What is “Programmatic”?
The term “programmatic” in programmatic advertising simply refers to the automated buying and selling of online advertising through the use of software and increasingly smart algorithms and AI/machine learning. Nonetheless, the word “programmatic” is often used loosely, albeit confusingly, to represent the advertising channels that are transacted using the OpenRTB specification, such as CTV/OTT, video, audio, display, native, DOOH, and email, while omitting paid media such as social media and search.
Defining Programmatic in XPO
Knorex XPO was envisioned and designed from the ground up to achieve the vision of Universal Marketing. Our goal is to provide unified, real-time access to paid media such as social media and search, and the open RTB-based “programmatic” channels (as listed above) where ad buyers can directly purchase ad inventory across all these different media and advertising channels in one place. Unlike other solutions in the market which typically cover some of the channels listed in the diagram below, XPO aims to cover as many channels as possible to attain the Universal Marketing goal. As such, we have prepared the following diagram to (re-)define the programmatic advertising as used in XPO for clarity purposes.
Referring to the diagram above, we explain the terms used in the diagram to present the different models and approaches in use.
Programmatic advertising buying refers to the use of automated programs to buy and sell online ad spaces. Unlike traditional ad buying where negotiations and ordering are done manually through tedious processes, programmatic advertising relies on technology to eliminate human error and to speed up execution and transactions by replacing tedious tasks of insertion orders and the likes.
Another great benefit of using programmatic advertising enables the use of a data-driven approach, allowing for better targeting instead of the spray-and-pray approach used in the traditional media. The audience becomes the key factor and less emphasis on the placement of the media.
These channels – OTT, CTV, Video, Audio, Native, Display, Email, and DOOH, are commonly referred to as “programmatic channels” despite the misnomer, as described above.
There are 2 general methods to connect to the channels, (a) by means of using the Open-RTB specifications; (b) private APIs provided by each of the media platforms, such as social media including Facebook, Instagram, LinkedIn and search including Google Search.
Pricing Mechanism and Buying Models
A. Open Auction Based:
- Open auction refers to an auction that is opened to participants at large, without generally as restriction limiting participants.
- In the Open Auction model, real-time bidding (RTB) is used in transacting the buy/sell of ads. The process typically happens between 50-300 milliseconds, which is extremely fast, faster than a blink of an eye!
- The RTB system starts with a publisher sending their ad inventory to an ad exchange. Advertisers use DSPs to place bids on the inventory, which is generally calculated in terms of ad impressions. The highest bidder wins the impression. It’s a win-win situation for both parties. Advertisers get to target their potential customers, and the publisher receives the highest possible amount on their inventory.
- Programmatic channels including – OTT, CTV, Video, Audio, Native, Display, Email, and DOOH, support the open auction model.
B. Private Auction Based:
- Private Marketplace (PMP) or commonly known as PMP, is opened to a select group of advertisers as invited by the media publishers.
- Social Media (includes Facebook, Instagram, and LinkedIn) and Search (includes Google Search, Bing, etc.) are also conducted using auction model albeit through their designated API which typically would require certain assessment and passing of their certifications.
C. Non-Auction Based (or Fixed Price)
- The Preferred Deal buying model is a non-auction buying with a fixed CPM. However, ad inventory is not guaranteed and the advertiser has the first right of refusal before it opens to open auctions.
- At times, this auction type may or may not have a pre-negotiated price.
- The Programmatic Guaranteed buying model is a fixed CPM but with guaranteed ad inventory (with premium inventory).
- Both Preferred Deal and Programmatic Guaranteed have private access to the market and are applicable to programmatic channels that include – OTT, CTV, Video, Audio, Native, Display, Email, and DOOH.
Access To Underlying Audiences
- Programmatic channels including – OTT, CTV, Video, Audio, Native, Display, Email, and DOOH, provide access to the underlying audiences where you can extend with your first-party or third party data.
- Social Media (includes Facebook, Instagram, and LinkedIn) and Search (includes Google Search, Bing, etc.), do not provide access to audiences underlying their channels.
Additional Material On Programmatic Advertising
- Programmatic In-Housing
- The Relationship between Programmatic Advertising and Real-Time Bidding
- 4 Programmatic Myths and Facts You Should Know