August 4, 2021

Intro to Programmatic Advertising

How does programmatic advertising work and what are the advantages

Digital marketing is widely dominated by automation and programmatic booking - this also applies to videos. Classic IO (insertion order) bookings, where clients specify the page inventory, runtime, and price of their ads, are on the decline.

The tipping point for programmatic advertising booking in Europe has in fact been reached last year when for the first time, more than 50% of ad spend was programmatic according to the IAB ADEX benchmark 2020 study.*

What is programmatic advertising?

Programmatic advertising defines the automated and software-based buying and selling of online advertising – in real-time. Two sides are involved. On the demand side, advertisers and agencies inquire about their ad placement opportunities via a Demand Side Platform (DSP). Larger DSPs are Adform, TheTradeDesk, Google DV360, or Amazon DSP

On the supply side, publishers or ad space providers offer their inventory including Desktop & Mobile Web, InApp, DooH and CTV via Supply Side Platforms (SSPs). Popular SSPs are Xandr, Freewheel, Pubmatic, Smart RTB+ and Google Ad Manager.

A user visits a website and while the URL is loading, the publisher‘s ad server informs the SSP it is connected to, about a possible advertising opportunity. This triggers a so-called bid request from the supply-side platform to the demand-side platform.

How does programmatic work?

A user visits a website and while the URL is loading, the publisher‘s adserver informs the SSP it is connected to, about a possible advertising opportunity. This triggers a so-called bid request from the supply side platform to the demand side platform.

Diagram of how real-time bidding works

Based on the available metadata inside the bid request, a DSP from the group of DSPs determines if the user and the ad opportunity at hand are relevant to its advertiser's campaign. Applying advanced tech-based decision-making logic the DSP tries to assess the relevance of an ad opportunity. Based on this vendor-specific decision, a bid in the name of the advertiser is placed. 

The SSP on the other end receives multiple bids from the DSPs, containing both, a CPM price and the creative for the respective campaign. The SSP evaluates all incoming bids and decides on the winner, depending on the price and other variables, varying from SSP to SSP. When the URL is loaded and the user enters the website, the auction winner's ad is displayed. 

Advantages of Programmatic Advertising

Both sides involved in programmatic advertising benefit from its immense flexibility: the scale of demand sources for supply – promising optimized yield management – and the access to a broader inventory for advertisers. Though overseeing the market as a whole, the control over optimization efforts is shifting from sell-side to buy-side. 

In IO campaigns advertisers have to assign to specific inventory beforehand with their media sales partners and then rely on subsequent optimization efforts which are lagging behind real-time happenings. In contrast to this, programmatic buying allows the demand side to lean more towards performance-based buying of traffic, e.g. cost per engagement campaigns, where the supply itself, being specific websites or channels, becomes secondary in importance – what counts is the outcome. 

Programmatic buying allows for  Control, Transparency, Flexibility, Efficiency, Competition, Real-Time Data

Supply path optimization as a trend in programmatic advertising

A strong movement towards so-called Supply Path Optimization (SPO) is aiming at reducing the number of intermediaries in programmatic advertising. Large advertisers agree on deals with large publishers directly hence shortening the supply chain - an approach which is familiar from B2C products under the mantra "cut out the middleman".

At ShowHeroes we embrace the rising involvement of advertisers in this process and support our clients and partners along the way. Because a significant number of advertisers say that hidden feeds and a lack of transparency prevent them from moving more brand budgets into programmatic we see a lot of potential in SPO.

The ShowHeroes solution

Through our ShowHeroes platform, publishers are connected with the industry’s leading demand partners. Thanks to an abundance of direct relationships with top brands, media agencies, and programmatic platforms optimum inventory monetization can be attained. We also support header bidding.

*In the ShowHeroes network, the year 2019 already marked the turning point at which the amount of programmatic bookings has exceeded the number of IO campaigns.

If you’re interested in finding out more about how our programmatic solutions can support your next campaign or monetization efforts, please get in touch with us.

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