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An Ultimate Guide on Programmatic Advertising

Guide on Programmatic Advertising

Global economic growth was slowed by the Covid-19 pandemic. There is no doubt that supply chains were disrupted, and business models were rendered inoperable. 

However, one of the few industries that continued to grow is digital marketing, specifically programmatic advertising. Over the past 15 years, it has truly delivered on its original promise of being “the future of online advertising.”

Getting consumers’ attention in today’s digital environment is a difficult task. Every day, consumers use various digital properties such as websites and apps and selecting the best place to show your advertisement is difficult due to ineffective targeting. 

To effectively reach your target users with your budget, you will need to use multiple platforms. 

If you or your company uses online advertising, you may have heard how programmatic advertising is disrupting digital marketing.

Your advertisement could be brilliant, but if it’s not in the right place and targeted at the right people, your campaign will never reach its full potential. So, if you nod and wonder why people say programmatic advertising is a game changer, you’re in luck.

In this blog, we will define programmatic advertising and its types with examples.

So, without further ado, let’s cover some basics.

What is Programmatic Advertising?

In its most basic form, programmatic advertising is the automated purchase and sale of advertising online. It is the process of selling inventory on publishing sites using various platforms and, on the advertising side, buying inventory and placing ads on a publisher’s site. It is also known as programmatic marketing at times.

Requests for proposals (RFPs), human negotiations, and manual insertion orders were all part of the process in the past. The entire transaction now takes milliseconds from start to finish and involves numerous platforms.

Programmatic Advertising is a sophisticated method of ad placement that uses traffic data and online display targeting to drive impressions at scale, resulting in a higher ROI for marketers. It can also produce excellent results for both SMEs and global brands, so don’t dismiss it because your company is small.

Ad exchanges operate computerized auctions that bring together both parties to the transaction in the market for digital advertising space:

  1. Advertisers looking to purchase ad space on the internet.
  2. Publishers are website owners who have digital space for sale.

Who uses Programmatic Advertising?

One method for businesses/enterprises to advertise on digital screens is through programmatic advertising. Before programmatic ad buying, digital ads were purchased and sold manually, which made the process costly and unreliable. It can be found in a variety of digital channels, including display, mobile, video, and social.

There is no doubt that traditional offline channels are also being digitized. Because publishers have enabled native ads on their websites, programmatic advertising has reached new heights.

The main reason publishers are embracing programmatic native advertising is that it is less susceptible to ad blockers than other ad types and platforms.

Previously, programmatic campaigns were reserved for larger budgets and media agencies, but with the rapid rise of self-service tools, smaller brands now have greater access to the technology and can compete with larger brands without having to go through expensive middlemen.

It is impossible to ignore the fact that it gives marketers more time to optimize and improve ads using programmatic techniques to ensure campaign success.

Let’s Talk About a Brief History of Display Advertising And The Rise of Programmatic Advertising

Media buying, like almost everything else in marketing, began with a traditional processing method that was modified by technological advancement to be more efficient and effective. It is the evolution of the digital world, with automated computer capabilities replacing manual handling.

Programmatic display ads date back nearly 30 years — in 1994 — when the web’s first banner ad debuted on the internet and experienced massive success early on as people clicked because they were intrigued by the new concept.

The banner in question appeared on hotwired.com as part of AT&T’s “You Will” campaign, with the text “Have you ever clicked your mouse right here? You certainly will.”

The click-through rates for these banner ads used to range between 40 and 50%. This means that half of those who saw the banner ad clicked on it. It surely opened the door for the programmatic advertising experiences we know today.

What was happening previously, and what’s now?

Ads were traded in the early days of digital marketing in the same way you’d buy a regular magazine ad. Salespeople would negotiate with advertisers to place a banner on a website for a set period. This meant that no matter who visited the site, the same banner was always displayed.

In 1995, the first central ad server was created, allowing salespeople to sell ads across multiple websites. This meant, for example, that you could choose to display your ads across multiple news websites owned by the same company.

Introduction of DoubleClick:

DoubleClick, one of the first ad servers, was purchased by Google in 2007 for $3.1 billion. It is still operational today but has been merged with Google’s marketing brand, Google Marketing Platform.

Initially, the number of publishers outnumbered the number of advertisers, implying that there were more websites available than people willing to advertise on them. This resulted in an oversupply of ad space and large amounts of unsold inventory for publishers.

Ad networks were created as a solution to this problem. They are platforms that aggregate unsold ad space from multiple publishers and make it available to advertisers at a reduced rate.

What are Programmatic Advertising platforms and tools?

