What is programmatic buying?

Things teens believe about sex:

• Talk about it a lot
• Don’t really know how it’s done
• Are convinced everyone else is doing it
• The ones who are doing it are learning on the go

Things digital media professionals believe about programmatic buying:

• Talk about it a lot
• Don’t really know how it’s done
• Are convinced everyone else is doing it
• The ones who are doing it are learning on the go

Notice a pattern?

Now that the cat’s out of the bag, let’s address the question head-on: What exactly is programmatic buying? We’re planning a series of articles to explain just that – simply, succinctly, and in a way that will help you understand what this new technology is, and what it means for the future of digital, and traditional, media.

The context in which programmatic buying emerged

Before we try to define the concept, let’s look at the context programmatic buying evolved in. To do that, we first have to understand the problem that programmatic was created to solve.

That problem was the speed, length, and complexity of the process to buy banner ads individually. I’m referring here to all the steps needed to plan, purchase, and above all optimize a media placement on a site like lapresse.ca.

People tend to think that buying a banner ad on the official website of La Presse or La Presse Plus should be easier than buying an ad in the print edition. In fact, the reverse is true!

In reality, unlike with traditional print ads, putting a banner ad up on a website involves a multitude of highly technical steps, and long, rigorous processes.

For example, even after the first step, which is to contact the sales representative to confirm the availability of ad inventory, there are still multiple contract revisions to go through, signatures, and then the arduous process of uploading banners to an ad server.

When it comes to putting the banner online, there can be integration issues (although this is less and less common) between the advertiser’s server and the publisher’s. For example, if the advertiser is using a non-standard ad server, there could be integration problems that would require the publisher to insert special macros into the JavaScript. Having worked on the publishing side doing advertising operations, I can attest to the fact that this type of problem is not unusual.

Then, once the ad is online, it needs to be monitored for optimization and performance. This is easy enough to do using analytics reporting tools, either directly through the ad sever, or through a platform like Google Analytics Premium, Adobe SiteCatalyst, etc. However, if your ad doesn’t perform as well as you’d hoped, then what?

Let’s say your goal was to attain a certain volume of conversions at a cost per acquisition of X, and that 12 of the 30 sites or networks on which you bought ads are not performing. What do you do?

In a pre-programmatic world, you would have to contact the 12 publishers or ad networks one by one and ask them either to cancel the contract (and incur a penalty), or, if you have a good relationship with the publisher, give them a chance to optimize the ad placement by changing the volume of impressions for certain creatives. For example, if your agreement with a particular ad network includes 150,000,000 impressions of a 728×90 banner and 75,000,000 of the 300×250 version, the publisher could charge a fee to redirect impressions from one format to another, since CPM often varies by format. You would then have to change your media plan, and consequently, get approval for this change and 11 others from your client or supervisor. By the time all the changes go through, the campaign may even be drawing to a close. In which case it’s too late!

This is the context in which programmatic buying came into being. This technology puts an end, at least in part, to the problem of speed and flexibility.

Okay, now, what’s programmatic buying?

Essentially, programmatic buying involves the use of software to automate the process of buying media, primarily banner ads. This process happens on huge technology platforms called “ad exchanges” that facilitate the buying and selling of digital advertising inventory. It’s more or less like a giant stock exchange for online advertising, where digital publishers like La Presse, the Globe & Mail, and hundreds of thousands of other sites list their unsold banner ad inventory (and there’s a ton of it!).

The programmatic platforms used by publishers are called SSPs (Supply-Side-Platforms). From this huge repository of ads, advertisers can bid on available inventory using platforms called DSPs (Demand-Side-Platforms). A bit like buying keywords in AdWords, where it’s easy to plan a campaign thanks to tools like the keyword planner, these DSPs help us find inventory on different sites, and in different site categories (sports, geek, fashion, etc.).

Because of all this, it’s now easier and faster to plan a banner campaign than ever before. In fact, for anyone who uses paid search, the best way to sum it up is to say that banner or display ads have finally caught up to the efficiency of paid search or SEM. We will see the same hold true for video ads, and before long we will even see it happen with traditional television ad buys.

In the next post, we’ll explore a second layer of programmatic buying that, in a way, goes even farther than SEM.