What is Programmatic Media Trading?
Definition: Programmatic media buying is an automated method of buying and selling digital advertising according to the decisions on a per-impression basis by supply and demand parties and in accordance with the rules of the exchange platform.
Put it simply, programmatic media trading is the buying of digital advertising space in real-time via an automated auction (real-time bidding). Sites that want to sell advertising space through this type of auction typically offer the inventory through a marketplace or ad exchange.
This method allows advertisers to reach the audiences they want, based on the value of the impression. On the supply side, it allows publishers to get higher-paying advertisers, since the higher the demand for your site audience, the higher the price for the impression.
Programmatic mechanics 101
Programmatic media trading uses automated platforms to simplify the buying/selling process according to a predefined budget. Advertisers connect to an ad exchange placing offers using their set budget. The ad exchange connects to ad networks which then choose ad spaces that meet the target market, size, and budget of the advertiser.
Programmatic trading offers advertisers better targeting for their campaigns. It also improves the quality of advertisers publishers may get on their sites. The automated technology uses data management and algorithms to select the right ad to serve the right user at the right time and price.
To understand programmatic media buying, you first need to know key concepts related to this process.
There are three categories of programmatic media buying:
Real-time bidding (RTB)
In this method, inventory prices are decided through a real-time auction. Any advertiser or publisher can access it. Ad exchanges and supply-side platforms often provide the framework for this auction.
How does it work? Ad exchanges collect information about the page and the user viewing it every time an ad impression appears in a user’s web browser. The ad exchange auctions the impression off to the advertiser that is willing to pay the highest price for it.
Private marketplace (PMP)
These auctions have restrictions on who can participate. Often they select advertisers on an invite-only basis. In other cases, publishers may have an interview and selection process so advertisers can apply to enter the PMP.
In this case, a publisher sells media inventory directly at a fixed cost per mille (CPM – cost per impression) to advertisers.
Programmatic advertisements have three components: the supplier side, the demand side, and the exchange platform (more about this below)
What is the role of a programmatic media trader?
A media trader is the professional that spends the assigned digital budget within the RTB environments. A media trader needs to know where is best to buy inventory for an advertiser, meeting the campaign goals and ROI.
Media traders maximize the advertiser’s digital budgets aligning them with the business goals. They create real-time bidding and paid search strategies, implementing this in digital media buying platforms, to ensure the advertiser’s goals are met.
A media trader has four key responsibilities when executing an RTB campaign:
- Know the market: media traders need to understand the market in which the impressions are happening. They define the strategy they will use, retargeting, prospecting, contextual targeting, and more.
- Oversee ad operations: this is the technical side of launching ads, including the restrictions on the placement of the ads and managing attribution.
- Trading: this involves managing a campaign, purchasing the ads, checking the reports, and making changes to the targeting. Is the responsibility of the trader to ensure the best possible outcome, achieving the highest possible ROI from the ad campaign.
- Reporting: the media trader pulls all the reporting from the platform analytics and provides insights on the key drivers of that performance.
How does a media trading desk work?
A media trading desk can be a service provided by an agency or a software solution. The service or solution provides planning, management, and optimization of programmatic advertising campaigns.
Advertisers benefit from an agency trading desk (ATD) that enables them to buy media for less than managing a campaign in-house. At first, you may think that ATD is similar to a demand-side platform (DSP). However, an agency trading desk offers the added value of programmatic advertising professionals on top.
ATDs provide the expertise of software developers, account managers, and data analysts that optimize the media buying for the agency’s campaign. ATDs work between the advertiser and the supply and demand platforms, and networks to purchase media. In this sense, they work similarly to AdTech platforms. They provide added services that regular demand or supply platforms don’t give to their clients like:
- Campaign launching and optimization
- Reporting and analytics
The State of Programmatic Advertising in 2021 ( Statistics)
Digital advertising has been changing in the last years driven by automation and innovative solutions that benefit both publishers and advertisers. Here are top statistics you need to know about the state of programmatic advertising in 2021:
Global programmatic ad spend will reach 155 billion in 2021
Global ad spending 2017 to 2021 (Statista)
Programmatic ad spending is projected to grow 20% in 2021.
The percentage of growth is also seeing a rising trend. Companies are expected to spend 20% more on programmatic advertising in 2021 than in 2020.
And the rising trend will grow well into 2023, according to a study by an e-marketer.
In fact, programmatic display ad spending is growing more than non-programmatic display ads.
- The average cost per action (CPA) is $49 for paid search and $75 for display ads.