Platforms for programmatic advertising provide a real-time marketplace for buying and selling ad space. They connect millions of publishers with marketers seeking to place strategic advertisements across the internet.

Everything happens in the blink of an eye:

  • A website visitor arrives.
  • The publisher records the visitor’s impression and relevant data.
  • Advertisers compete for impressions.
  • The ad is placed by the highest bidder.

Marketers and advertisers can use a programmatic advertising platform to automate the purchase and management of digital ad campaigns. This includes media planning, ad placement, tracking performance, and campaign optimization. Many platforms also include an editing tool for creating campaign graphics.

Programmatic advertising platforms enable publishers to manage their ad inventory. Ad inventory, also known as advertising inventory, refers to the ad space that an online or offline publisher has available to sell on their website, mobile app, video, and so on.

Let’s look at each type of programmatic advertising platform to get a better understanding of what it does and who it’s for:

What is a Demand-Side Platform (DSP)?

A demand-side platform (DSP) is a type of software that enables advertisers to buy advertising using automation. DSPs are a powerful marketing automation tool because they enable mobile advertisers to buy high-quality traffic at scale with minimal friction.

A demand-side platform operates in two distinct stages. To begin, the advertiser uploads creative configures targeting and establishes a budget for their campaigns. This is all done through the dashboard.

Once the campaign creative is uploaded, the DSP searches its publisher network for sites and mobile apps that meet the advertiser’s requirements and makes a bid for placement.

Following that, the DSP resolves the bid, places the ad, and manages payment – all in milliseconds.

What is a Supply-Side Platform (SSP)?

A supply-side platform is an advertising technology (AdTech) platform that publishers use to automate and optimize available inventory (aka ad space) on their websites and mobile apps.

Publishers can monetize their websites and apps by displaying display, video, and native ads to their visitors.

SSPs are an important part of the real-time bidding (RTB) process in programmatic advertising, allowing publishers to optimize yield by connecting their inventory to multiple ad exchanges and demand-side platforms at the same time (DSPs).

The publisher’s site can maximize revenue for its inventory by exposing impressions to as many potential buyers as possible. As a result, SSPs are also known as yield-optimization platforms.

SSPs’ functionalities have evolved, with many now including ad-exchange mechanisms, allowing publishers to connect directly to DSPs rather than through other ad exchanges.

What is a Data Management Platform (DMP)?

A DSP is a type of programmatic platform that is used by advertisers. Advertisers submit bids to a DSP, and the platform makes the final decision.

A DSP stores user profiles and third-party data and combines it with advertiser bids. When visitors land on web pages, the DSP decides which ad to serve where. It must take into account the bid, with the highest bidder winning, the ad’s content, and the cost to the advertiser.

The pixel that publishers place on their website collects data and sends it to the DSP, allowing audience segments to be created. The DSP has advertisers ready to make automatic bids so that the best ad is shown to the right audience.

Advertisers benefit from precise ad placement, whereas publishers benefit from the highest bidder winning. The DSP and Ad Exchange communicate to the SSP their decision on which ad to match to which webpage.

Is Google Ads a DSP?

Yes, Google Ads functions as a DSP (Demand Side Platform). But there is one significant difference between it and other DSPs. While other DSPs allow you to buy traffic from third-party vendors, Google only sells from its inventory.

Despite having access to over 2 million websites, the Google Display Network has no reach in some areas. One of the primary advantages of using a third-party DSP is that you gain access to inventory that is not covered by Google’s ad network.

As an advertiser, you want as much inventory as possible to increase your chances of finding profitable placements.

What is Real-Time Bidding (RTB)?

Real-Time Bidding (RTB) is a method of purchasing ads programmatically. Advertisers can participate in an auction when an impression becomes available using RTB. If their bid wins the auction, their ad appears immediately on the publisher’s website. RTB not only saves time but also allows advertisers to focus on the most relevant inventory.

Multiple advertisers can bid on a single impression of a publisher’s inventory at any time, and the winning ad (with the highest bid) is shown to the user. Advertisers can use RTB to fine-tune their targeting and focus on the inventory that is most relevant to them.

This, in turn, results in a higher ROI and eCPMs. RTB also enables advertisers to make real-time changes to their campaign budgets to improve campaign performance.

Is Real-Time Bidding a form of Programmatic Buying?

Real-time bidding (RTB) is a type of programmatic media buying that refers to the practice of buying and selling ads in real-time in an instant auction on a per-impression basis. It’s employed in a programmatic app campaign.

In summary, real-time bidding is a subcategory of programmatic media buying that is programmatic because the purchasing process is automated (in an auction). Thus, RTB employs programmatic advertising, but not all programmatic advertising employs RTB.

