Also called closed, private and invitation-only auctions, private marketplaces (PMPs) give a highly limited set of ad buyers — sometimes even just one advertiser — access to ad inventory from a highly selective set of publishers. Because PMP deals most often involve premium inventory and hand-picked advertisers, the cost per mille (CPM) involved is usually quite high. This model allows publishers to offer inventory that is centered on particular metrics that may be desirable to certain advertisers, such as particular audience characteristics or content types. 

While the invitation and selection process can take some time, PMPs are still programmatic. Once the buyers and sellers are in touch and in agreement, the deals happen programmatically.

Open Programmatic Exchanges

Open auctions are the most crowded room in the house of programmatic advertising types. That’s because all buyers are eligible to bid on publishers’ inventory in real time. That can mean high competition because every buyer has a chance to nab a particular piece of a publisher’s inventory.

It’s not as chaotic as it sounds, though. Publishers can set floor prices for their inventory, block certain advertisers and allow only certain types of ads. Similarly, advertisers can set up and optimize their campaigns before the bidding begins. That way, they only get ads that satisfy their campaign requirements, and they get them with the speed that only programmatic provides. This does involve lots of turning knobs and dials to get all of the settings tuned just right on both ends, and must be repeated across each platform used by a publisher or advertiser.

While ad buying and selling strategy will vary widely and be based on the individual needs of the publisher or advertiser, open programmatic exchanges are a common venue for publishers to sell inventory that didn’t get snapped up in the preferred, private or guaranteed programmatic marketplaces.

Data Use in Programmatic Advertising

For both publishers and advertisers, data is a hugely important part of programmatic advertising. Why? Because advertisers use layers of data to optimize their programmatic campaigns to select inventory that will get in front of the right audience, and publishers use data to tell advertisers that they have the audience they’re looking for. 

Programmatic advertising uses two key types of data: first party data and third party data. 

What Is First Party Data?

First party data is the information publishers collect directly from the users on their sites. How users interact with content, demographic information, buyer intent and more pieces of information can all come from publishers’ first party data. 

Publishers collect first party data and use it to prove to advertisers that they have an engaged audience that matches what ad buyers are looking for. Feeding first party data into the programmatic process allows algorithms to match publishers’ information (based on their provided data) with advertisers’ campaign optimization requests. 

This can increase revenue for publishers, by making their inventory more attractive, and ensure that advertisers get what they bargain for in terms of relevant impressions.

What Is Third Party Data?

Third party data has been a cornerstone of digital advertising for years. Usually collected through third party cookies, third party data tracks a user’s behavior and information across all of the sites they visit — not just the site of a single publisher.

Advertisers often purchase third party data sets to get broad user and demographic information and find the best potential customers to serve their ads to. Then, they may layer information from the third party data they have collected into their programmatic ad buying campaigns to unlock access to the right kinds of ad impressions.

Although third party data is what traditional programmatic ad platforms provide access to, it can present some problems. For one thing, third party data is often inaccurate or incomplete. When you compare it to verifiable first party data, you can easily identify conflicting information. In Playwire’s experience, third party data can provide inaccurate information up to 50% of the time. 

Still, advertising agencies may have a mandate in place to check certain boxes based on information from third party data. This can lead to problems in programmatic campaigns. All the right boxes may be checked, but because the third party data was weak or inaccurate, the campaign isn’t delivering the expected results.

First Party Data: More Important Than Ever

For better or worse, third party data has been the driving force behind many programmatic campaigns for years. But that’s about to change. Google has announced that it will put a stop to third party cookies on its Chrome web browser by 2022. With more than 50% of the world’s web traffic coming through Chrome, this announcement is a game-changer.

How is programmatic advertising going to work without third party data? How are advertisers going to ensure that they get relevant and useful impressions, and how are publishers going to help advertisers understand that their inventory is relevant?

The answer is first party data. Even with the death of third party cookies — or at least a profound change to them — publishers will still be able to gather first party data to use in programmatic advertising. And advertisers can use that first party data to decide whether a publisher’s inventory is worth the price.

via GIPHY

There’s one problem: scalability. At best, gathering enough first-party data from publishers to understand the available inventory is inefficient. At worst, it’s impossible. Similarly, publishers can’t possibly leverage their first party data with enough individual advertisers to create enough competition to generate high revenue. 

There’s one solution: first party data marketplaces like Playwire. With first party data input from thousands of publishers, Playwire has enough first party data for advertisers to get the highest-value impressions on their campaigns. Playwire’s marketplace offers access to thousands of advertisers for publishers who have first party data to leverage but nowhere to leverage it.

Now that we have covered the basics of programmatic advertising and data use, we need to take a closer look at programmatic advertising on the advertiser side and on the publisher side. Let’s start with the advertiser side.

