What is Programmatic Media Buying? Everything You Need to Know

If you have a business, you may have heard people rave about programmatic media buying.

It seems that everyone does it today. It may seem confusing but you are not alone!In this article, we will break down everything that you need to know about Programmatic Media buying.

According to Insider Intelligence, the US programmatic advertising spending is expected to jump from $106 billion in 2021 to almost $142 billion in 2023; media buying shows no signs of slowing down.

It’s one of the approaches that will help your business earn more qualified leads and gain more exposure to the right audience. Brilliant, right?

So, before designing your marketing plan or even looking for three-to-four potential media buyers for your team, you need to understand how to make the most of your ad and money.

That can happen if you use the right tool, which is programmatic media buying.  

We understand that every business has a limited budget, ultimately this article is designed for informational purposes for a general audience, so it won’t suit every organisation. We would love to hear from you if want to explore other marketing methods online!

What is Programmatic Media Buying?

Programmatic media buying is a buying and selling advertising space used via an automated system. This system uses real-time algorithms to purchase ad space on websites, apps, or digital properties. Programmatic media buying can be used to purchase both display and video advertising. 

Advertisers benefit from programmatic media buying because it allows them to target specific audiences with laser precision.

To understand what programmatic media buying is, we need to go back to know what happened before this new advertising concept.

So, two parties are involved in any digital ad; an advertiser and a publisher. 

The advertiser is a company that wants to promote an ad and reach out to people to show its product, so they need ad space, which is what a media buyer should take over.

On the other hand, a company has a website or apps that can sell ad slots to advertisers to accommodate campaigns in different forms.  

Thus, a media buyer contacts a publisher to negotiate the price and conclude a contract to post their ads on their websites or any offline mediums, such as billboards, TV, or radio.

That’s not how things work in the digital world.

With the skyrocketing number of websites, it became difficult for advertisers to keep track of all digital marketing channels. It became difficult to contact each publisher separately, and most importantly, choosing which space is the best for your product or service becomes more challenging. 

So, at a later stage, we hear about something new, ad networks.

What are ad networks?

Well, an ad network is a company that manages the exchange of advertising revenue between publishers and advertisers. The ad network handles the logistics of placing the ads on the website and ensuring that the right people see them. It uses different technologies to place website ads, including cookies, web beacons, and pixel tags. They typically charge advertisers based on the number of impressions or clicks an ad receives.

So, they make it possible for advertisers to reach a wide pool of prospective buyers without having to strike deals with individual websites. And, because ad networks typically charge based on performance, they provide a way for advertisers to control their spending.

That’s why ad networks are vital to the online advertising ecosystem. In other words, they help connect advertisers with websites that have audiences that might be interested in what they have to offer. 

So, here is what we have right now. 

We have advertisers and publishers. They can communicate directly or through ad networks.

But the advertising process has seen significant recent change, and now we have another concept: an ad exchanger.

Then what is an ad exchange?

An ad exchange is a marketplace that gathers publishers, and advertisers can buy and sell advertising space. It’s just like a trading platform where interactions and transactions happen. Ad exchanges use real-time bidding (RTB) to price and place ads. RTB is a programmatic way to buy and sell ad space in an auction-like environment. More later…

This software is designed to increase efficiency and transparency in the digital advertising ecosystem. That happens by bringing together demand (advertisers) and supply (publishers) in one place.

Using RTB, ad exchanges can price ad space dynamically, in real-time, based on factors like the advertiser’s bid, the publisher’s inventory, and the user’s profile. 

One of the most popular ad exchanges out there is Google Ad Manager.

The core concept of ad exchange use DSP or “demand side platform.” It works by allowing advertisers to bid on ad space in real time.

That means that they can adjust their bids based on what they think the value of the ad space is at that moment. The DSP then determines which ad to show based on the highest bidder.

On the other hand, ad exchange connects the publisher with SSP or “supply side platform.” It helps publishers manage their ad space and sell it to advertisers in an automated way.

It allows publishers to set their own prices and terms for ad space, then matches them with advertisers willing to pay those prices. 

SSPs make money by taking a cut of the ad revenue they generate for publishers. They typically charge around 10-20% of the total ad spend, but this can vary depending on the publisher’s size and the SSP’s fees. 

Both large and small publishers can use SSPs, but larger publishers commonly use them with a lot of inventory to sell. If you’re a small publisher with only a few ad spaces, you may not need an SSP and can work directly with advertisers or use an advertising network instead.

And that’s what forms programmatic media buying; DSP, SSP, and Ad exchange.  

