Programmatic is automatic

This first part is not intended to precisely depict the programmatic ecosystem in 2023. The following blocks are more theoretical than operational today, given how rapidly ad tech evolves. Thus, we invite the reader to consider this first part as a summary of the original programmatic. With the upcoming end of third-party cookies, for example, Data clean rooms often supplement the DMPs described below. 

The ad network is a platform that acts as an intermediary between the advertiser and the publisher. It first appeared in the programmatic chain to enable media owners to automatically sell large volumes of unsold ad space. The ad network aggregates these spaces into inventories and offers them to advertisers through their agencies and/or trading desks, based on their interest in a certain type of audience. Over time, ad networks became specialized, ranging from those with the largest market share in terms of volume, like Google Display Network or Meta, to those focusing on a specific sector or industry, or those offering specific types of ad formats, like Sublime for skin or specifically built for a type of consumer device, such as AdMob for mobile. There are several hundred ad networks, which alone do not provide a complete understanding of the current programmatic chain but whose stability and constant technological development reinforce their importance among publishers and advertisers. Advertisers evaluate their performance and purchase based on CPM (cost per 1000 impressions), CPC (cost per click), cost per installation (of an app), per view (CPV), or any other indicator that measures user interest in an ad's content and engagement.

The ad exchange, or marketplace for digital advertising, is similar to a stock exchange for ad space, hence its name. This type of platform addresses the ongoing increase in transaction volumes of ad space requiring automated processing. Especially for large advertisers, it quickly becomes an indispensable step, complementing the role of the ad network. Advertisers can buy ad space from multiple ad networks at once. Without ad exchanges, a large advertiser would need to configure the same campaign as many times as they submit it to new ad networks to reach as many internet users as possible. The time savings and economies of scale provided by ad exchanges are considerable.

What a well-resourced advertiser (with financial means) prefers, whether their campaigns are launched directly with publishers, on isolated ad networks, or through ad exchanges, is to centralize and manage them on a single platform to optimize costs and efficiency, while collecting as much data as possible on their audiences and refining their targeting, acquisition, and retargeting strategies. Ta-da! The Demand Side Platform (DSP) plays the role of aggregating, configuring, and interfacing all of an advertiser's programmatic campaigns. The added value of the DSP in the programmatic chain is commensurate with the fee it charges, depending on whether the advertiser chooses a more or less customized solution, allowing them, through an API, to provide their own data (CRM) to the DSP. The Google Display & Video 360 and The Trade Desk offers include the functionalities of a DSP.

The equivalent of the DSP on the publisher side is the Supply Side Platform (SSP). It allows for the creation and sale of ad space to advertisers or auctions through ad exchanges. Google Ad Manager, Xandr, Magnite, and Equativ offer SSPs. Similar to how the DSP collects and analyzes audience data, the SSP processes data related to ad space for sale and its contribution to yield optimization accordingly. DSPs and SSPs can directly interact without going through ad exchanges.

DSPs and SSPs are, in turn, connected to another important technological piece of the programmatic chain: the ad server. The advertiser's ad server stores, manages and distributes its ads (to the DSP and the publisher's ad server). They are referred to as “creatives”, which are images, audio or video files, or a combination of these, depending on the type of ad space defined on the publisher's page. The advertiser's ad server aggregates all creatives from all campaigns run by the advertiser on all programmatic channels (DSPs, ad exchanges, direct publisher platforms), thereby facilitating their tracking. In addition to creatives, the advertiser's ad server can store and manage tags for calling these files on other platforms responsible for their creation, such as Creative Management Platforms (CMPs). Google DV 360 is an ad server for advertisers.

The publisher's ad server, on the other hand, allows for the creation, management, and monetization of ad space. Equativ, Xandr, and Google Campaign Manager (formerly DoubleClick) are ad servers for publishers.

Finally, two other modules of the programmatic chain deserve mention. The Data Management Platform (DMP) connects to DSPs and SSPs and enables advertisers and publishers to gather, segment, and complement data that allows for better sales or buying decisions. Thanks to cookies and data purchased from other advertisers or publishers, the DMP allows advertisers to create personalized audiences and send the audience characteristics to the DSP, which only bids on an impression if its criteria match the interests of the advertiser's audience. The data collected and segmented by the DMP can be sold to other advertisers (audience extension). Oracle Data Cloud, Weborama, and Adobe Audience Manager are DMPs.

The Ad Fraud & Detection solution, as the name suggests, prevents advertisers (through their DSP) from buying fraudulent impressions (generated by bots rather than humans) or bidding on them. Visibility modules like IAS or Oracle allow buying or enriching pre-qualified inventories at the expected level of creative visibility. Advertisers typically buy 80% visibility – the 80/80 combo, i.e., 80% visibility and 80% completion rate) being the norm for video campaigns now. Integrating this module into the programmatic chain is essential to avoid wasting ad spend. However, having one does not guarantee a "clean" CPM. Without exception, advertisers, to some extent, fall victim to click or impression fraud. In fact, it is the second most lucrative organized crime in the world after drug trafficking, which is logically understandable when considering that 50% of users are actually bots...

These methods must also be addressed to understand the chain. There are two:

• Real-Time Bidding (RTB), which refers to real-time auctions :

  In RTB mode, publishers put their ad space up for sale on ad exchanges where advertisers can place their bids. The advertiser with the highest offer wins the auction, and their ad is automatically (and almost instantly) displayed on the publisher's website or mobile app. Publishers participate in RTB auctions when they have not been able to directly sell their ad inventory to advertisers - i.e., through traditional or "direct" means, where the publisher or ad agency provides an insertion order to their client. For advertisers, RTB is an opportunity to display their ads to relevant audiences at a low cost. There are two types of RTB auctions: open auctions, accessible to any advertiser with access to the ad exchange where the auction takes place, and private auctions, where the participation is restricted to a pre-defined group of advertisers, and a minimum purchase price (CPM) is set.

• Direct programmatic, a buying method without auctions between advertisers and publishers :

  In direct programmatic mode, the exchange of ad inventory between advertiser and publisher is based on a fixed CPM price agreed directly between them. It can be a preferred deal, giving the advertiser exclusive access to the publisher's premium inventory, or a guaranteed deal, where a publisher commits to buying a defined number of impressions at a fixed price. This is the fastest-growing programmatic buying mode in 2022. Both advertisers and publishers see it as a safe way to optimize their return on investment (ROI) and yield.