This post was first published on LinkedIn by Ankush Gupta.
Programmatic advertising is one of the most recognized, yet highly misunderstood terms used in the marketing industry today. It is a sector that grows rapidly each year, and as shown in the infographic below, display is expected to outpace paid search in 2017 — in fact, within the coming year, 72% of all display media buying will be done programmatically. So, here is a comprehensive guide for anyone looking to get a better understanding about programmatic advertising.
What is Programmatic advertising?
Simply speaking, programmatic advertising can be defined as technology-assisted buying, selling and optimization of ads. In contrast, non-programmatic (or traditional) advertising, involves RFPs, human negotiations, and manual insertion orders.
So basically, programmatic advertising means using technology to buy & sell ads.
Sounds familiar? Yes, paid search is a classic example of programmatic advertising.
“The use of technology to automate processes and the use of math to improve results. It is the future of marketing, available now.” – Joe Zawadzki, CEO, MediaMath
PROGRAMMATIC DISPLAY
Generally, if you hear somebody talk about “programmatic” – there is a good chance that they’re referring to programmatic display. This is due to the fact that ‘paid search’ can be bought ONLY programmatically — which is why nobody calls it “programmatic paid search”, instead, it’s simply known as paid search. For the purpose of this article, we will focus on programmatic advertising, or more appropriately — programmatic display advertising.
How does Programmatic display advertising work?
Programmatic display advertising is a type of display advertising, where advertisers programmatically serve display ads to their targeted audience on publisher sites.
Have a look at this diagram to better understand how media buying occurs programmatically:
In my opinion, there are 5 main players essential to the process:
- Advertisers / Marketers: buy-side
- DSP: used by advertisers (or agencies working for advertisers) to create, manage & optimize campaigns that serve ads on publisher sites, via the ad exchange. (kind of like: AdWords GDN or DoubleClick Bid Manager / DBM)
- Publishers / Audiences: sell-side
- SSP: used by publishers (or agencies working for publishers) to make website ad inventory available for selling to advertisers, via the ad exchange. (kind of like: AdSense or DFP)
- Ad Exchange: marketplace where the auction takes place. DSP sends requirements for buying the ad to the Ad Exchange, and SSP fulfills that demand from Ad Exchange while satisfying the requirements. This entire process is concluded in milliseconds.
The chart below showcases the programmatic display ecosystem in the real-world:
Important to note:
As seen above, an advertiser needs to use some kind of a DSP (like: AdWords GDN or DBM) to enter the programmatic ecosystem. So, the terms Programmatic and DSP are often used interchangeably from an advertiser’s perspective. (Note: AdWords GDN is not a proper DSP – which will be explained further below).
What are the different forms of Programmatic buying?
Ever heard of the phrase “remnant inventory”?
The world of programmatic advertising revolves around remnant inventory — i.e., publisher ad inventory that is leftover after executing their direct media buys. (Note: direct media buy share is shrinking every year).
- Programmatic Direct: In short, it’s an agreement (directly between the advertiser and the publisher) to purchase a pre-determined number of impressions or clicks (guaranteed or unguaranteed) on the publisher site at a fixed price but served programmatically — it can be considered as a subset of direct media buying. To put it another way, any remnant inventory that is not auctioned through the open or private exchange, is purchased using programmatic direct. (Tip: this approach can be highly effective when you know a site performs well for your brand, and you’re trying to acquire the maximum possible impressions on that site).
- Programmatic Guaranteed / Reserved (or Automated Guaranteed): A sub-category within Programmatic Direct; it occurs when a publisher guarantees a specific number of impressions or clicks at a fixed price to the advertiser. (Tip: caution must be observed as the prices are generally very high).
- Private Marketplaces (PMP): This is a type of private-environment programmatic buying (RTB or non-RTB) made available to a select number of advertisers by a publisher. This falls in-between programmatic direct and open auction RTB deals.
- Open Exchange / Open Auction RTB (or simply, RTB): Any ad inventory that is still leftover after executing the direct media buys and programmatic direct buys, reaches the open public auction for real-time bidding. Here, advertisers are able to purchase the ad inventory on a per-impression basis — which requires them to compete in an auction-type environment. This allows advertisers to only buy the impressions they want, at a price they’re comfortable with, based on the prospective viewers of the ad. (Note: this is the programmatic type used by most advertisers).
If you’re looking for more clarification, have a look at these charts that illustrates how different deal types are prioritized within the programmatic media buying process:
What is RTB & How is it different from Programmatic? [RTB vs DSP]
To keep it simple, programmatic advertising can be defined as the overall methodology of media buying using technology, instead of using the traditional method (RFPs, human negotiations, etc.). This includes every form of programmatic buying: programmatic direct, private marketplaces, and open exchange (RTB).
On the contrary, real-time bidding (RTB) is a type of programmatic advertising that occurs on the leftover ad inventory which reaches the open-auction environment as explained above.
As briefly stated earlier, an advertiser needs to use a DSP (like: AdWords GDN or DBM) to enter into the programmatic ecosystem. So, the terms DSP and Programmatic are sometimes used interchangeably from the advertiser’s standpoint.
This makes the distinction between a DSP and RTB very easy to understand. A proper DSP is one that can perform all the functions of programmatic advertising. On the contrary, RTB is only one of the functions within the world of programmatic advertising.