Programmatic Advertising for Advertisers

For advertisers and agencies, programmatic ad buying offers scale, convenience, speed and precise audience targeting. The vast majority of online advertisers spend some, if not all, of their budgets on programmatic deals. The reasons for that may already be clear, but programmatic does come with some drawbacks for advertisers. 

In this section, we examine some of the pros and cons of programmatic ads for buyers, types of programmatic ad inventory, how to buy ads programmatically and how to refine your programmatic ad buying strategies to maximize results.

Pros and Cons of Programmatic for Advertisers

If you want access to the full range of online publisher inventory, it’s going to be hard to avoid programmatic platforms. Almost nobody skips programmatic completely, which is due in part to the benefits of programmatic advertising and to the fact that everybody else is doing it.

Even if you can’t really decide to completely forego programmatic in your buying strategy, it can be helpful to understand some of the pitfalls of programmatic for advertisers so you can do your best to avoid them or at least see them coming and prepare. The following are a few pros and cons of programmatic for advertisers.

thumbs up blk-1Pro: Automation Saves Time and Resources

It has to be said: programmatic is fast and scalable. If you had to dig through the inventory available from every digital publisher who would like to land a portion of your budget, you would work around the clock and still never make a dent.

Programmatic helps to solve that. Publishers make their inventory available in the programmatic marketplaces, and you feed your desired demographic and user characteristic data into the program, set up and optimize your ad campaign and let the algorithm do the work. It’s highly automated to give you the wide inventory access you need and save you the time you don’t have to waste.

thumbs down blk-1Con: Click and Impression Fraud Happen

Sadly, some publishers engage in click and impression fraud to inflate their revenue, and often this is happening without the publisher’s knowledge. These publishers don’t have the audience they say they have — instead, they use bots to drive up clicks and impressions to satisfy campaign requirements. Meanwhile, your campaign is not reaching the actual human beings it needs to reach.

A 2016 report by White Ops and the Association of National Advertisers found that advertisers lost as much as $7.2 billion in ad dollars to bots that year. That’s a lot of wasted money. As hard as the industry has tried to create safeguards against invalid bot traffic and impressions, few methods have worked well enough to prevent ever more sophisticated bots from inflating the numbers in traditional, open-market programmatic deals.

The good news is that you can take steps to avoid losing your budget to bots. Stick with trusted programmatic platforms that have as many fraud safeguards in place as possible and, where possible, look for deals that involve direct contact with a publisher. If you’re working in a programmatic guaranteed, preferred or PMP environment, you have a much better chance of spotting fraudulent publishers because you have to interact with them before the programmatic deal takes place.

thumbs up blk-1Pro: Target Precise Audiences with Programmatic Ads

For many advertisers, the ability to target precise audiences across thousands of publishers’ audiences is the best part of programmatic advertising. Instead of identifying just a handful of publishers who appear to have the right audience, you can feed your preferences into a programmatic platform and let the algorithm do the work for you.

Programmatic offers the audience targeting scalability factor in spades, but it also offers audience segmentation that is hard to recreate with more traditional IO buys. With programmatic, you don’t just buy a spot in front of a publisher’s entire audience. You can buy a spot in front of a particular segment of a publisher’s audience and have your ad delivered to them in real time as they interact with the publisher’s site. That kind of precision is hard to beat.

thumbs down blk-1Con: Technical Problems Can Derail Campaigns

Like most other forms of advertising, programmatic advertising is vulnerable to tiny mistakes that can derail entire campaigns. One wrong setting on your programmatic platform or one mistake on the publisher’s side, and your campaign may not deliver ads to the right people or even show at all.

As a piece of advertising technology, programmatic can present a technical barrier to entry that is hard for some advertisers to overcome. That’s why many advertisers work with a programmatic ad mediation partner like Playwire to ensure their campaigns are set up correctly and getting the best possible results.

Diverse Programmatic Inventory Types

Back when it first started, programmatic ad buying only applied to traditional banner display ads. It’s come a long way since then. Now, advertisers can buy the following inventory programmatically:

Display

Banners, interstitials and other types of display inventory are all available for purchase programmatically. 

Video

Programmatic platforms can easily match up advertisers who have video ads to show and publishers who have video players to fill with ads. 

OTT

Over-the-top (OTT) ads appear on streaming devices, often on free channels. A relatively new player in the programmatic ad game, programmatic OTT inventory can offer access to semi-exclusive OTT channel audiences.While most OTT content is streamed on internet-connected TVs (CTV) today, some OTT content is streamed on mobile devices. CTV-specific ads are available programmatically.