What Are Types of Programmatic Media Buying

Since programmatic media buying depends on automated technology to help your business spot ad space, there is more than one process. 

Now, we will see the three types of programmatic media buying.

1- Real-Time Bidding (RTB)

It’s one of the most common programmatic media buying where advertisers place bids on ad space in real-time as publisher inventory becomes available.

So, we can define it as an automated digital auction that enables advertisers to bid on ad spots from publishers based on criteria such as the user’s location, demographics, and browsing history on CPM or a “cost on thousands of impressions” basis.

So, CPM is what you pay to show your ad to one thousand people. It is a type of online advertising for businesses to get their message in front of potential customers, and it may be a very efficient method of reaching many people.

So how does CPM advertising work? Advertisers create ads and then choose how much they want to spend per thousand views. Then, when someone views the ad, the advertiser is charged based on their selected amount. That means that advertisers only pay when someone sees their ad.

CPM advertising can be a great way to reach potential customers at a low cost.

Back to RTB—like an auction, the highest bid from relevant advertisers will typically win the ad placement. This process occurs in milliseconds before the website loads. Therefore, you will not even notice that when clicking through a website attracts high traffic. 

How does Real-Time Bidding work?

RTB advertising is a part of programmatic media buying. It starts with you; when you click a link to a website, real-time bidding begins. When you arrive on a website, the site sends available ad page dimensions to the supply-side platform (SSP) before the page loads. 

That’s when an SSP looks at your cookie, which includes data stored from your activity, interests, demographics, and more. This data helps the SSP identify what you love and what you are not interested in, so this software will figure out what ad would be relevant to you.

Next, it’s time for the demand-side platform (DSP) to do its job by assigning the value to the user and placing a bid on the ad space based on the user’s information. 

And the SSP receives the bids and picks a winning website according to the best and most reasonable offer. Ads are selected at random, and the winning ad is shown on the website when it has fully loaded.

And yes, the whole process, from clicking on a search result to fully loading the website, takes almost no time. That’s a lot of complicated steps in a short period of time. Indeed, it’s the quickest auction you’ve ever seen.  

In short, real-time bidding is beneficial for advertisers and publishers because it allows for more transparency and efficiency in ad-buying. 

Okay, but what about you as a business owner? What should you do, and what happens to your bid and ad?

Let’s put it in perspective. 

First, you need to know that you will never know where your ad will appear, but here is the deal.

Let’s say you run a restaurant and decide to offer cooking courses. You want to take advantage of bids placed in real time to increase brand awareness among consumers actively seeking to learn something about cooking and exotic recipes. 

So, someone in your target audience, who frequently searches for courses to master cooking and launch their startup, visits a popular food blog with a particular ad space for your product or service.

If your bid is the highest, your ad will appear on the site where someone searches for what you’re selling.

That’s how real-time bidding allows you to target a very particular audience, which may provide a high return on investment.

Cost: The cost of RTB varies depending on other bids and what you’re targeting from your ad, like keywords, locations, demographics and interests. So, it’s all about what you want to invest in your ads.

So you can pay anywhere from £2000 upwards to £20,000 for one campaign. But you’re not limited to this range. It’s totally up to you and your objectives.  

Just keep in mind that RTB operates on a CRM basis. So, your bid can be something between £2 and £3, or it will exceed £20,000, as we said.

You can control your real-time bidding budget. However, it would help if you were logical to differentiate yourself in a crowded market.

Pros: RTB can save you valuable time regarding your ad campaign. It can give you better pricing precision. Or in other words, it’s one of the cost-efficient solutions to promote your offerings because you have complete control over setting your budget and defining how much your exposure will be.

Also, the whole process is automated. So, once you set your parameters, you’ll let it work for you. 

Eventually, you’re pretty sure your ad will arrive in front of someone already interested in something just like what you have. That means you will never spend money on people with zero interest in your business. That increases the chances that users will actually click on the ad, which leads to better results for the advertiser. 

Cons: RTB can be expensive. Since advertisers are bidding against each other for ad space, the prices can quickly become inflated.

Most importantly, one of its drawbacks is that RTB purely depends on the demand and supply rule. That means there is no guarantee that your ad will always be placed on a website. It only depends on the buyers’ motivation and interest.   

2- Private Marketplace (PMP)

In this type of programmatic media buying, your ads will only appear on the websites within the specific marketplace if you’re invited.  

This private marketplace is typically an invite-only market influenced and managed by publishers only who control which companies will promote their products on their site. So, it’s advertisers’ job to convince publishers that their ads and product are premium enough to take a position on the publishers’ websites. 