- The US social media ad spends reached $43 billion in 2020. This was a 20% increase from 2019. (Source: eMarketer)
- Marketers use ineffective strategies: Only 61% of marketers believe their marketing strategy is effective.
- 40% of marketers consider that proving the ROI of the marketing efforts is a challenge.
Programmatic Advertising Trends
The pandemic affected programmatic advertising, but as was reported by MediaRadar in September, the numbers were bouncing back. There was a 36% growth in July 2021 from 2020 levels, which puts the market at pre-pandemic levels.
What’s next for programmatic advertising? Here are some trends to look for:
- Avoiding “heavy ads”
In August 2020, Google implemented a feature on Chrome that blocks “heavy ads” to improve the user experience. Any ad that Google considers as heavy is removed and replaced with a label that says: “ad removed”
What’s a heavy ad?
- It has more than 4MB of network data usage
- Uses the main thread for 60 seconds in total
- Uses 15 seconds of CPU in a 30 seconds window
This means companies will need to optimize video ads to prevent being labeled as heavy ads.
- Planning for Post Third Party Cookies (P3PC)
Third-party cookies are being phased out on Chrome by 2022 and are going to change the way companies carry programmatic advertising. Organizations need to prepare for 2022 when they can no longer use 3PC. That means they need to take a multi-layered approach to advertise.
- Programmatic advertising spending will continue rising
The 2020 IAB Europe reports that companies will keep raising their budgets for programmatic advertising. Here are some of the reasons:
- The number of companies investing more than 41% of their display budget into programmatic advertising grew to 70% in 2020.
- 54% of advertising agencies buy almost half of their video ads programmatically.
- Publishers report they are selling 81% of their inventory.
- Adoption of emerging formats
New formats like connected TV (CTV) and Digital out-of-home media are slowly taking off. CTV in particular offers an opportunity for programmatic advertising. It allows advertisers to reach two different audience types at the same time. The people that want to watch TV on their timeframe and people that avoid linear TV.
What about Digital Media Trading Platforms? How do they work?
Technology is changing the way companies buy and sell digital advertising space. What once was done by human buyers, and advertising salespeople now is done through technology trading platforms.
How do they work? The media trading ecosystem consists of three key actors: demand-side platforms, supply-side platforms, and the ad exchange where they interact. Let’s explore how each one works:
Demand Side Platforms (DSP)
Demand-side platforms enable advertisers to buy impressions from publisher sites, targeted to their audience. Publishers put their ad impressions for sale on ad exchanges. The DSP selects the right impressions for the advertiser in a real-time auction through real-time bidding.
How does this work?
The advertiser inputs the target audience preference and budget into the DSP. Then, the platform places programmatic bids using artificial intelligence (AI). The auctions take place in seconds and the highest bid ad is the one that appears on the page. The entire process happens automatically, without human intervention.
Best demand-side platforms
Some of the most popular demand-side platforms are well-known digital giants, others act independently of the media channel they run.
- Facebook Ads Manager: they provide the buying platform and the biddable ad space. The ads manager enables advertisers to create, edit, manage, track and analyze campaigns from one place.
- Rocket Fuel: is a self-service DSP, allowing companies to bring programmatic marketing in-house. The platform uses predictive AI to serve real-time ads relevant to the customer profile.
- Amazon: Amazon Advertising Platform (AAP) uses the amazon algorithm to serve ads in real-time, leveraging precisely targeted campaigns for relevant customers. The downside is that users (advertisers/publishers) don’t get much information about conversion rates or click-through rates.
- MediaMath: is an independent programmatic company for advertisers. One of its advantages, MediaMath can have full access to their data.
A supply-side platform is a software solution geared to help online publishers sell their display, video, or mobile ad impressions. It works as the publisher-side of a demand-side platform. SSPs are designed to maximize the prices of impressions for publishers.
How does it work?
It allows publishers to connect their inventory to several ad exchanges, DSPs, and ad networks. Thus expanding the range of potential buyers for ad space. Real-time bidding helps publishers to get the highest possible rates. The SSP inputs impressions into ad exchanges, where a DSP analyzes and purchases them. The process, although looking complicated, happens in real-time in the time a page takes to load.
Best supply-side platforms
- MoPub: is a hosted ad serving solution built specifically for mobile publishers.
- Google Ad Manager: formerly Double Click for Publishers, works as an ad revenue engine that connects with the Google Ad Exchange. The downside is that it is locked to Google products.
