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Programmatic Buying: Just a Buzzword or the Future of Media Buying?

Posted 26 May 2015 9:30 AM by Jessy Davis

Programmatic is a word we’ve heard a lot lately. And when it comes up in conversation, other terms quickly follow: DSP, SSP, DMP, PMP, reserved, guaranteed and non-guaranteed. So what does all this chatter mean? Is programmatic buying just a new concept or the new reality?

As the subject and the practice continues to gain momentum, most agencies and publishers are starting to train and develop dedicated experts to be their “go-to personnel” for programmatic questions. Yet as programmatic spending increases and more premium inventory (e.g., home page takeovers, custom executions, etc.) becomes available, all — yes, all — media buyers and sellers should have at least a basic understanding of programmatic buying. And that’s the goal of this blog. By the time you finish reading it, you should have a general sense of what programmatic buying is. You’ll also know why it will become increasingly more important as the media landscape evolves. 

What is Programmatic Buying?

According to the Interactive Advertising Bureau (IAB), programmatic buying is “the buying and selling of advertising, real-time bidding, automation, and the buying and selling of digital media.” In simple terms, programmatic media is a marketplace for buyers and sellers, with digital media being the product. By leveraging data and real-time bidding (similar to paid search), advertisers are able to stretch media dollars further than ever to hit the right customer at the right time on the right site. Except with programmatic, the buying is now happening faster than it takes to load a web page.

Breaking Down Programmatic

In a marketplace, a buyer (media agencies or advertisers) is looking to purchase digital media ads/impressions (inventory) from media sellers (publishers), while publishers are looking to sell their inventory to advertisers and media buyers. In summary, someone’s looking to buy, and someone’s looking to sell.

How does the buying and selling occur and where does it take place? Open exchanges and private marketplaces (PMPs) are accessed by demand-side platforms (DSPs) via integrations with supply-side platforms (SSPs) and exchanges. That’s a bit of an alphabet soup, so here’s a more detailed explanation of each: DSPs are the platforms where buyers manage their digital media purchases and try to obtain the most efficient CPMs for their digital ad spend. SSPs are the platforms where sellers sell their products to maximize their profits on their inventory. Like an ad server, there are two sides with similar technology that connect digital media buyers and sellers.                                  

Now that we’ve covered the buyer and seller platforms, next up are the several ways to purchase this inventory. The programmatic buying structure is like a funnel: Inventory starts at the top (higher value) and travels down to the bottom (lower value). Along the way, buyers are bidding to win the impression. If it sells, it’s gone. If it doesn’t sell, it continues to move down the funnel until (ideally) someone purchases it. The flow of inventory between the funnel levels is fast — only seconds long, if that. As such, it’s usually advised to use a mix of the buying structures to purchase the most effective rate and win relevant impressions.

Two main tiers of programmatic buying are PMPs and exchanges. PMPs allow a scalable solution for advertisers to utilize established relationships to buy more select inventory and secure efficient rates, while exchanges embrace real-time bidding in an auction-based environment that grants mass scale and inventory.

5 Common Programmatic Buying Structures (Reserved and Unreserved)

1. Automated Guaranteed (Private Marketplace)
      • Direct Sales – buyers and sellers agree to a fixed rate on inventory that delivers guaranteed impressions
2. Programmatic Reserved (Private Marketplace)
     • Reserved Inventory – publishers negotiate deals on a fixed rate that reserves inventory that delivers guaranteed impressions
3. Unreserved First Look
     • Unreserved Inventory – publishers present inventory that is not sold in the reserved tiers to a select advertiser before opening it up to any other advertisers
4. Invitation-Only Auction (Exchange)
     • Unreserved Inventory – publishers invite selected advertisers to an auction to bid for the impression
5. Open Exchange (Exchange)
     • Unreserved Inventory – auction for unsold inventory without guaranteed impressions
 

Why Buy Programmatic?

The simplest answer: It’s an easier and more efficient way to buy media. Automating the buying process allows advertisers to maximize their media spend by (1) utilizing existing consumer data across all buys, (2) enabling the negotiation of more effective rates, (3) creating more flexibility in purchase decisions and (4) providing access to premium inventory on premium sites without having to manage multiple publisher contracts, which saves time for both parties. Publishers also benefit tremendously by having a place to sell their entire inventory.

DSPs, SSPs and buying structures are just the tip of the programmatic iceberg. There are many more complex details, but that is where the programmatically trained really become valuable to agencies and publishers. As Laura Desmond, CEO of Starcom MediaVest, stated in Ad Age, “If you're a marketer, do you want your programmatic decisions siloed and balkanized from everything else that you're doing? No. You want it integrated." Understanding the foundation of what programmatic buying is, popular buying structures and the advantages of purchasing programmatically differentiates media professionals as adaptable and invested in the ever-changing, integrated advertising ecosystem.

As a forerunner in the digital media arena, Moxie is taking programmatic by the reins. In addition to implementing and leveraging our own internal resources, proprietary technology platforms and centralized data warehouse, we recently developed and launched a 10-week agency course in programmatic buying for our media team. If you want to find out how programmatic can drive your business forward, contact Moxie today.

Jessy Davis is an Assistant Media Planner at Moxie. She is currently preparing to represent Moxie at the 2015 Cannes Lions International Festival of Creativity in the Young Media Academy. Follow Jessy on Twitter, @_JessyDavis, through her journey at Cannes beginning June 19.

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