What can be done in 300 milliseconds? With programmatic - a lot!

In today's digital world, where user attention is scarce and competition for it is relentless, effective ad buying is becoming crucial to the success of marketing campaigns. Traditional ad buying methods, based on direct agreements between advertisers and publishers, are time-consuming and often inefficient. This is where programmatic ad buying comes in, an approach that automates and optimises the process of buying and selling online ad space through software platforms (tools). Instead of lengthy manual negotiation and deal-making, advertisers thus use technology to buy ad space in real time, in order to reach the right audience (potential customers) at the right time and place in the digital space provided by publishers.

The programmatic ecosystem is now quite large and complex, but its core components are still the SSP, Ad Exchange, DSP and Ad Server.

SSP (Supply-Side Platform) is a platform for publishers to manage and sell their advertising space. The most used SSPs are Google Ad Manager, Index Exchange or Xandr Monetize.

Ad Exchange is a digital marketplace where bids (from publishers) and inquiries (from advertisers) for ad space meet. The most widely used are Google Ad Manager or OpenX.

DSP (Demand-Side Platform) is a centralized platform for advertisers to manage and optimize their ad campaigns. The most used DSPs are DV360, Xandr Invest, AdForm or The Trade Desk.

Ad Server is a platform for storing creative that is displayed to the user at the end of a programmatic buy. In the very early days of digital advertising (mid 90's), there were no DSPs and SSPs and so the Ad Server itself decided on the display of the ad. The most used are Flashtalking or Google Ad Manager.

How does programmatic ad buying work?

Imagine you visit a popular web portal. In the fraction of a second it takes for the page to load, a complex process takes place that decides what ad you see. This process, referred to as Real-Time Bidding (RTB), takes place as follows:

When a user (consumer) visits a web page, the web page sends information to the SSP at that moment requesting to see an ad (impression). The SSP analyses data about the user (location, browsing history, age, gender, interests and other anonymised and aggregated data obtained from cookies and other data sources). It then sends this information on to Ad exchange.

Ad Exchange receives the information, connects with all DSPs and sends them the user data. The Ad Exchange then starts the auction itself.

The DSP analyzes the user information and determines if the user is relevant to the advertiser.

If the DSP evaluates the user as relevant, it automatically bids a price for the ad impression (according to predefined parameters set by the advertiser). This process is called bidding and takes place in real time.

Ad Exchange compares all bids and selects the highest bid. The highest bidder wins the auction and his ad is displayed to the user (the final price paid by the advertiser then depends on whether the purchase was made with “first price auction” or “second price auction” rules).

The user is then shown an advertisement from the Ad Server of the winning advertiser on the website (Ad Exchange).

This entire open exchange process, from the visit to the website to the display of the ad, takes approximately 300 milliseconds. By comparison, that's faster than a human blink.

Such an RTB process can be further simplified if the Ad Server is directly part of the DSP. However, it can also be complicated if the user data management platform (DMP) or the verification and brand safety check of the ad space still has to go through (either before or after the auction itself). Alternatively, the purchase would be made through a Preferred (Private) deal with a minimum (floor) bid price (which takes precedence over an open auction) or through header bidding. But more about that next time.

Advantages of programmatic ad buying

Efficiency: automating the process of buying and selling advertising saves time and resources. Within this process, the advertiser (via their platform) can choose from a large number of publishers and decide which ad space has the most potential for them with respect to their KPIs.

Targeting: Programmatic buying allows for greater control over targeting and precise targeting to the right audience increases the effectiveness of ad campaigns.

Optimization: Continuous automatic optimization of campaigns based on real-time data to ensure optimal budget spend for the advertiser.

Transparency.

The most common programmatic campaign management platforms for advertisers are DV360 and Google Ads. Both are part of Google's advertising ecosystem, but each may serve a different purpose and is designed for a different type of advertiser.

Google Ads is a platform suitable for smaller advertisers with smaller budgets who want to generate traffic to their site or conversions quickly. On the other hand, for large advertisers, DV360 provides a powerful tool for programmatic advertising including RTB, cross-channel frequency management or advanced targeting (it also allows the use of custom CRM data and the creation of “look-a-like” audiences) and the ability to optimize purchased ad space (inventory). DV360 allows you to buy premium inventory from a number of advertisers via open auction or private deals, unlike Google Ads which can only buy inventory within the “Google Display Network” (GDN).

Undoubtedly, programmatic buying offers many benefits for the advertiser, the publisher and the customer. That is why we can safely call it a “win-win-win”.

According to the IAB, in 2024, spending on programmatic advertising in Slovakia accounted for 78% of spending on display advertising, which amounted to EUR 102.5 million. Compared to the previous year, this is an increase of more than 13%. Spending on programmatic advertising in Slovakia has been increasing every year and will increase by more than half from 2020.

It is estimated that spending in programmatic advertising could exceed $700 billion globally in 2027 (up from $178 billion just a decade ago). The channels with the largest and fastest growth today include Connected TV (CTV), digital audio and digital out-of-home.

Are you ready for this? We at GroupM Nexus are, thanks to our wide range of products and programmatic solutions.