Advertising technology seems to have a language all its own. Pay-per-click, demand-side platform (DSP), ad exchange — the list goes on and on.
Out of all the jargon, there are two terms that have become real buzzwords in recent years, and understanding them is key to getting a handle on ad tech and, ultimately, reaping its benefits.
Programmatic and Real-Time Bidding (RTB)
While programmatic and real-time bidding are closely connected and often used together, the two words are not synonymous. Let’s break them down and take a look at their differences.
Media buying, as it applies to digital advertising, is the most powerful and most often-used tool in the repertoire of modern marketers. Without it, how would brands ever reach potential customers?
In the past, advertising relied on a system where agents had to submit orders, often in writing directly to publishers, and haggle over price, size, and many other details. With the accelerated pace of the Internet and the need for more speed and agility in marketing, this process was begging for improvement.
Consumers now move from desktop to smartphone to tablet and back again, meandering across various websites, social networks, and mobile apps, so how in the world are advertisers suppose to keep up? How can they make sure they’re not wasting time (and a whole lot of money) serving ads to people who couldn’t care less?
The answer is programmatic.
Simply put, programmatic media-buying is the process of purchasing digital ad space (display ads, banners, video) with the help of automated software based on complex algorithms.
As mentioned above, this automated process has greatly improved efficiency for buyers and sellers alike. Its benefits are especially significant given the high level of fragmentation caused by the exploding number of digital channels and potential publishers. Add to that the difficulty in tracking results and it’s not hard to see why a better solution was needed.
On top of increased efficiency, compared to earlier methods of media buying, what also makes programmatic powerful is data about customer behavior, geography, time of day and many, many other factors that help advertisers quickly target specific audiences with their ad spend. With the aid of a DSP, advertisers can quickly sift through publisher offerings and select the optimal channel for their ads.
Real-Time Bidding (RTB)
RTB is basically an auction in which advertisers bid against each other through an automated platform, such as a DSP, for space publishers offer on the “open market.” Based on audience data available to advertisers at the moment of the ad call, they can choose where impressions are served in real-time just as a page loads.
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While RTB is estimated to account for over 90% of all programmatic buying and over a third of digital ad spend overall, there is also something called programmatic-direct or fixed-price programmatic, also known as automated guaranteed. In this model, ad inventory is sold directly to advertisers without any bidding, although there still may be some negotiation involved.
Ads sold through programmatic direct are often tied to premium publishers (think Forbes and The Wall Street Journal) who reserve a certain percentage of their inventory they prefer not to sell on the open market because they can demand a premium price from advertisers.
Because they can still be sold through an API, with little or no direct human involvement, these ads are still considered “programmatic.”
In addition to fixed-price advertising, some publishers (again, those with the most clout and in highest demand) organize private auctions, which gives them greater control both over price and which advertisers they sell to. Advertisers also prefer this model, as they can be surer where their ads will be displayed.
Room for Growth
Now that we’ve seen exactly how programmatic and RTB fit together, what does this mean for the future?
Given rapid developments in ad tech over the last few years and increasing emphasis on efficiency in advertising and marketing spending, programmatic and RTB will continue to grow.
Advertisers who want to maximize their ad budgets definitely need to get on the bandwagon and see how programmatic media-buying, both RTB and direct-buy, can save money, scale campaigns effectively, and help achieve advertising success.
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