What Is “Programmatic Advertising” Anyway?

Video Transcript: What Is “Programmatic Advertising” Anyway?

Hey there, welcome to another video about digital advertising. Today we're talking about the definition of programmatic advertising. And programmatic advertising is the use of data and automation to make really good decisions about who should be seeing an ad and the type of ad they should be seeing and the types of environment that the ad should be delivered in.

And so here's some key fundamentals about programmatic advertising. The first thing to note is that the term itself programmatic is going away. It is just becoming synonymous with digital advertising and I would even go so far as to say that digital advertising is becoming synonymous with advertising.

So programmatic is the foundational element that is powering advertising in 2020 and beyond. The core elements of programmatic advertising is data driven media. And data is being aggregated from everywhere we go in the physical world and online and our purchase habits and our credit card purchases, etc.

Aggregated and then sold to advertisers. And we, who have access to some really great valuable tools, turn on that data so that advertisers can target people with very high precision about their interests and their purchase habits and the types of things that really motivate a person to make a decision. So here's some key elements about programmatic.

The first is that when an advertiser buys advertising space, they are usually using a demand side platform, a DSP. Examples of DSPs are The Trade Desk, MediaMath, RTBIQ, Basis, Adelphic and Simplify. And generally what these tools do is they pull together lots of different data sources.

So for example, there are over 150 different data sources in The Trade Desk. And we estimate about 500,000 different data segments in The Trade Desk. And so it's plug and play.

We know the information that's available in The Trade Desk. And we serve ads to people based on creating custom segments that are created or available in The Trade Desk. So the advertising is being bought through ad exchanges and supply-side platforms such as Rubicon and Pubmatic and Google.

So when an ad gets delivered, when you're on Yahoo and you might see an ad or you're on your favorite app and you might see an app, there's one of three different business models that happens that is happening on the back end that allows for that ad to be delivered. The first is real-time bidding. And real-time bidding, or RTBIQ, is about creating an auction that allows the advertiser and the inventory owner to connect on the value of that ad inventory.

So the idea is when an ad loads on Yahoo, the advertiser says, Hey, we want to buy this ad. How much should we pay for it? The publisher says, Well, here, let me give you some data.

This person is male, 38 years old, lives in Los Angeles, has a family, likes Dodgers, has a dog, has a child. Is any of that data about this person interesting to you? Like if you're the Dodgers, you might want to serve ads to Dodgers fans.

Or if you are Petco, you might want to serve ads to people who have dogs. Cool. If you're Guitar Center and nothing indicates that I want to play an instrument, then the value of me sitting behind the screen seeing an ad on Yahoo has just dropped.

So if Guitar Center is advertising, they might say, Eh, we're not that interested. He's not the right person who we're trying to target. But if the advertiser is the Los Angeles Dodgers, the value increases because we know this person is a Dodgers fan.

They've been to Dodgers Stadium last year and they're going to go again this year. Cool. So the advertiser places a bid.

A number of different advertisers place a bid. The auction finishes and the advertiser wins and the ad is delivered. Data was used to make a decision about who to serve the ad to.

And then data gets passed back to the publisher and the advertiser about the environment the ad was delivered in. It was a news page in the morning and it was on Yahoo and it was a Wednesday. And then whether or not the person clicked and whether or not the person then clicked and bought something or did something else.

Right. So there's data that's being passed back both ways. So that's real time bidding.

The next component is private marketplace. A private marketplace is still an auction. But the difference is that let's say that the value of that ad impression was $1.

Well, the private marketplace might stipulate that the ads can be sold for no lower than $2 per thousand impressions. So no matter the value of the ad, the minimum, the price floor has to be $2 and it can only go higher from that. So that's one element of a private marketplace is a price floor.

The other element of a private marketplace is that there might be a special relationship between the advertiser and the publisher. They may provide the advertiser with additional data or additional reporting that makes it more valuable to the advertiser. Or they might provide additional ad inventory that isn't available on the open exchanges through real time bidding.

And then finally, there's programmatic guaranteed. And programmatic guaranteed is really about buying ads at the same price for every ad impression and on specific pages on a site or an app that are predetermined. The idea here is there is no fluctuation in the ad prices.

There's no fluctuation in where the ads run. We just know ahead of time where the ads will run and the price will pay. So there's guarantees in place there.

There's a lot more to the programmatic ecosystem, but these are the fundamentals. Real time bidding, private marketplace, programmatic guaranteed, demand side platforms and supply side platforms. All right, guys.

Talk to you soon.