Programmatic Advertising 101: A Guide for All Advertisers
There are two ways to approach ad buying. The old way, where advertisers reach out to publishers directly to negotiate and buy ad space, and the new way, where everything is automated. In other words, manual digital media buying vs. programmatic advertising.
Nowadays, most people don’t use the old method, and for good reason. It’s not as efficient. Programmatic advertising is the preferred method, and it’s expected to make up 91.1% of global digital display ad spending in 2023.
But what exactly is it?
What is Programmatic Advertising?
Programmatic advertising is the buying and selling of digital ad space automatically. It happens in real-time through sophisticated software, and the whole process takes just 100 milliseconds. Examples of channels where programmatic advertising is utilized include display, social media, audio, video, native, in-game, and Digital-Out-Of-Home (DOOH) ads.
💡Fun fact → The first programmatic display ad was a banner ad on hot wired saying, “Have you ever clicked your mouse right HERE?” with an arrow pointing to “YOU WILL.”
Programmatic advertising is not the same as the Google Display Network (GDN) that serves Google Ads to advertisers. While they are both automated ad networks that make online advertising seamless, some differences exist.
These include access to more publishers as the programmatic inventory is robust (20+ exchanges) with 200 million active sites, while GDN has only one exchange, with 2 million sites. Programmatic advertising also includes connected TV and native ads, which are unavailable on the GDN. Lastly, programmatic uses multiple data sources for targeting, but Google’s targeting is limited to its data.
This is not to discredit Google Ads. It is best for beginner advertisers with lower budgets as it is cheaper. It is also good for advertisers who use Google Workspace (for easy integration) and whose audience primarily exists in the Google ecosystem.
Advantages of Programmatic Over Traditional Advertising
The automated nature of programmatic advertising makes it more efficient than the traditional mode. But there are still other benefits.
- Improved targeting, which helps you deliver precise and targeted ads to the ideal audience at the right time.
- Real-time performance tracking and ad measuring with detailed analytics.
- Access to more publishers.
- Greater audience reach.
- More varied ad channel options.
- More ad space sales.
How Does Programmatic Advertising Work?
Imagine an art auction house auctioning off rare paintings by artists, and a bidding platform is used to ensure a fair and efficient process. At this auction, there are buyers representing wealthy clients and tripping over one another to bid on and win these pieces. And there is also the art historian who shares more information on the history and style of the paintings with the buyers so they can make informed decisions.
The analogy above describes how programmatic advertising works.
There are 6 major players. The advertiser, publisher (owner of the ad space), Supply Side Platform (SSP), Demand Side Platform (DSP), Data Management Platform (DMP), and Ad exchanger or network.
The auction house can be likened to the Supply Side Platform (SSP) as they provide publishers with the software to sell their ad space for the best price, just as auction houses give artists the platform to sell their art. The SSP runs the auction in real-time through an ad exchanger, like the auction house uses a bidding platform.
The Demand Side Platform (DSP) acts on behalf of the advertisers and helps them find the best ad placements for their brand by bidding on the inventory available on the SSP. It’s the same way art auction buyers act on behalf of collectors.
To ensure the advertiser is paired with a suitable publisher, the DSP uses a Data Management Platform (DMP) equivalent to the art historian. The DMP collects, organizes, and analyzes audience data to ensure the publisher targets the right audience.
Once there is a fit, the DSP connects to the ad exchanger, sends a request to the SSP, which then runs an auction among buyers.
All of these happen automatically and in a split second. The DSP is only alerted by the ad exchanger when their bid is accepted, allowing them to place the ad on behalf of the advertiser.
TL;DR: There are 5 steps in the programmatic advertising process.
- The publisher makes their inventory available through the SSP, which connects to an Ad exchanger and provides the publisher’s details.
- Advertisers use the DSP, which finds the best ad inventory for the advertiser with a DMP, and when a good fit is found, the DSP places a bid through an ad exchanger (intermediary between SSPs and DSPs)
- The Ad exchanger uses real-time bidding to choose the highest bidder or DSP for the SSP.
- The exchanger contacts the winning DSP, and the ad is served to the searcher.
- Advertisers can then track the analytics to determine ad performance and make decisions.
The process described above is how real-time bidding programmatic advertising works. But there are also other (lesser-known) types.
Types of Programmatic Advertising
- Real-Time Bidding (RTB): Another name for this is open auction (because all eligible buyers can participate), and it’s the most popular one.
