What is Programmatic Advertising?

At Mediavine, we call ourselves a programmatic-first network. A lot of people ask us what that means, so we’re here to explain. Before we dive into the more nuanced aspects about what we do in the programmatic space, we thought we’d start with the most basic question.

What is programmatic advertising?

Programmatic advertising is the purchasing of digital advertising using computer software.

Wait, wouldn’t that be all digital advertising?

You’d think.

However, digital advertising today is still done with a combination of direct sales and programmatic advertising.

Direct Sales

Direct sales are sort of what they sound like. An advertiser, through an ad agency, worked directly with a publisher to purchase ad space. It required multiple steps and human beings.

If Walmart wants to buy an advertisement on your site using a direct buy, there’s a whole lot of back and forth. Paperwork called an RFP, or “request for proposal”, which you then have to respond to with your own requirements. When all that gets hammered out and you have a deal, you sign an “insertion order” or a “IO”.

Now comes all the technical stuff. With that signed IO would come the manual trafficking portion. The ad agency would load up the ad in their ad server and send you tags from their ad server. You would then take those tags and place them in your ad server.

Are your eyes glazed over yet? Hang with me.

Based on the IO and the accepted proposal, you, as the site owner, would set the targeting parameters for the ad based on your site’s demographic data and the advertisers requests – something like “target all women interested in technology between the ages of 24-35”.

Now that the ad is live, human beings on both sides would be responsible for making sure the campaign is pacing correctly and set to deliver all of the impressions the advertiser is paying for.

Because of the discrepancies, or difference, between the publisher and agency’s ad server impression numbers, this is never an easy process.

Assuming everything went perfectly, and the publisher didn’t have to “make good” on any under-delivery of impressions, now comes in both sides’ finance teams. It’s time for invoicing and payment!

You’re going to have to send Walmart, or their ad agency, an invoice and collect payment.

Sound like an efficient process for purchasing digital goods on the Internet? Not especially, right?

Could you imagine that process every time you went to buy something from Amazon?

No, of course not. That’s why programmatic advertising was born.

How Programmatic Advertising Works

Let’s go back to our friend Wal-Mart, and change the game to programmatic. To create a programmatic ad, their ad agency would simply log into whatever Demand Side Platform (DSP), or software they use to make their ad purchases. Examples of this include Google Doubleclick Bid Manager or The Trade Desk.

They would log into this software and pick the targeting parameters they want to buy on such as, again, “all women interested in technology between the ages of 24-35”.

That software is directly connected to ad exchange, such as Google AdExchange or Google Adsense, where they have a “seat”, or membership, for lack of a better word.

On the other side of that ad exchange, publishers have a “seat” as well, by setting up ad tags on their site, through a company like Mediavine, or, for example, directly with AdSense, if you’re not working with a network. For this example, let’s say you’re directly running Google Adsense on your site.

Google Adsense, conveniently, has a direct connection to Google Doubleclick Bid Manager.

Now, whenever a user visits your site, your Adsense tag sends your available ad impression to the market to say it’s available for purchase.

Now the DSP, or Doubleclick Bid Manager in this case, already knows what Walmart are looking for when they initially set up your campaign. If your impression matches what they’re looking for, they run an auction and they can decide in real time if they want to buy it.

If they do want it, and they offer the most money? They WIN. And you win too. Because money.

You just sold your impression to Walmart without ever talking to them!

What’s better, Google, in this case, is responsible for collecting payments and dealing with discrepancies. As far you’re concerned, your work is done and Google will magically be paying you down the line.

Programmatic advertising, although definitely more complex to set up initially, makes the process vastly more efficient.

There are less humans involved, and a lot more control is given to all sides.

While programmatic advertising was initially born through the ad networks and out of remnant ads behind direct sales, that more powerful targeting, ease of transactions, and efficiency of letting advertisers work more directly with more publishers has slowly closed the gap in revenue and profit between programmatic and direct.

So now, when we say we’re programmatic-first? It’s a good thing. An old school competitor with their giant sales force may look down upon a network that’s only selling programmatic ads, but we know that this is the future.

Here we look at every impression as valuable. Every single impression – programmatic and direct sold – is up for auction. And every single impression goes to the highest bidder.

It means we keep a lean, streamlined operation at Mediavine. Which translates directly into more money in our publishers’ pockets. And that’s the best thing of all about this approach.