App

App publishers keep the lights on by selling their in-app ad inventory programmatically. Interstitials, videos and banners are common programmatic selections, but the flashier gamified and rewarded ads are not typically available. 

What Traditional Programmatic Can’t Do (But Playwire Can!)

Programmatic advertising focuses on the bread-and-butter — but somewhat boring — ad inventory types: display, banner, standard video, commercial spots and the like. That’s a side effect of programmatic’s need to make a huge number of publishers’ inventory work for a huge number of advertisers in real time.

You won’t find custom ad, site takeover, gamified ad or rewarded ad inventory on the vast majority of programmatic platforms. These more interesting, and often more effective, inventory types are typically only available through direct buys because they require a lot of communication between the publisher and the advertiser.

Playwire has stepped in as an intermediary that can not only create and facilitate these ads, but sell them programmatically at customizable scale across our vast publisher network. Contact our team of online ad experts to learn more. To see some examples of Playwire’s custom ad units, click here.

How to Buy Programmatic Ads

The process of buying ads programmatically is largely automated, but it requires your input in the early stages to ensure that you get your ads in the right places.

Picking DSPs

Advertisers use DSPs to control their activities on programmatic ad exchanges. Basically, you set your targeting parameters inside the DSP, the DSP furnishes that information to the ad exchange and you buy ad inventory in real time based on the parameters you set. 

You may use multiple DSPs to reach certain kinds of inventory or certain publishers. DSPs are not all the same. When selecting a DSP, you need to consider the following:

  • Does this DSP give me access to the types of inventory I need?
  • Does this DSP provide filters to help prevent ad fraud and keep my ads from displaying next to inappropriate content?
  • Does this DSP provide real-time, accurate reporting that I can use to inform my programmatic ad buying activities?
  • Does this DSP charge an appropriate amount of money for what it delivers? 
  • Will the cut the DSP takes from each buy damage my ability to reach enough people with my budget?
  • Does this DSP allow me to use the right kinds of data to target the precise audience I need to target? (And is it prepared to leverage first party data as data from third party cookies fades?)

Focusing on Select SSPs

SSPs list and connect publisher sites in the programmatic ecosystem, but advertisers can leverage what they know about certain SSPs to ensure that they get access to the right programmatic ad inventory. 

If you know, for example, that certain SSPs cater to publishers with high-income audiences or audiences that live in particular locations, you may be able to select those SSPs in your DSP settings and only purchase ad inventory from them.

Because SSPs do not have publishers’ best interests in mind, Playwire adds value by getting involved in the ad sales process and ensuring that maximum publisher revenue is the first and foremost concern.

Publisher Site Lists

To get even more granular, some DSPs allow advertisers to use lists of individual publishers to drive their programmatic ad buying activities. If you have narrowed down the inventory you want to a few hundred or even a few dozen publishers, this method can help you get your ads in the right places while still benefiting from the convenience and speed of programmatic advertising.

Buying Ads by Vertical

Advertisers who are less interested in particular publishers but really want to get impressions from people who are engaged with a particular topic may benefit from programmatic ad buying by vertical. You may be able to select certain verticals inside your DSP. That way, you would only purchase ads from publishers within that vertical.

Preventing Fraud

Fraudulent reselling of inventory and click and impression fraud plague the world of programmatic advertising. But two technological innovations help advertisers avoid becoming victims of ad fraud: Ads.txt and Sellers.json.

These are both files that enable buyers to verify the identity of the final seller of the inventory. DSPs and buyers should only buy through Ads.txt channels and look for Sellers.json files you can review on exchanges.

Programmatic Advertising for Publishers

For publishers, programmatic advertising offers a vast ocean of advertisers who have cash in hand and are ready to buy their inventory. Virtually all publishers are selling at least some of their inventory programmatically, but not all of them are doing it in a way that maximizes their revenue. 

Let’s take a look at some of the pros and cons of programmatic for publishers.

Pros and Cons of Programmatic for Publishers

It’s hard to deny that programmatic advertising has been a good thing for publishers overall. After all, programmatic’s very creation solved the big problem early online publishers had: a ton of inventory and no one to sell it to. But the plus side of programmatic does come with some negatives for publishers. Here are some of the benefits and drawbacks:

thumbs up blk-1Pro: Sales Teams Can Bring in Higher Yields

Profit margins for publishers look different from vertical to vertical and publication type to publication type. But in the aggregate, publishers often face small profit margins that leave little room to squeeze in a fully equipped and trained ad sales team.