Even though Real-Time Bidding accounts for roughly 90% of programmatic buying, there are other methods of programmatic advertising. However, some advertisers may purchase from publishers through direct agreements that do not involve a real-time bidding process.

What is the difference between RTB and Programmatic Advertising?

Real-Time Bidding is only one piece of the digital marketing puzzle. It’s a method of auctioning off ad space on a case-by-case basis, as opposed to carpet-bombing, in which everyone sees the same ad.

Other critical components must be in place for a programmatic system to function properly. This would be a Demand-Side Platform (DSP) connected to a Data Management Platform on the advertiser’s site (DMP).

A Supply-Side Platform (SSP) is used by suppliers (publishers) to distribute their available inventory across one or more Ad-Exchanges.

How Does Programmatic Advertising Work?

Ad blockers help some users avoid seeing a lot of ads, but they only block certain types of ads. Others continue to appear so subtly on even the most ad-averse users’ screens that many ad-haters don’t notice them.

Ads appear on a user’s screen so quickly that they appear hard-coded into a webpage like the rest of the content. There is usually no lag between the ad content and the rest of the content on a page. You might even wonder if everyone receives the same advertisements.

However, there is a lot of work going on behind the scenes to ensure that the right ads are shown to the right people at the right time. This complex process is easily handled by programmatic advertising.

Publishers – those who have websites with ad space (ad inventory) to sell – and advertisers – those who want to buy that ad space to promote their brand – can be connected by programmatic ads.

Here’s how all of these parts fit together:

  • First, the publisher uses SSP to list all of its available ad spaces on an ad exchange.
  • Publishers use pixels to send data to a DMP (website, user, and ad space characteristics).
  • Meanwhile, a B2B marketer uses a DSP to set the parameters of the ads to determine targeting and budget.
  • The demand side platform DSP then works with the DMP to find the best inventory on the ad exchange that matches the advertiser’s requirements and issues a request.
  • To evaluate which ad best matches impression opportunities, the ad exchange employs algorithmic software.
  • The DSP then sends the ad to the SSP, who displays it to visitors to the publisher’s website.

Although this appears to be a lengthy process, it only takes 100 milliseconds to complete the bidding. After the impression is purchased, it is delivered to the publisher’s website for display. The process is repeated each time a user visits the website or refreshes it.

Buying and Selling: Auction Types for Programmatic Advertising

Let’s take a look at the various auction types for programmatic advertising. Each has distinct advantages for publishers. Aside from auction methods, direct methods of sale and purchase are also available, providing even more control over the process.

Header Bidding:

As an alternative to the waterfall method, header bidding is a sophisticated programmatic advertising technique that allows publishers to simultaneously offer their ad inventory to multiple ad exchanges and ad networks. Header bidding is essentially a programmatic auction in which bid requests are sent in real-time to multiple demand partners, maximizing the value of ad inventory.

Exchange Bidding:

Exchange Bidding is an RTB auction that is completely managed by Google. Google generates a bid request, which is then routed to Ad Manager for auction. The bid request is then classified based on the demographics of the visitors, ad type, size, and format. The bid request is presented to interested bidders, triggering a server-side auction, depending on the category.

First Price Auction:

Bidders participate in the auction simultaneously in the first-price auction model, and the highest bidder wins. The highest bidder pays exactly the price per thousand ad impressions (CPM) that he bid during the auction. The clearing price is another name for the winning bid.

Second Price Auction:

In a second price auction, the runner-up determines the price of an impression. The highest bidder still wins, but only by a cent more than the runner-up advertiser bids.

Open Auction:

Publishers make their media inventory available in an ad exchange at a set minimum cost per thousand (CPM) price, and advertisers compete for the available media. The impressions are awarded to the highest bidder. If you want to buy media at the lowest possible cost while reaching the largest possible audience, open auctions may be the way to go.

Why Programmatic Advertising is Important for Advertisers?

According to Statista’s programmatic advertising worldwide outlook, global programmatic ad spending will reach $129 billion in 2020, surpassing $150 billion by 2021. This sustained growth can be attributed to some advantages that programmatic provides over traditional media buying:

Ability to scale:

Programmatic advertising enables advertisers to reach a large audience by purchasing ad space from any available ad inventory rather than being limited as they were previously.

Real-time flexibility:

SMBs on a tight budget can simply set a monetary limit on their campaigns to avoid overspending and paying more than they bargained for. Companies can simply increase or decrease their budgets as needed.

Targeting capabilities:

An advertiser’s budget can be put to better use and spent more efficiently with programmatic targeting. The specificity of programmatic advertising allows for a level of targeting that no other form of modern marketing can match.