- Sharethrough: is an omnichannel supply-side platform for programmatic advertising, geared to publishers, content creators, and app developers.
- AppNexus: this is an independent programmatic marketplace, with the advantage of accessing data and managing the advertising offerings.
What are Ad exchanges?
Is a digital marketplace that connects advertisers and publishers to buy and sell advertising space through real-time auctions. They are used to sell display, video, and mobile ad inventory.
Best ad exchanges
PubMatic: it offers an easy-to-use interface and advanced advertising features like open-source header bidding.
Verizon Media: the company offers a large range of advertisers, serving over 2 billion ad impressions daily. Provides header bidding, programmatic direct selling, and management tools.
Google Adx: uses both open-auction and private-auction bidding models. The downside is that it has a high barrier of entry
Ad exchange vs ad network
What’s an ad network?: is an intermediary that collects inventory from publishers and sells it to advertisers.
How does it work? Ad networks are organizations that collect, curate and sell publisher’s ad inventories. They charge a commission for the intervention, and the inventories are sold in bulk.
What’s an ad exchange?: is a digital marketplace where advertisers and publishers buy and sell ad inventory directly.
How does it work?
An ad exchange is a platform that gives an environment for advertisers, agencies, DSP, publishers, and SSP, to buy and sell media in a transparent way, in real-time.
|Ad Network||Ad Exchange|
|Type||Company services||Technological platform|
|Target Users||Agencies, advertisers, and publishers||Agencies, Advertisers, DSP, SSP, publishers|
|Optimization speed||Takes time to change||Changes in real-time|
|Transparency||Advertisers don’t know where the ads are served. Publishers don’t have information about the buyer||Both parties have information on the transaction|
|Inventory||Offers a premium inventory to advertisers||Offers remaining inventory.|
|Pricing||Depends on negotiation||According to the bids placed|
|Pros||Publishers can sell at a premium price because they set the price.||The price is set automatically according to the bidding process.|
|Cons||There is little transparency about where the ad is served and who is the buyer.||Publishers may not get a premium price for their inventory.|
Tips to Increase your Ad Revenue
Publishers need to develop a programmatic ad strategy that aligns with the overall sales strategy. The most important point is ensuring the quality of the inventory so it doesn’t get categorized as remnant inventory.
Publishers can follow some tips to increase the advertising revenue of a website. Let’s review a couple of them:
In Cost-Per-Mille advertising, you get paid per thousand impressions of an ad. Publishers can use this method to set the prices they want to get for their ad impressions. This method works best when you have high traffic and a targeted audience.
Another popular method is Pay-Per-Click. With PPC ads, you get paid every time a user clicks on an ad served on your site. You can increase your revenue as a publisher with PPC by using an ad network like CodeFuel. An ad network will give you the control and information to maximize the revenue for the ads on your website.
Join affiliate marketing
You can also advertise and promote products for third parties on your website. You get paid every time a customer clicks on the link or makes a purchase through your site. This method can be combined with other advertising methods.
If you want to know more about ad revenue, check Ad Revenue: What Is and How to Increase it?
Maximize your ad revenue with CodeFuel
Codefuel is a complete monetization platform that enables publishers to maximize their ad revenue through intent-based ads.
CodeFuel ad network enables publishers to generate higher revenue with text, display, and search ads. Tap into the broad reach of. premium search vendors while enriching the user experience. The CodeFuel Hub enables publishers to manage and optimize traffic with real-time data enhancing the value of their impressions. Learn more about how to increase your ad revenue with CodeFuel by contacting us.
What is The Future of Media Trading
In its beginnings, media trading was conducted almost entirely on a managed basis. Later, vendors implemented self-serving platforms. The issue with programmatic advertising tools is that in reality, the user needs to choose their target audience, the budget, and other aspects of ad campaign optimization. With marketers using over 30 tools regularly, this can be a hassle and lead to inefficiencies.
New media platforms need to address several challenges:
User experience is king: Enhancing the user experience is key for a successful interaction between publishers and advertisers.
Mobile friendly: users need to manage the media platform across devices.
Transparency and clear information: buyers and suppliers need clear information about what is happening with the real-time bidding. Buyers need to know where the ads will appear to optimize the campaign.
More Business Intelligence: new platforms use AI to target the audiences at the end-user level. The software will understand the target user’s intent, behavior, and preferences.
Publishers and advertisers cannot go blind when using media trading platforms. Programmatic platforms must provide a high-targeted user experience while maximizing revenue through transparency.