As the digital landscape continues to evolve, the role of programmatic advertising technologies is becoming essential for all parties involved in the supply chain, particularly for publishers. In the past, publishers had to rely on traditional advertising methods (such as a waterfall or daisy-chaining) to monetize their inventory. They had to negotiate with ad networks to reach a limited number of buyers and sell their ad inventories in bulk.
Besides, they also had very little control over the ads running on their sites, which could be problematic regarding brand safety and other issues. The process was also time-consuming, so publishers could get less done during their day-to-day operations. Programmatic advertising technologies have changed all of that.
Why Should Publishers Care About Programmatic Advertising?
Programmatic advertising automates the selling and buying of digital ads. It cuts down the manual effort required from publishers to sell their ad inventory and gives them exposure to a diverse range of advertisers. Here are some benefits of programmatic advertising:
Increased revenue opportunities
Through programmatic technology, publishers can sell ad inventory on the website at higher prices. This is because publishers have access to a larger number of advertisers willing to pay more for ad inventory due to their real-time ability to bid on it.
It also enables publishers to increase their revenue without limiting them to specific ad formats. Publishers can efficiently leverage the technology to serve interactive ad formats, e.g., rich media and videos.
Better targeting options
Programmatic technology enables publishers to target their audience more accurately. It allows them to reach specific segments within their audiences, such as those who have previously visited their website and engaged with certain types of content.
As a result, it improves user experience by ensuring that users see relevant ads based on their interests and behaviors. This reduces clutter (such as banner blindness) and improves ad engagement rates, leading to higher conversion rates for advertisers and increased CPMs for publishers.
More efficient operations
Programmatic ad selling can help publishers reduce costs associated with manual processes such as updating inventory parameters regularly, managing multiple campaigns, tracking performance metrics, and reporting on results. Automation can also eliminate human error when processing orders from advertisers or managing campaign data from third-party services such as Google’s AdSense.
Better reporting means providing more information about how the ad was bought, who saw it, and what they did (or didn’t) do as a result of seeing it. This can be done through post-campaign analysis or ongoing optimization. Either way, it helps publishers understand what worked for their ad inventory and campaign so they can replicate those results in future campaigns.
Moreover, publishers can track the performance of their ads in real time so they can make necessary adjustments. Various programmatic platforms and technologies are compatible with third-party tracking solutions such as Google Analytics, allowing publishers to see how well their ads perform across all channels.
It’s no secret that publishers want higher quality advertisers and more revenue, while advertisers want targeted audiences and measurable returns on investment. This puts programmatic advertising in the spotlight. The research by eMarketer suggests the industry’s value will reach $141.96 billion in 2023 in the U.S.
With the growing use of programmatic advertising, publishers are always searching for the best technology for monetizing their inventory. There are a dozen or so to choose from, but which ones should publishers use, and are they worth their time? In this guide, we’ll demystify the technologies behind programmatic advertising so that publishers can implement its benefits from day one and be aware of its associated challenges.
The Technologies Behind Programmatic Advertising
Programmatic advertising delivers the promise of automation at scale, making it possible to display an ad to its ideal audience across various media devices. Several technologies work in tandem to serve an ad to a user when they visit a website. Let’s take a look at them.
As the name says, programmatic direct deals allow publishers to sell their ad inventory directly to advertisers using automation. They allow publishers to select advertisers, negotiate prices, and serve ads on their websites. Such deals give publishers more control over how much they charge for their inventories and with which advertisers they want to work.
Programmatic direct deals can be divided into two categories:
- Programmatic Guaranteed deals
- Preferred deals
Programmatic Guaranteed Deals
In Programmatic Guaranteed deals, there is a commitment from the advertiser (selected by the publisher) that they will buy a specific number of ad inventories at a certain price rather than relying on third-party networks or exchanges that may not always return ads. So what are the benefits?
- Better control over fill rates: With Programmatic Guaranteed, publishers can reduce the risk of unfilled ad inventory and improve their fill rate. They will also have more control over the price of their inventory and how much of their inventory is sold.
- More predictable revenue: Programmatic Guaranteed deals help reduce fluctuation in revenue by offering fixed CPMs upfront for ad inventory. Publishers don’t have to worry about selling out at different times throughout the day or week because they know exactly how much money they will get per impression before it’s even sold.
