Commentary

The Premise of "Programmatic"

Ask 10 different industry ad tech influencers for the definition of "programmatic" today and you'll get 10 different answers, including the popular misconception that programmatic is synonymous with real-time bidding (RTB). While there are many flavors of programmatic advertising, let’s take a step back and establish a common foundational definition. At its core, programmatic refers to the automation of a series of activities related to the buying and selling of digital advertising. This includes some or all of the following elements: placing the insertion order, delivery of and testing creative tags, pacing of day-to-day delivery, and the actual delivery of impressions, as well as billing and remittance activities and inventory performance analysis. These activities holistically enable advertisers and publishers to buy and sell efficiently at scale.

Back in the day, all of these steps were done manually via laborious phone calls and faxes between the buyer and either a publisher or a network responsible for aggregating the inventory. Fortunately with today’s technologies and algorithmic bidding systems, many of these steps are now handled in a fraction of the time with far greater efficiencies, better targeting and less overhead. The key driver that enables efficient programmatic ad buying is server-to-server communication, which requires enough standardization for all parties to understand and respond to requests automatically based on layers of preset parameters.

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While the IAB took a big step by standardizing ad unit size, it is currently working to standardize even more ad impression attributes, e.g., third- and first-party user demographic data, lifestyle info, search and purchase patterns, etc., into an organized data structure to drive further automation. Further standardizations yield more effective buying, as well as capturing impression-specific information such as which publisher, which section of the publisher’s site, session depth, place on page, viewable versus non-viewable impressions, context of topic on page, etc. This additional data richens the impression, and when enabled on a server-to-server basis, provides a greater level of automation and more targeted buying and selling.

The key to programmatic is that the information related to an impression must offer enough granularity for the buyer to decide whether they want the impression and for there to be a pricing mechanism that works – whether predetermined or auction-based (RTB). To glean the level of detail required about the impression, a programmatic environment no longer relies on the previous varied panel-based information and instead incorporates third- and first-party data and a common attribution methodology.

There are three types of programmatic advertising. For example, RTB involves automating the process of setting the digital ad price through an auction format. RTB offers less certainty about the quality of inventory, timing and frequency of ads being served but enables buyers to select their audiences and buy inventory economically and at scale. Another type of programmatic advertising is enabled through private marketplaces, whereby buyers and sellers have specifically chosen each other and agree on pricing, but there is no certainty around volume and other important metrics. Finally, over the last few years, a new category of programmatic buying and selling has emerged.  It has generically been referred to as programmatic premium, but is also labeled programmatic guaranteed, programmatic reserved, and programmatic direct, among others.  This channel offers pre-negotiated pricing, volume and delivery through a programmatic technology layer that facilities direct relationships between buyers and sellers.

Ultimately, the goal of all programmatic channels is to lower overhead costs while delivering on the promise of more effective advertising. The first true realization of this promise, RTB, was the initial channel of programmatic.  As these new channels emerge and new standards and definitions are developed, more options will be created and more value unlocked for both publishers and advertisers.

As programmatic standardization continues to evolve, we expect to see even further automation—and turn richer opportunities for buyers and sellers to fully deliver of the promise of programmatic. 

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