In other words, you could say:
“All RTB buys are Programmatic, however, not all Programmatic buys are RTB”.
An accurate analogy to explain this would be, “All apples are fruits, but not all fruits are apples”.
Love formulas? Try:
- Programmatic Advertising = All Inventory – Direct Media Buys
- Programmatic Advertising = Programmatic Direct + PMP + RTB
What’s the difference between a DSP and AdWords GDN? [DSP vs GDN]
Throughout this article, I’ve referenced AdWords GDN as a DSP. But in reality, there are certain elements missing from AdWords GDN which makes it insufficient in terms of a ‘true’ DSP.
For the purpose of comparison, I will use DoubleClick Bid Manager (DBM), a true DSP, to highlight some of the differences between a DSP and AdWords GDN — please see below:
- Reach by Ad Exchange
The most obvious difference is the magnitude of reach.
AdWords GDN reaches only the Google Display Network (i.e. sites owned by Google or its partners) – which is estimated to be more than 70% of the web. On the contrary, DBM can reach ad exchanges outside of Google as well (like:Yahoo BrightRoll, AOL, Rubicon, etc.).
Here is an example of some ad exchanges available through DBM:
My Take:
Generally speaking, you can reach the majority of your audience on the web through Google (DoubleClick Ad Exchange). Furthermore, I would suggest caution when using other ad exchanges to extend your reach, as the quality of traffic from other ad exchanges could decline.
Word of Caution: Bot Traffic / Ad Fraud
This has been the biggest problem in display since the advent of online advertising. Needless to say, Google is much better at detecting and avoiding ad fraud, as compared to other ad exchanges. This is one of the primary reasons why direct response advertisers find it difficult to get performance on other ad exchanges outside of Google.
Verdict: DBM is the winner
2. Programmatic Direct or Private Marketplaces (PMP) Buys / Non-RTB Buys
Currently, it is not possible to conduct media buying in the form of programmatic direct or private marketplaces from AdWords GDN. This type of media buying is usually done through a proper DSP, like: DBM.
My Take:
It is worth exploring this form of programmatic buying if you’re looking to get exposure on highly reputable sites or gain access to non open-auction inventory. Keeping in mind, you could be paying premium prices.
Verdict: DBM is the winner
3. Targeting
Over the years, AdWords GDN has really improved its capabilities on targeting, including contextual/category targeting, frequency caps, remarketing, etc. — which historically, were only available through a DSP. However, there are still some targeting areas where a DSP has definitive advantages over AdWords GDN, as seen below:
a. 1st-party email lists
At the time of writing this article, it is not possible to target email lists on the Display Network through AdWords GDN. However, this is possible through DBM.
Tip: if you’re looking to run an email-list retargeted campaign on a budget, try AdRoll.
b. 3rd-party audience data
It is possible to use 3rd-party audience data for targeting in DBM. If you’re looking to run a custom audience targeted campaign, where your audience segments are built by an external DMP (like: Acxiom) – you will need to use DBM, as AdWords GDN does not support this functionality.
c. Granularity
The level of granularity in overall campaign targeting possible through a typical DSP (like: DBM) is extremely advanced. See this screenshot from a DBM targeting panel:
My Take:
This can be very useful if you’re looking to run hyper-targeted campaigns. For example: targeting “Verizon phone users using broadband speed on iOS Devices and Chrome browser” – this level of combination targeting is currently not possible through AdWords GDN.
Verdict: DBM is the winner
4. Creative Ad Options
AdWords GDN supports all types of creatives (text, responsive, image, video, etc.), however, a typical DSP (like: DBM) does not support “text or responsive ads” — as it solely works with rich media assets.
My Take:
Like myself, if you’ve seen significantly better performance on “text or responsive ads” in your AdWords GDN campaigns, you may face performance issues when switching over to a DSP.
Verdict: AdWords GDN is the winner
5. Bidding Options
Both AdWords GDN & DBM offer similar bidding options — manual and automated. In both platforms, you can use vCPM, CPC or CPA as your bidding strategy.
Having said that, I’ve found AdWords GDN bidding capability to be superior to DBM – as it allows bid adjustments and custom bids for individual targets.
Verdict: AdWords GDN is the winner
CONCLUSION
So, let’s conclude the debate by stating that AdWords GDN does offer some of the capabilities seen in a typical DSP, but comes short on many other areas discussed above. However, if AdWords GDN continues to evolve and can address some of the shortcomings highlighted above, it can truly give DSPs a run for their money.
Is AdWords GDN classified as Programmatic?
Absolutely. Every time you’re buying media using technology instead of direct — you’re doing programmatic buying.
Are AdWords GDN buys the same as RTB buys?
Yes, but it only applies to Google (DoubleClick Ad Exchange) inventory. Moreover, AdWords GDN does not support Private Marketplace RTB environment.
Is AdWords GDN the same as a DSP?
Not completely. There are still many functions that are missing from AdWords GDN, as discussed above, which would make it a proper DSP. Having said that, the future looks bright as Google continues to improve their AdWords GDN product. For now, I like to call it as an “incomplete DSP” — (LOL).
Future of Programmatic: Native, Mobile, Video (in no particular order)
“Programmatic buying will be a subset of the automated movement – everything that can be traded programmatically, will be.” – Oli Whitten, The Rubicon Project
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