The process is more streamlined with programmatic advertising. Real-Time Bidding allows advertisers to buy and place ads quickly. By serving ads to relevant audiences and minimizing ad fraud risk, programmatic media buying reduces wasted ad impressions while also being cost-effective.

How much does programmatic advertising cost?

Because programmatic advertising is priced using a CPM (cost per mille) model, the price can vary. CPM is an online advertising term that refers to the cost per 1,000 ad impressions. The cost increases if publishers/advertisers want more specific targeting.

The CPM (Cost Per Mille) or Cost Per Impression model is used in programmatic advertising. 

CPM stands for cost per 1000 ad impressions on a website. CPM for programmatic ads is typically estimated to be between $0.50 and $2. 

On average, programmatic CPMs are less expensive than social media advertising methods and provide significantly more value than traditional offline approaches.

This means that even small businesses with limited marketing budgets can incorporate programmatic ads into their digital marketing strategy.

What is an Ad Exchange?

Ad Exchanges are online marketplaces where publishers and advertisers can trade digital ad inventory such as display, native, video, mobile, and in-app ads. Real-time auctions enabled by RTB (real-time bidding) technology are used for buying and selling.

The Ad Exchange is an auction mediation pathway that serves neither the buyer nor the seller; it is a self-contained platform that facilitates programmatic ad buying.

What Is the Google Ad Exchange (AdX)?

Google AdX (formerly DoubleClick Ad Exchange) is an online marketplace for buying and selling digital advertising space. As a programmatic advertising exchange, Google AdX determines the price of advertising space through real-time bidding (RTB). It works in the same way as a stock exchange in that advertising space is freely traded.

Overall, AdX is a large-scale ad exchange that connects publishers and advertisers, allowing both parties to buy and sell display advertising space more efficiently.

What is the difference between an ad network and an ad exchange?

An ad network is an aggregator that collects and sells ad inventory from publishers to advertisers. It serves as a go-between. An ad exchange, on the other hand, is a digital marketplace where advertisers and publishers buy and sell ad inventory directly. Ad exchanges do not use a middleman.

Ad networks are typically organizations that aggregate and curate the ad inventories of publishers, sell them to advertisers, and charge a commission. Ad networks do the heavy lifting for advertisers by categorizing ad inventories based on demographics, behavioural characteristics, or context. Ad inventory is purchased and sold in bulk.

But, in the technological sense, an ad exchange is a platform that allows advertisers, agencies, demand-side platforms (DSP), publishers, and supply-side platforms (SSP) to participate in the transaction. Because ad impressions are sold in real-time via a software application, the media buying process is highly transparent.

What is Programmatic Targeting?

Programmatic targeting provides a straightforward solution: it assists brands in reaching the right people with the right content. Ads can reach ideal audiences for maximum engagement by tapping into consumers’ locations, behaviours, and more.

Keyword Targeting:

A type of contextual targeting in which ads are served based on specific keywords. To provide the best match for your ads, your keyword list is matched to the keywords used in the article.


Ads can be served to people based on their region or zip code, which is a type of location-based targeting. Geo-targeting is used by brands to reach customers in their area. Geo-targeting can be used by international brands or online services to serve language-specific ads tailored to audiences in a specific country.

Contextual Targeting:

Contextual targeting focuses on just that: the context. Contextual targeting allows relevant ads to appear alongside related articles on the websites of editorial publishers by using data to determine what types of content appear on the websites people are viewing.

Data Targeting (Audience Targeting):

Audience targeting, as one of the most common and widely used ad targeting types, allows businesses to serve ads to specific populations based on characteristics such as gender, household income, age, interests, and more. Essentially, the ideal customer.


A cookie is placed on a potential customer’s computer whenever they visit your website. This information can then be used to target ads to this specific person, increasing the likelihood that they will return to purchase from you. Because they already have a relationship with you, retargeting is a highly effective way of re-engaging them with your brand.

Key Takeaway

The future of programmatic advertising is bright, and now is an excellent time to capitalize on a growing trend. 

Programmatic advertising is ideal for companies with larger ad budgets who want tight targeting at each stage of the customer journey. The best way to get the most out of your advertising campaigns is to work with a marketing agency that understands your target audience and can develop a marketing strategy based on existing data.

We hope that this blog on what is programmatic advertising from Digiligo, a promising digital marketing agency, has given you the information you need to understand this topic and incorporate it into your digital advertising strategy.

Programmatic advertising is the future of advertising because it allows marketers to channel their messaging across desired channels and optimize ad creatives to effectively reach their target demographic. To ensure proper targeting, programmatic advertising is a tricky business that requires extensive knowledge.

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