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Programmatic Advertising 101

Programmatic advertising is probably on the list of outbound strategies for every marketing professional around the world. And rightfully so – it has revolutionized the way brands reach and engage with their target audiences.

For those of you still wondering what it all means, we’re going to try to clear the air a bit so you can make informed advertising decisions and not let your precious marketing budget deliver lemons.

Fundamentally, programmatic advertising refers to the automated buying and selling of online ad inventory.

In the days before online advertising, advertisers would contact newspapers, magazines, etc and buy specific ad spaces from them for specific dates, sizes, etc. Their ad would be seen by everyone who read the newspaper.

Now, there are millions of websites where you can potentially show your ad. How do you go about finding the perfect website for your ad, while ensuring you pay the right price for that ad space? Can you imagine doing this manually, website by website?

So instead of negotiating and purchasing ad space one at a time, programmatic advertising utilizes data and algorithms to place ads in front of the right audience, at the right time, and at the right price.

Automating this process of ad buying enables marketers to optimize their campaigns and achieve far better results. And because it’s algorithms that match your ads with potential viewers in near real-time, advertisers are able to target audiences with much higher precision than before.

We won’t get into too many buzzwords, but there are some concepts you should get yourself familiar with:

(1) Ad exchanges serve as virtual marketplaces where publishers and advertisers can buy and sell ad inventory in real-time.

(2) Demand-side platforms (DSPs) are tools that allow advertisers to manage multiple ad exchange accounts through a single interface, streamlining the process of purchasing ad space.

(3) Supply-side platforms (SSPs) help publishers maximize their ad revenue by connecting them with multiple ad networks and exchanges.

(4) Cost Per Mille (CPM): The baseline metric for programmatic advertising, measuring the amount advertisers have to pay for every 1,000 ad impressions.

(5) Real-Time Bidding (RTB): Ad inventory on websites is sold almost instantaneously to advertisers through a real-time auction that takes place whenever a visitor visits a website through RTB.

Just imagine: in the time it takes for a page to load and ads to show, the website has determined your location, browser type, device type and numerous other indicators to SSPs and ad exchanges, where a DSP offers to buy that inventory at the highest bid. All this in a fraction of a second.

By connecting advertisers and publishers, ad exchanges and SSPs create a marketplace where ad space is bought and sold in real-time. Imagine a stock market where stocks are bought and sold at lightning speed – the programmatic advertising ecosystem is analogous to that.

We hope that helped you understand how the programmatic advertising ecosystem usually works. Of course, there’s a lot of complexity and numerous other intermediaries involved, but advertisers typically don’t need to look beyond a good DSP partner to get their ads humming.

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