The purchase of advertising in digital media is experiencing a moment of emergence of systems that take advantage of the use of technology to link, in real time, the main players in buying and selling online advertising.

One of these systems is the programmatic buying; a system for buying advertising through an automated way that involves taking advantage of the power of the algorithms of the DSP (Demand Side Platform) platforms to simultaneously access, in real time, global inventories with thousands of advertising options per second that adjust to what each advertiser is looking for.

The interesting thing about the programmatic buying system is precisely that it is an automated process that allows you to buy spaces in all the Ad Exchanges, supports and web pages from the same control panel. And it certainly does it not by searching for inventory audiences, but through a model for buying specific audiences composed of users. That’s the reason it improves whenever behavioral and retargeting strategies are applied.

The programmatic buying is based on the combination of Real Time Bidding (RTB) and Big Data

The White Book of Programmatic Buying/RTB, published by IAB Spain, the Association that represents the advertising, marketing and digital communication sector in Spain, defines the programmatic purchase as “the execution of online media purchases through bids or stable offers with the help of technologies based on algorithms that define the terms of the demand and are able to execute the most appropriate purchase for the campaign objectives, defined in terms of profiles, price, value or any other parameter set and identified by the buyer and whose execution is done in real time”.

Thus, the programmatic buying automatically relates to 3 key players:

1. Advertisers They need to make their products known through creative messages. For them, it is important to reach the right audience that they can convert into customers. Next to the advertisers you can find two types of actors intervening in the process:
   1. Media Agencies: They bring support for advertisers. They help brands identify the media in which it is most appropriate to be present. In many cases, they are the buyers of advertising space for their clients, the advertiser brands.
   2. Trading desk agencies: Although in some cases it is confused with technology, this relates to the technical team that is responsible for optimizing the programmatic buying of its different advertisers.
2. Users: They are the potential customers. They are the main axis of the equation. If there are no visitors of spaces on which brands can make impact messages, it would be impossible for advertisers to achieve their results.
3. Publishers. They are the ones that offer the foundations that link the advertiser brands with users. In addition, regarding to the media, there are advertising networks that represent several publishers.

Factors that make programmatic buying possible

1.- Technology that makes possible to purchase advertising space through a console

In this case, there are up to 5 types of technological tools that allow the programmatic buying:

1. Demand Side Platforms (DSP), which are those used by advertisers to establish the parameters that will define their purchases. This platform is where the bids are made in real time, and in which the achieved results will be measured. Therefore, it is essential since it automates a process that until now, advertisers could only do manually. Currently, there is a wide variety of DSP platforms in the market: these include MediaMath, DoubleClick, DataXu, Cadreon or IgnitionOne.
2. Sell Side Platforms (SSP): This is the place where the offer of different media and publishers met. They are technological platforms of automated commercial management that are born so that the editors of the different websites can manage their advertisement inventory and maximize the revenue that is received from the advertiser brands.
3. The AD Exchange platform: This is the technology that connects the sellers, which are publishers that enable advertising spaces, with the recruiters, which are advertisers who need to hire advertising spaces in which their ads are displayed. There are two forms of Ad Exchanges:
   1. Open Auction Ad Exchange: It allows a type of bid in which sellers make their spaces available to all users and applicants. Being an open bid, both the demand and are greater.
   2. Private Auction Ad Exchange: Here the bidding is done through a closed selection of advertisers and publishers.
4. Data Management Platform (DMP): It consists of a centralized data management platform. Its goal is to help advertisers define their target audiences based on a combination of data collected from different sources. Generally, the data with which the DMP platforms work are:
   1. 1st party data: That is, data collected by the advertiser’s own sources: their website, their spaces in different social media, e-mail marketing campaigns, display actions or their own CRM.
   2. 3rd party data: Which is data collected from external sources of advertisers. They usually consist of data referring to age, gender, socio-professional category, geographical location or the interests of users.
5. Trading Desk platforms: It is the technology used by the Trading Desk agencies to manage in an automated way the purchase of advertising from media agencies.

2.- The real-time bidding model for each impression: Real Time Bidding (RTB)

The RTB system, which is one of the axes on which the programmatic buying is based, goes beyond the traditional way of managing digital display advertising, based on the CPM model (cost-per thousand impressions). In this relatively simple system, the following steps are taken:

• The advertiser chooses a medium in which to show his ads.
• A price is agreed for each impression (CPM).
• The ad is displayed.

