# What is Programmatic Advertising?

Picture this: It's 2005. You're a Nike marketing exec who wants to run ads on CNN. Here's what you have to do:

1. **Call up CNN's sales team** 
2. **Schedule meetings** (multiple, because the first one never closes the deal)
3. **Negotiate pricing** (back and forth, lots of emails)
4. **Sign contracts** (legal reviews this for 3 weeks)
5. **Create an Insertion Order** (a PDF specifying creative, placement, schedule, targeting)
6. **Email the IO** to CNN's ad ops team
7. **Wait for them to manually upload your creative** and schedule it
8. **Hope they don't screw it up** (they sometimes did)
9. **Wait weeks for performance reports** (delivered as Excel spreadsheets)

This process took weeks or months, involved multiple humans, and was error-prone at every step. For a single campaign. On one publisher.

Now imagine doing that for 100 publishers. Or 1,000.

Programmatic is the combination of automation and auctions.

  **Programmatic advertising** is the use of software instead of people to buy and sell digital ad space automatically.

  Machines do the following instead of calling and putting orders: - Finding available inventory - Evaluating audience quality - Bidding on impressions - Serving ads - Tracking performance - Optimizing in real time

  It goes from "hire a sales team and negotiate deals for months" to "set a budget and targeting parameters and let the algorithm do the rest."

  In 2025, **~90% of digital display ads** will be bought automatically.   It's not a trend; it's just how things are done in the business now.

 ### The Who's who of the Programmatic Ecosystem: 

**Advertisers**   (Buy Side)  Businesses and brands spend money to get in front of customers. Nike, Coca-Cola, and even your neighborhood grocery stores all use Facebook ads to promote their businesses.

**Publishers** (The Sell Side)  Websites, apps, and streaming services that have advertising on them. Publishers include CNN, The New York Times, mobile games, and podcast platforms.

**Ad Networks** These companies buy ad space from a lot of different publishers and then sell it to companies that want to advertise.      Not as prevalent now that exchanges are around, but still there.

Two examples are Google AdSense and Microsoft Advertising.

Ad exchanges are websites where anyone may purchase and sell ad space in real time through auctions.  

 AdX, OpenX, and PubMatic are examples of some of these players.

 **Platforms on the Supply Side (SSPs)** These are tools that enable **publishers** sell their stock to ad exchanges.  SSPs connect to multiple exchanges and help publishers make the maximum money.

SSPs are essentially a sales team that works for the publisher.

Google Ad Manager (GAM), Magnite, and PubMatic are among examples.

Demand-Side Platforms (DSPs) are software that lets advertisers get ad space from ad exchanges. DSPs connect to a lot of exchanges and help advertisers find the best content at the lowest price.

You may think of DSPs as the automated media buyer for advertisers.

Some examples are Google Display & Video 360 (DV360), The Trade Desk, and Amazon DSP.

**Interesting fact:**  Some businesses are both SSP and DSP, which means they have two sides.Google Ad Manager is both of these things.  This creates some interesting conflicts of interest that is well reported on in the media.

 Data Management Platforms (DMPs) help advertisers find the right people by gathering, storing, and analyzing data about their audience. DMPs are still around, but CDPs (Customer Data Platforms) are slowly taking their place.

 Oracle BlueKai and Adobe Audience Manager are two examples.
MOAT, DoubleVerify, and Integral Ad Science (IAS) are other examples.

### **Ad Servers**  
These are the systems that keep track of ad creatives and choose which ad to show in which slot.   

 Some examples are Google Campaign Manager 360, Flashtalking, and Sizmek.

 The Three Levels of Programmatic Deals

 Not every programmatic inventory is the same.  Publishers put transactions in order from most important to least important, selling the best inventory first and the rest last.

 1. Programmatic Guaranteed (PG) - The Reserved Seats

 This is the most like regular insertion orders, except it's automated.

 **What it does:
 - The publisher promises a certain number of impressions to one advertiser. - The price is set and agreed upon ahead of time (typically high CPMs: $15–$30+).
 - The inventory is set aside, so no one else can buy it.

 **For example:**  Nike wants 10 million views on ESPN's homepage over three months, with a cost of $25 per thousand views. Nike is the only company that can use the inventory from ESPN.  The deal is done through a program, but it's a direct interaction.

 **Why publishers love it:** They know they'll make money, they can charge a lot for ads, and they have a direct link with the brand.

 **Why advertisers use it:** They can buy high-quality material that won't be available in open auctions and know when it will be delivered.

  2. Private Marketplace (PMP) - The VIP Room

  A publisher holds a private auction with a starting price for premium inventory and invites a small group of marketers to bid on it.

  **How it works:** The publisher puts together extra content for some purchasers after PG agreements. - They set a minimum price, say $5 CPM.
 - Invited advertisers bid against each other in a closed auction. This is also known as "one-to-few" or "invitation-only" transactions.

 **For example:**  After their guaranteed deals, the New York Times still has some stock remaining.  They let 20 high-end advertisers bid, starting at $10.  Only those 20 can bid, and the highest bidder wins.

 **Why publishers enjoy it:** They can set better pricing than in open auctions, they can choose who advertises on their site, and competitive bidding drives higher CPMs.

 **Why advertisers use it:** They can get high-quality inventory that isn't available on open exchanges and there is more transparency than in open auctions.

 3. Open Auction: The Free-for-All

 The open auction gets any stock that is left over after PG and PMP deals. Anyone who has a DSP can place a bid.

 **How it works:**
 - No floor price (or a very low floor: $0.50–$2 CPM) - All DSPs can bid - The highest bidder wins - Also termed "one-to-all" transactions or "open exchange"

 **For example:**  A random blog has impressions that haven't sold after private auctions and reserved deals.  They put it up for auction, and the person who bids the most money (even if it's only $0.50) wins it.

**Why publishers tolerate it:** Some revenue is better than $0. Fills otherwise unsold inventory.

**Why advertisers use it:** Cheap impressions at scale. Quality varies wildly, but if you're buying millions of impressions, the law of averages works in your favor.

This is where **Real-Time Bidding (RTB)** happens—millisecond auctions for individual impressions.

The Waterfall (in order of importance)

 This is how publishers sell their inventory:

 1. **Programmatic Guaranteed**—$20–$30 CPM, guaranteed 2. **Private Marketplace**  - $5–$15 CPM, only invited bidders can bid  - Anyone can bid, and the price is between $0.50 and $3 CPM.

 The "waterfall" refers to how the inventory moves from the top (most expensive) to the bottom (cheapest) until it is sold.

 Smart publishers make the most money by selling as much as they can at the top of the cascade.  Smart marketers receive the best inventory by being invited to PG and PMP deals instead of just bidding in the open exchange.

 **Before programmatic:**
 - Weeks to start campaigns
 - Manual insertion orders and trafficking - Limited targeting (demographics and context) - Reporting took weeks - All decisions were made by people

 **After programmatic:**
 - Minutes to start marketing
 - Bidding and displaying ads automatically - Targeting very specifically (by behavior, context, location, device, time of day)
 - Reporting in real time - Algorithms keep getting better

 Is it perfect?  No.  There are problems with fraud, lost money, brand safety, and a lot of middlemen getting a piece.  But it's still a lot better than sending insertion orders via fax and waiting for quarterly reports.