What is programmatic advertising? Our Senior Director of Product Management, Dylan Hecklau, recently hosted a company-wide lunch and learn titled, "WTF is programmatic?" where he talked about how we got to where we are today, what exactly programmatic advertising means, and the differences between demand-side and supply-side platforms (DSPs and SSPs). Here's a recap:
So, what is programmatic advertising?
Programmatic advertising is an automated method of buying or selling advertisements. Even easier, think about it as software or machines that are buying and selling ads.
Stuff We Missed in History Class
Programmatic advertising is relatively new and many people don't know where it came from. Here's a brief history of digital advertising:
- 1994: The first banner ad was displayed on the HotWired website for 3 months. The ad was for AT&T and the Click Through Rate (CTR) was an extraordinary 40-50%! As a point of reference, CTR's today are usually around 0.06%.
- 1996: The internet expands rapidly creating a large supply of inventory. With growing advertiser demand, the ability to target ads becomes increasingly important and the first ad servers are created. More than 20 years later and DoubleClick is still the backbone of Google's display dominance.
- 2000: Publishers start using ad networks to sell their unsold inventory. Google introduces AdWords a few years later, further solidifying the online ad space in the wake of the Dot Com Crash. This was a big step in the direction of programmatic advertising.
- 2007 - 2010: Needs arise for publishers to manage the ad buying process and to connect with advertisers to sell their inventory at the best price in real-time. Ad exchanges like RightMedia (Yahoo!), Google AdEx, Mircosoft AdECn, Pubmatic, Rubicon Project, and OpenX all start building Real-Time Bidding (RTB) software.
New Players in Programmatic
Between 1994 and 2010 a lot happened in the digital ad space, resulting in a need to clarify the chaos. This is where demand-side and supply-side platforms come in.
As an example, here's how we use our DSP and SSP today at Jelli:
We mentioned that Real-Time Bidding (RTB) was introduced in the early 2000s, but it's important to clarify that RTB is a type of programmatic advertising, but not the only one. For instance, the how-it-works chart above does not include RTB.
Data: The New Gold
Although RTB has provided efficiency and automation gains, Data Management Platform (DMP) solutions have been a significant driver of audience-based buying. This is important to note because we are currently in the age of data.
A DMP is a warehouse of data. It is software that stores, sorts, and spits out information in a way that buyers and sellers can easily leverage.
A DMP can help:
- Buyers execute programmatic campaigns more successfully via their DSP.
- Sellers segment their audiences and increase the yield impressions garner when sold via the SSP.
Long Story Short
In the early stages of the internet, buying an online ad was super simple but you didn't really know what you were getting. As the internet grew, it caused an oversupply of ads that were cluttering websites, hence organizations like the IAB (Interactive Advertising Bureau) came into play to establish regulations.
Then came ad networks which categorized a publisher's unsold ad inventory so it was easier for buyers to access. As these ad networks grew and more publishers started utilizing them, supply-side platforms gained traction. SSPs provided publishers with a way to manage who gained access to their ad inventory. Next, demand-side platforms emerged to help agencies and advertisers easily buy ad inventories, enabling them to manage media buying via a single platform.
Hopefully, this answers the question "WTF is programmatic?" but if you want to learn more, take a look at these free resources.