Understanding programmatic advertising deals

Programmatic advertising – using technology to automate the buying and selling of digital ads – is the newest area of growth in advertising, and many studies have shown it will only increase in importance and reach.  According to an AOL study , more than 90% of advertisers use programmatic buying methods in their advertising and marketing campaigns.  eMarketer found  that in 2013, marketers spent $3.37 billion through programmatic RTB ad buying. The firm also estimates that programmatic buying will skyrocket to $9 billion by 2017.

Despite the projections and rapid adoption by some advertisers, confusion remains about the different deal types of programmatic buying, how to do it and why to choose different providers. A study conducted by the Association of National Advertisers and Forresterrevealed that only 23% of marketers say they understood programmatic buying and used it to execute campaigns. Slightly more than a fourth (26%) said they understood programmatic as a concept, but needed to learn more about how to apply it to campaigns. Almost a third (29%) said they’ve heard the term programmatic but don’t have a clear understanding of it.

Much of the misunderstanding stems is due to the fact that though the broad definition of programmatic ad buying is “using technology to automate digital media buys,” there are four distinct types of deals, according to the Interactive Advertising Bureau (IAB).

Open auction real-time bidding entered the market first, and it’s often erroneously considered the sole definition of programmatic. In an open RTB auction, buyers (through technology) bid on impressions based on audiences, not specific media brands, and generally don’t know where their ad will run. Publishers typically offload inventory they haven’t been able to sell into these exchanges for extra revenue. Since there isn’t a direct relationship between buyer and seller, there is a major lack of transparency, but buyers are able to get volume, reach and targeted audiences.

Invitation-only auctions, also called private marketplaces, are a different deal type. In these marketplaces or exchanges, a publisher determines which buyers and brands can bid on impressions on their site(s). Private marketplaces offer publishers more security around the brands that can advertise, while allowing publishers to sell more inventory. For advertisers, the main benefit is that they have much more clarity around the media brand, its audience and data.

Unreserved fixed rate deals are another distinct type of programmatic buying. These buys occur when a publisher makes its inventory available at a set price for a single buyer. These deals leverage RTB infrastructure, but allow the publisher to give preference and better rates to specific demand-side partners. These transactions are also known as preferred deals or private access.

While the first three segments of programmatic are similar in that they involve bidding, the last of the four differs in many ways. In automated guaranteed deals, the buyer and seller directly negotiate about reserved inventory. The publisher puts aside inventory for a buyer, determining the fixed price. The campaign typically runs at the same priority as other direct deals in the ad server sold by direct sales people. During this process, the IO is digitized and there is automation in the campaign trafficking process, which is why this type of transaction is considered programmatic.

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