Even before artificial intelligence (AI) had become a buzzword, the digital advertising industry had its very own way of selling and buying inventory, thanks to programmatic advertising. So what is programmatic advertising? In simple terms, this form of advertising relies on AI and machine learning to automatically sell the ad inventory in real time, ensuring that those ads target the most suitable audiences.
Interestingly, this process is executed with the aid of multiple platforms which allows agencies to automate the process. Advertisers can buy impressions or target a particular set of users based on signals or contextual cues. Moreover, it is believed that this form of advertising is more cost effective and as a result, smallest publishers and advertisers can use the medium to achieve their marketing and sales goals.
In 2023, the digital advertising industry across India spent around 58% of its ad budget on direct media purchases, while the remainder was spent on programmatic purchases, as per a recent report by Statista – a market research firm. Overall, projections indicate that the industry will increasingly switch to programmatic advertising over the years to come, with a market share of 45% by 2025. According to industry experts, the adoption of programmatic media buying would allow advertisers to have increased flexibility and more control over their creatives and optimisation capacities.
How does it work: Programmatic advertising typically starts when a consumer visits a publisher’s website. The publisher offers the ad impression for auction through header bidding and supply-side platforms (SSPs). Demand-side platforms (DSPs) then bid on the impression for advertisers, taking into account the campaign’s strategies, budget, creative sizes, and other factors. The impression is automatically awarded to the highest bidder—the advertiser or DSP offering the highest CPM (cost per mille, or cost per one thousand impressions). The ad is then instantly displayed on the website.
Understanding supply-side platform (SSP)
Supply-side platforms or SSPs typically hold publishers’ inventory. How it works is that a publisher submits a web page as a source for an ad to the SSP. Then it will connect to one or multiple ad exchanges, ad networks, and DSPs. In an effort to gauge return-on-investment (RoI), SSP puts a pixel code on the page to track visitor behaviour. What the code does is that it provides publishers with anonymous data about visitors and the actions that they take.
It is the job and the SSP and it is to be noted that it is programmed in such a manner to maximise the value that publishers receive from an ad impression. Moreover, SSPs also allow publishers to filter ads by advertisers besides other criteria. Moreover, publishers can set different rates for ad spaces to define the cost.
Understanding demand-side platform (DSP)
Meanwhile, advertisers use DSPs to participate in bids that align with the parameters of their ad campaigns. Publishers include a pixel on their website that collects data, enabling the creation of audience segments and sending this information to the DSP. The DSP then automatically places bids on behalf of advertisers, ensuring the best ad is shown to the appropriate audience. What is to be noted here is that advertisers tend to benefit from accurate placement of the ad, while publishers benefit from the highest bidder winning. The moment DSP and ad exchange have arrived at a decision as to which ad to match to which page, this is communicated to the SSP.
Understanding the difference Between an SSP and a DSP
In simple words, DSP and SSP are two connected parts of the programmatic ecosystem. While advertisers use DSP to find the right ads and organise the ad-buying process, publishers use SSP to connect to different parts of the programmatic ecosystem which includes ad networks, and DSPs, among others.
Understanding real-time bidding (RTB)
Real-time bidding (RTB) is a way to buy ads programmatically. This allows advertisers to participate in an auction post impressions become are made available to them. If they win a bid their ad is displayed instantly on the publisher’s site. With RTB advertisers can focus on the most relevant inventory.
Understanding header bidding
Header bidding enables publishers to request bids from multiple demand sources simultaneously and send these bids to their ad server for an auction. The ad server then determines the winning bid and displays the ad on the site. By allowing multiple bidders to compete for the same inventory at the same time, header bidding increases competition and provides advertisers with the opportunity to access premium inventory from these publishers.