- Private Marketplace (PMP): It’s also a real-time bidding auction, but closed, not open. Advertisers need an invitation from publishers to access the marketplace. Publishers who prize their inventory as premium and exclusive are known to use this type of advertising.
- Programmatic Guaranteed (PG): Like traditional advertising, there is no bidding here. Instead, there is an understanding/agreement between the publisher and advertiser for an inventory at a fixed price. This type gives full control to the advertisers as they choose where their ad will be shown, when it will happen, and the cost. The difference between this and the traditional method is that it’s still automated via programmatic platforms.
- Preferred Deals (PD): This is similar to Programmatic Guaranteed in that it’s a direct agreement between publisher and advertiser. It differs because Preferred Deals are when advertisers are given exclusive first look/priority at an inventory at a fixed price. And if not interested, they are released onto a Private marketplace or for Real-time bidding.
Programmatic advertising is so widely used that global spending is predicted to reach $725 billion by 2026, according to Statista. But that might not be a reality because of some challenges plaguing this type of advertising. One challenge, in particular, stands out: Ad fraud.
What is Programmatic Ad Fraud
This is a sub-set of ad fraud where fraudsters attack programmatic ads to generate fake impressions, clicks, or views. Often, these fraudsters are the publishers themselves attempting to defraud their advertisers.
Programmatic fraud usually happens in the following ways.
Click fraud is the practice of generating fake impressions on an ad by clicking on it multiple times. Click fraud (not to be confused with invalid click) is usually deliberate by publishers, competitors, bots, click farms, or cyber criminals. They can attack your programmatic ad to drive costs for you or benefit financially.
Domain spoofing is a type of cyber attack that occurs when a fraudster impersonates another website to trick advertisers into placing ads on them. And because the websites they are impersonating are usually well known with tons of traffic, they can charge a premium for the space to unsuspecting advertisers. It’s difficult to detect these fake websites as they look similar to the original with few changes like an extra or wrong letter or a different suffix (e.g., .com to .org).
💡Pro tip → Edgemesh’s Domain Spoofing Solution helps protect your domain from any spoofing attack.
One way publishers defraud their partners is by stacking ads. This is when multiple ads are placed on each other, with only the top one visible to website visitors. It is shady as advertisers end up paying for the stacked ads because the clicks and impressions for the visible ads also record for the invisible ones.
This is like ad stacking in that the programmatic ads are manipulated to generate clicks or impressions, even though they are invisible to the website visitor. But in this case, the ad is compressed to fit into a smaller space (1 x 1 pixel size) than it usually would. These ads are invisible to humans, but advertisers are charged for them. Just so more ads can be published on the site, meaning more money for the publishers.
Traffic from some regions (usually first world) are more valuable than others. So publishers sometimes mask their location to make it seem like the traffic coming to their site is of high quality and from these desirable locations to entice advertisers to pay premium.
Apart from the loss of money for advertisers, programmatic ad fraud skews campaign data making it unreliable to base decisions on. It also damages the brand’s reputation in the case of domain spoofing.
How to Stop Programmatic Fraud
Here are some suggestions to reduce ad fraud rate.
- Only work with trusted and quality DSPs or networks.
- Vet and contact publishers directly using the Programmatic Guaranteed method.
- Use ads.text, a public list of authorized and trustworthy digital inventory sellers.
- Monitor ad metrics for discrepancies. For instance, a high number of impressions should have corresponding clicks. Similarly, rising clicks should see an increase in generated leads. If these are not happening, there’s a chance your ad is affected by fraud.
- Use a tool like Edgemesh’s Adfraud Analysis and Protection System. The software solves programmatic fraud by detecting click fraud (bad bots & bad humans causing it), sets you up with an end-to-end security system to protect your domain from spoofing, and tracks and monitors your ad campaigns to identify unusual patterns.
Try it for free here.
Protect Your Programmatic Ad Campaign With Edgemesh
Programmatic advertising offers a win-win solution for website owners looking to sell ad space and companies looking to buy. The former can sell more space easily, leading to less waste, and the latter can reach the right audience at a lesser rate and more efficiently.
However, as an advertiser, be careful while embarking on ad campaigns, as a huge chunk of your budget can be eaten by fraudsters.
Invest in a good protection system like Edgemesh to eliminate ad fraud and maximize your budget.