- Higher CPMs across all devices: Since Programmatic Guaranteed ads are sold at a fixed price, there is no risk of underselling impressions on mobile devices — which often have lower CPMs than desktop ads due to lower click-through rates and higher competition among advertisers vying for those impressions.
- More control over targeting: Publishers have total control over their targeting parameters — including geographic location, device type, and more — so they can create particular audiences and negotiate CPMs accordingly.
- Reduced fraud: Fraud is one of the biggest challenges facing digital advertising today. With Programmatic Guaranteed deals, publishers can guarantee that their ad inventory is clean as they allow selected advertisers who serve legitimate ads on their websites.
Preferred deals enable publishers to select the advertisers and negotiate the price, but the advertiser can optionally buy the inventories. In practice, an ad inventory. Advertisers can view available ad inventory and purchase it if they find it suitable based on pre-negotiated CPM. Publishers can take their unsold ad inventory to hold a private auction if advertisers don’t buy.
Benefits of Preferred Deals
- Higher CPMs: Publishers get better CPMs because advertisers are willing to pay more than they would in an open marketplace. They know they will get specific audience segments and viewable impressions as part of their campaigns.
- Flexibility: Publishers can set their bid floors and frequency caps* on preferred deals. The capping enables them to sell inventory at a preferred price and limit the number of impressions an advertiser is allowed to buy per day or week so that they don’t buy too much and serve the same ads to the same user (which would decrease both viewability and conversion rates).
- Less risk: Preferred deals eliminate risk by guaranteeing performance at both a minimum and maximum CPM rate for all ad impressions.
Frequency capping can be done for all Programmatic Direct deal types. Read more about it here.
While the benefits of Programmatic Guaranteed and Preferred Deal are the same, the risk of having unfilled ad inventory is higher for the latter. Here’s a detailed blog post for more information about preferred deals.
The main challenge with Programmatic Direct deals?
Publishers must choose advertisers and send them proposals through their Google Ad Manager account. This is a challenging task, especially if the website is small, as there might not be a lot of advertisers willing to participate in the deal. Another challenge is that publishers can’t set up one Programmatic Guaranteed deal or Preferred Deal and let it run its course; they must constantly monitor performance and make changes introduced by their advertisers.
Real-time bidding (RTB) is an automated advertising technology used by publishers and advertisers to conduct auctions in real time on an impression-by-impression basis. It allows advertisers to bid on a publisher’s inventory using real-time data to determine the maximum price they are willing to pay for a specific impression.
The publisher’s ad server will respond with the winning bidder and their bid price. Once the advertiser has won the auction, the ad server will serve up an ad from that advertiser.
There are two main ways to conduct real-time bidding: Open exchanges and Private marketplaces.
An open exchange, also known as open-market RTB, is a marketplace where all ad inventory is available to all advertisers. An open exchange model allows advertisers to bid on the highest price they’re willing to pay for a specific ad impression. Typically, ads are sold in real-time based on device, location, and user behavior.
A private marketplace is an exclusive group of a publisher where some selected advertisers can bid on specific inventory or audience segments within that group. This RTB model is more controlled than an open exchange because it allows publishers to set specific pricing tiers and give advertisers guarantees about the quality of traffic they will receive.
Benefits of Real-time Bidding (RTB)
- Increased revenue: Publishers can maximize their yield by selling through an RTB platform and get the most money for their inventory. In addition, they can increase their ad fill rate by selling more impressions, which means a better yield.
- Better targeting: Using their website visitor’s data, publishers can serve relevant ads to their audience more effectively using RTB technology. This helps them increase ad viewability, CPMs, and other ad engagement metrics, thus increasing ad revenue even further.
- Increased efficiency: Real-time bidding allows publishers to quickly identify the most valuable inventory on their website and optimize the minimum bid price (known as price floor) accordingly. This increases efficiency for the advertiser and publisher — less money is spent on ineffective impressions and more on highly effective ones.
- More insight into user behavior: With real-time bidding, publishers can better understand how different variables affect the ad’s performance — from geography to device type to ad creative. Publishers can also use this information for future ad optimization efforts.
But there are also some disadvantages of real-time bidding that publishers should know, such as:
- Ad fraud: Real-time bidding makes it easier for criminals to buy fraudulent traffic and resell it as legitimate impressions, which hurts advertisers and publishers alike.