However, this traditional approach has some problems. For example, the sale to the bottom of part of a support’s inventory. Or, even, it is possible that it will not be sold in its entirety. Thus, the RTB system introduces technology and knowledge in a process that happens in milliseconds:

• . A user accesses a web page. Through cookies, the necessary data is collected to create your visitor profile.
• An automatic bid is established between advertisers, for whom this profile is relevant, and media companies. There may be several options to bid on: banner, single advertiser, floating ads…
• The publisher selects the offer that interests him most to show a specific advertisement.
• The advertisement is added on the publisher’s website while the advertiser is informed of its publication.

The Real Time Bidding system is showing adequate for all parties. As far as publishers are concerned, it gives them the possibility to earn more income by opening the inventory to a buying market designed to maximize the value of each individual impression.

For advertisers, this is a way to optimize the ad to the right customer profile. Not only is it shown to a potential customer profile willing to buy your product; in addition, it is done on a support and at a time when it is more likely to get their attention.

3.- Big Data

All of the above would be impossible without the ability to generate and evaluate millions of data in real time: Big Data. These data is the one that provides intelligence to the entire programmatic buying process. The intelligent exploitation of millions of data is what allows the different technological platforms to execute their work.

For example, without this data analysis it would be impossible for the DMP platforms to identify the user profile. For this, they need to cross the data of both the advertiser and the data providers that they collect in many different ways over the Internet.

In addition, it is the proper interpretation of these millions of data in real time that allows defining the criteria of each specific bid in infinitesimal time fractions.

Investment through programmatic buying will go through the roof in the upcoming years

The different processes of the traditional digital advertising sales model will continue to work. However, the automation based on thousands of data on which the programmatic buying is grounded allows the creation of smarter media buying strategies by bidding in real time which, logically, will make more and more players introduce it to their businesses.

So far, the purchase of advertising in digital media has had a personalized approach matching relevant ads with relevant sites to reach relevant segments. However, the investment in online display ads through the programmatic buying will register increments of two digits per year until 2017.

All the data indicates the progressive incorporation of the programmatic buying process. According to the data of eMarketer that can be seen in the previous graph, this year, 2016, the programmatic buying of display in the United States will reach up to 22,10 billion dollars. An impressive jump of 39.7% compared to 2015. And what is even more interesting: more than two thirds, 67%, of all display advertising will be purchased programmatically.

Another interesting fact is that it refers to the importance of mobile channels, which are the ones that are supporting most of the growth of the programmatic buying. In 2016, the programmatic mobile buying in the United States will reach 15.45 billion dollars, 69% of all programmatic investment.

In addition, regarding the programmatic video, the figures indicate that this year will be key. More than half of the investment in digital video will be made with programmatic buying. The forecast is that in 2016 it will reach 5.51 billion in the United States, 56% of the entire investment.

Elements intervening in the programmatic buying process

In the programmatic buying, many factors intervene between very diverse elements. Therefore, it is not easy to master the whole process. To help the marketing managers of the companies, a periodic table of elements of the programmatic purchase has been created.

This table divides the recurring elements of the programmatic purchase into the following 5 groups:

1. Inventory: It has the following categories referring to the advertising space that can be hired:
   1. Inventory
   2. Markets
   3. Types of Inventory
   4. Devices
2. Platforms: Aspects that help control the configurations of campaigns, among which are:
3. Creativity: Focused on the aspects of the creative pieces to be used:
4. Data: It refers to the different types of data that come into play in the programmatic buying:
   1. Targeting data.
   2. Demographic data
   3. Intention data
   4. Interest Data
5. Objectives: Among those that differ:
   1. Reach
   2. Clicks/Engagement.
   3. Installations
   4. Contacts/Purchase
   5. Visualizations

What are the advantages of buying programmatic advertising/RTB?

The programmatic buying model offers several advantages over traditional models:

1. It allows you to target not only an approximate percentage of customers based on a combination of sites and ads, but also those customers you really want to reach, a segmentation that is achieved thanks to algorithms that take into account not only the profile but also their behavior in the digital environment.
2. It simplifies the system. All the processes that take place between the different actors of digital advertising (advertiser, agency, support, adserver…) meet in a single channel, with less human intervention and the consequent saving of time, work and money that is possible thanks to automation and Campaign optimization
3. You can reach many more digital media than with a manual purchase. Many media are pouring their entire inventory and not just the unsold items. In addition, receptive segments of clients can be brought together to reach a massive scale which allows a greater optimization of prices and a much more accurate purchase of means that improves by being able to measure conversions in real time.

 Do you want to start optimizing your programmatic buying campaigns?

If you want more information on how to make optimized programmatic advertising campaigns, do not hesitate to contact our experts in programmatic RTB advertising asking for the information here.