With programmatic, you just feed your inventory into the platform and let it sell automatically in real time. Programmatic advertising platforms reduce the need for a sales team, and the sales staff you can bring in will have more efficiency at their fingertips, allowing them to bring in more revenue. 

thumbs down blk-1Con: The Programmatic Middle Man Takes a Cut

Cutting out the middle man is a well-known way to increase your revenue. But it really isn’t possible in programmatic advertising. Publishers have to rely on an SSP to feed their inventory into the system. Then, they need a programmatic platform to facilitate the deal. On the other side, the advertiser is using a portion of each budget to pay their DSPs.

Each of those parties — the SSP, programmatic platform and DSP — is a middle man. And they all take a cut of each buy. That means less money per buy in publishers’ hands.

thumbs up blk-1Pro: More Ad Dollars Go to Programmatic Ads

Even if a smaller percentage of each programmatic buy is going to the publisher, there’s still plenty of money to be made for publishers in programmatic advertising overall. That’s because the vast majority of online advertising dollars go to programmatic buys. To get your cut of that money, you have to go where the money actually is.

thumbs down blk-1Con: Publishers Don’t Get Guaranteed Budgets

Programmatic advertising may open your access to more advertising dollars, but you can’t always count on the budgets in programmatic deals. Because advertisers use multiple DSPs and platforms at once and change their budgets on the fly, you don’t get a guaranteed spend like you do with a traditional IO.

Programmatic guaranteed can bring you closer to the guaranteed budget you’d like to rely on, but nothing is as solid as the old-school IO.

Programmatic Inventory Sales Strategies

For publishers, “programmatic” is the method of selling your inventory. But you still have to choose the channels through which you will sell your inventory programmatically. 

As a general rule, larger and premium publishers tend to have more offline sales efforts going at once, so they can be a little more selective about the programmatic channels through which they sell. 

Selling Everywhere

The strategy of selling your inventory through every SSP you can find is a common one for smaller publishers and those who are trying to bring in revenue any way they can as they grow. If you’re unconcerned about the types of ads that display alongside your content, this strategy may work, but be advised that being a little more selective can sometimes pay off for publishers.

Keep in mind, too, that DSPs are getting smarter all the time. They’re getting much better at finding inventory at different price points and picking the lowest amount.

Selling Via Select SSPs

Some publishers like to be more targeted with their programmatic advertising activities. In fact, some publishers use only one SSP if they can find one that gives them access to enough demand and high enough eCPMs.

But many publishers use only three or four SSPs to ensure they aren’t overwhelmed by having to manage them all, while still getting the diverse features and access to advertisers that they need. 

So, how do you go about selecting an SSP? Consider the following factors before making your choice:

  • The SSP’s reporting process and whether it is detailed and fast enough to allow you to tweak your approach and maximize revenue in real time
  • Whether the SSP’s access to ad exchanges, partners and advertisers is broad enough to generate competition for your inventory
  • Whether the SSP allows you to sell your preferred inventory types and even custom ads

Why Programmatic Is Better with Playwire

Almost everybody on both the publisher and advertiser sides is doing programmatic, but very few are maximizing their potential revenue or reach. A mighty river of revenue opportunity for both advertisers and publishers flows through the gap between simply “doing programmatic” and doing it right.

Playwire helps publishers and advertisers capitalize on that opportunity by offering programmatic campaign management that leverages a wealth of first party data, custom ad types and a human touch to complement the automation that programmatic offers.

Playwire Is a First Party Data Marketplace

The programmatic ops team at Playwire has put a lot of work into building out volumes of first party data from thousands of diverse publishers. In a world in which third party data is likely to fade significantly or go away for good, this first party data is only going to become more valuable.

For both advertisers and publishers, working with a first party data marketplace is a win. Advertisers get access to the information they previously obtained from third party data so they can target the right audiences, and publishers can leverage their valuable first party data with a platform capable of increasing their revenue.

Playwire Can Sell Custom Ads Programmatically

Advertisers, do you want custom gamified ads to drive engagement with your brand? Publishers, do you want high-dollar custom ad inventory that you can sell programmatically? 

That’s what we do at Playwire, and almost no one else is doing it. We bring all the customization, audience targeting and inventory optimization of a premium ad partner to the automation, speed and scalability of programmatic. On top of that, we are Trustworthy Accountability Group (TAG) certified and Children’s Advertising Review Unit (CARU) compliant

Playwire Brings a Human Touch to Programmatic

Don’t mistake automated for fully automatic. Programmatic advertising still requires a human touch if you want to maximize your revenue as a publisher and make your dollar go further as an advertiser. Playwire’s programmatic ad tech solutions are technology-driven but human-controlled. That gives both publishers and advertisers the best of both worlds. 

Playwire: Managed Programmatic Advertising That Works

Programmatic advertising is here to stay. And Playwire is here to make it work for you. To discuss your unique programmatic advertising needs with an expert, reach out to us. Give us a call at 1-561-206-4621 or contact us online.

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