Also, the advertisers can choose the ad spots, including the time and area they want their ads to show off. 

On the other hand, publishers set aside excellent ad space to attract advertisers willing to pay more for premium spots on their websites.

Unlike real-time bidding, advertisers always know where their ads will display in the marketplace, one of the prominent features of this type of programmatic media buying. 

How does Private Marketplace (PMP) work?

A real-time auction starts out insanely when a user clicks through a link with ad units. Then, a DSP manages a private auction where a bunch of pre-selected ads can access the website using a time-sensitive deal. 

Meanwhile, publishers have set a floor price for tier ad spots, so bidding begins shortly. 

Like any digital auction, you will likely win the deal with the highest bid you offer. However, it’s not the case all the time. You need to know more about the private marketplace you will share to understand how to gain the premium ad spot. 

So, you can tell PMP has an advantage over RTB because it will offer more transparency. After all, it’s an invite-only slot, and you will be aware of the publishers and vice versa. So, it guarantees that you can better reach your target audience, and publishers can offer a more ad relevant experience. 

Cost: Time and cost of the whole process will tell you more about what type of programmatic media buying you can start with. It will cost you a higher CPM price tag because of the limited number of advertisers allowed to bid in this private space. So, it couldn’t be the perfect choice for small to medium businesses.  

Even though you can set your budget according to your marketing objectives.

Pros: Most advertisers who choose to target their segment through PMP have already complained about the lack of control over their placement in RTB and the potential fraud.

That’s when PMP lies in; it’s a workable private solution that comes to offer you a premium service. This kind of programmatic media reduces the possibility of fraud with a handful of values— transparency stands atop them all.

Not just that, you will control where your ad will appear, so there is no room for insensitivity or awkward pairings. So, this programmatic advertising process is more efficient for buyers who want to place their ads on top-tier websites. 

In general, PMP will offer you improved brand management and highly-focused segmentation.

Cons: Private marketplace can be more expensive than other types of programmatic media buying. That is because advertisers are paying for guaranteed access to premium inventory. 

Also, if you want to ramp up your strategy and try to test campaigns, PMP is definitely not the right approach. 

Another disadvantage is that Private Marketplaces can limit your reach. That is because you can only buy ad space from the publisher you have correspondence with. Therefore, you will need to work with multiple publishers to attract a sizable audience.

3- Programmatic Direct (PD)

Programmatic Direct is a type of programmatic media buying where advertisers purchase inventory directly from publishers without going through an ad exchange.

How does Programmatic Direct (PD) work?

Advertisers submit their bids to the publisher, who then decides whether to accept or reject them. The advertiser pays the publisher directly for the ad space if the offer is accepted.

Cost: Unlike both types of pragmatic media buying, there is no bidding involved. It’s just an agreement between the publisher and the advertiser, and they will negotiate and agree on the deal. 

Pros: Programmatic direct offers many benefits, including increased control over ad spending, more accurate targeting, and improved creative capabilities. It allows you to increase your exposure scale. 

Cons: This kind of advertising can be challenging to manage and may not be worth the extra effort for smaller businesses. Besides that, you will need to invest your time and money to break down the complexity that comes with this industry which leads to a lack of transparency. 

How Can Profiletree Help You?

Profiletree is built on a single concept; helping our clients generate leads and sales through structured digital strategy, sleek web design and engaging digital content. That can happen by supporting diverse creators and producing inspiring, inclusive ideas.

The world of business is complicated, but your organisation shouldn’t get lost in the overwhelming abundance of new software, tools, and technologies.

Your brand can stand out by taking advantage of experiences and high-tech merchandise to maximise impact.  

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• Get a Selection of Products 

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We are already experts in identifying and understanding the world of commerce. However we realise that every business is unique, there is no one-size-fits-all option for success. We’ll tailor complete personalised solutions to enhance your existing marketing and digital efforts.

• Tailored Solutions Are Waiting for You 

All the to-do’s on your list will be addressed with the well-tailored tools, strategies, and approaches to grow and go. No project is too complex. We can even arrange to train you in digital marketing practices along the way so you will feel confident in your abilities.

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Whether you need more sales, customers’ attention, a complete marketing strategy, media planning, media buying, or all in one, we’ve got you covered. You will get exclusive access to high-value premium branded components to take your business to new heights maximise your brand experience.  

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After working with countless products and tools, our experts know what it takes to harness any operations and make your business work for you.

Check out our service pages or contact us for the most up-to-date information on what we can offer your business.