- Loss of control: Publishers lose control over which ads are shown on their sites, which can hurt brand performance if they show the wrong ads on their pages.
- Low ROI: Real-time bidding might lead to low eCPMs (effective cost per thousand impressions) if the ad inventory through RTB auctions isn’t optimized well.
- Unpredictability: It’s difficult to predict what price publishers will get for each impression because it depends on many variables — including other buyers competing for the same ad space — and this unpredictability means that some publishers may have trouble understanding revenue potential accurately.
Header bidding is a real-time bidding (RTB) technology that enables publishers to run multiple demand partners (ad networks, SSPs, and ad exchanges) on the website simultaneously. Instead of demand partners bidding sequentially based on their historical performances, each partner competes with one another in real time. This means publishers can get better CPMs from advertisers and optimize their inventory performance.
The two types of header bidding are Server-side and Client-side.
Client-side Header Bidding
Client-side header bidding is the most common type of header bidding. It works by inserting a script on the publisher’s web page that sends a bid request to all demand partners and runs the auction inside the user’s web browser when they load the page.
Each demand partner then decides whether or not it wants to compete for the impression and sends back an answer (with a bidding price and ad creative). The highest bidder wins the ad slot, and the ad creative is displayed on the page.
Server-side Header Bidding
Server-side header bidding is a technology that allows publishers to receive bids from multiple demand sources simultaneously. Publishers can increase their yield and fill rates by accepting additional bids from different bidders.
When a user enters a web page, the browser sends a bid request to the publisher’s ad server*. The publisher then sends the bid request to its demand partners and receives multiple bids back. The publisher then selects the highest-paying bid and returns that ad tag to the user’s browser.
*An ad server is a platform that manages the sale and delivery of digital ads. It’s a centralized platform that connects advertisers and publishers and offers a range of tools for sellers and buyers. Here’s a detailed article on the role of ad servers in programmatic advertising.
The primary difference between both header bidding is that the server-side header bidding happens on the server instead of the user’s web browser.
Benefits of Header Bidding
- Improved yield: Header bidding enables publishers to see every bid from every partner in real-time, which means they can make more informed decisions about how much inventory to sell and at what price point. This helps publishers make more money from their inventory.
- Increased competition among buyers: Bids from multiple demand partners may result in higher CPMs and revenue for publishers because more buyers are competing for ad space.
- More flexibility with demand partner integration: Header bidding allows publishers more freedom when choosing their demand partners. Instead of having to choose between partners, they can use multiple partners at once to achieve better results for their websites and advertisers.
- More transparent pricing: It provides more transparency into what price each demand source is willing to pay for the publisher’s ad inventory. This helps them decide to price their ad inventories on future buys for advertisers and set expectations appropriately from the start.
- Improved user experience: With a traditional advertising set-up, i.e., waterfall, there’s always a lag between when the ad request is made and when the bid is sent back by the ad network or exchange. With header bidding, this latency issue doesn’t exist because there’s no delay between when an ad request is made and when it’s filled, as demand partners are called asynchronously*.
*Asynchronous calling doesn’t block the web page, ad server, and other header bidding partners from loading independently.
However, there are some challenges to using header bidding as well.
- Impact on latency: Client-side header bidding adds another layer of complexity to the publisher’s website code that must be managed carefully to avoid impacting user experience or performance metrics such as page speed and render time.
- Inconsistent fill rates: Header bidding makes it harder to track fill rates because multiple ad networks, SSPs, and ad exchanges are involved in the process. As a result, publishers may need consistent fill rates across different demand partners.
- Limited control over ad relevance: Server-side header bidding doesn’t allow cookie synchronization, meaning it cannot identify users’ behavior and interests and share the relevant information with the advertisers. This reduces the targeting capabilities of a buyer and ad relevance for users and publishers.
Getting the Most Out of Programmatic Advertising
Programmatic advertising is not new; it’s being utilized much more efficiently than possible. Publishers can now connect with a large pool of advertisers and control what ads are displayed on their pages. This ultimately helps bring higher CPMs for their ad inventory and optimize ad revenue.
However, programmatic advertising alone might not be enough for a publisher’s business success. Understanding how programmatic can affect a website and what publishers can do to achieve the best results is essential.