Programmatic Advertising: How It Works


Programmatic advertising is an effective tool for managing advertising campaigns and interacting with the target audience for business. More and more companies from various niches are choosing programmatic, taking into account the ease of working with it and the accuracy of the action. On the other hand, the development of solutions for working with programmatic advertising is also promising, especially considering the fact that there are white label DSP and SSP offers. In this article, we suggest that you familiarize yourself with the history of the emergence of programmatic advertising and the features of its functioning.

Developing Relationships Between Brands And Sites

To sell a product, you have to talk about it, and advertising helps with this. Nowadays, complex programmatic systems allow you to purchase advertising automatically, but once upon a time, everything was different. Let’s look at the paths that advertising has taken on the Internet.

1. Posting on websites.

As digital technology developed, websites appeared. Brands have realized that with the help of websites, they can reach their target audience. They began placing advertisements on websites. All readers saw the advertising banners. It was unclear whether the message reached the right audience.

There were more and more sites. Brands negotiated with each site individually. The agreements were difficult to regulate (both technically and legally). At this stage, there were no intermediaries yet.

2. Advertising networks and combining sites by topic.

Over time, advertising networks appeared. They installed tags on websites to display advertising banners and began aggregating banner placements. So, a brand representative contacted the advertising network, agreed on volumes, and waited for the advertisement to appear on the sites. It is now possible to aggregate sites, classify them by packages and topics.

Publishers got the opportunity to monetize inventory. Another link has appeared – advertising agencies. They brought clients, which speeded up the work. Inventory could be purchased from the site; such traffic was considered premium. The sites sold the final traffic through advertising networks. The SRM was recorded.

Two layers of intermediaries have emerged: advertising networks (for websites) and advertising agencies (for brands).

3. The emergence of targeting and platforms on the supply and demand side.

It was not enough for advertisers to purchase a set of website packages. They wanted to clearly reach the audience. Tools have appeared to identify the target audience and conduct purchases based on interests and demographics. Advertising has become more personalized.

  • SSPs (supply side platforms) have emerged. They give users the opportunity to set sales conditions for inventory. Publishers can better monetize sites by using the SSP tag where the banner landed. SSP began to support the function of working in auction mode – offering space for which advertising networks competed. And the publisher received wider access to the audience.
  • DSPs (demand side platforms) have emerged. They made it possible to purchase inventory based on a set of targets that can be set.
  • DSP and SSP are demand and supply side platforms. Thanks to them, everything has become more technologically advanced.

4. The emergence of an advertising exchange.

To enable DSP and SSP to communicate with each other, AD Exchange comes into being. This is an advertising exchange (marketplace) of Internet inventory for trading between DSP and SSP. Here’s how it works: The DSP sends a request to buy audiences and inventory. SSP responds by giving space on the site. An auction takes place (several players apply for one place). Whoever wins the auction gets the show. Now DSP and SSP work with the help of an advertising exchange.

How Does Programmatic Advertising Work?

Programmatic advertising can be purchased using different models:

  • RTB. All buyers participate in the auction. There is no agreement with the publisher and no guaranteed volume. Advertisers work according to the CPM model. In the RTB work format, you can purchase at the second or first price. In a first-price auction, the winner buys advertising at his or her bid. In a second-price auction, to win, you only need to bid higher than your competitor, but you will pay 1 cent more.
  • Private Marketplace. An advertiser can limit the number of players purchasing their inventory. In this case, the auction is held for several buyers who have agreed with the publisher. Volume is not guaranteed.
  • Private transactions. the volume of impressions is again not guaranteed, but the CPM is agreed upon with the publisher.
  • Programmatic-direct. This is work with one buyer with consent. You get guaranteed volume at a fixed price. If the publisher does not comply with the conditions, it may be disconnected from the SSP.

Other programmatic players:

  • Trading Desk. This platform allows you to work with different DSPs for media buying. For example, you can connect Facebook inventory to your trading desk. You can manage all media placements in one office.
  • Advertising server. Banners, videos, and creative materials transferred to the site are stored here. The server is responsible for delivering advertising content to the publisher, targeting ads, and tracking the number of impressions. It helps monitor the effectiveness of advertising campaigns. For example, Campaign Manager allows you to download a banner, send it to sites via DSP, save ads, and set targeting settings.
  • DMP (data management platform). This platform collects data about audiences, combines them, and divides them into segments for which you can purchase. The targets used are stored on the DMP side. You can collect first party data yourself.

Wrapping It Up

Every year, the share of programmatic advertising is growing, and the share of budgets is increasing. With its help, a business can acquire any audience in any location in the world. Users can automate placement and use data for insights, hypotheses, testing, and marketing personalization. If you want to enter this niche with your own programmatic advertising solution, we recommend taking a look at TeqBlaze. The company offers white label SSP and DSP solutions that will allow you to quickly enter the programmatic advertising market. In addition to white label demand side platform, the company offers a white label SSP + Ad Exchange solution.

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