Here’s everything you need to know about programmatic buying

The (online) media world is changing fast – really fast. Blink and you might miss it. We are living in exciting times where buying efficiency, campaign measurability and performance are no longer just buzz words but now actually achievable! Technology and data are the key drivers behind this change and huge amounts of money are being invested by forward thinking agencies and their partners into programmatic buying capabilities.

So what is Programmatic buying? Simply put it can be described as using technology to buy media space. But it is so much more than just the simple automation of buying digital inventory. To demonstrate, allow me to take you through a short history of how digital media planning has evolved…

From then to now

In the 90s media agencies and advertisers would buy inventory direct form publishers. Sites would be selected based on their audience profile and how well they “matched” the audience that I was trying to reach. It was a guess at best because no-one really knew exactly who the audience was, or how much they were really worth. We would typically negotiate a CPM rate (cost per thousand) for X amount of inventory, serve our ads and hope for the best. The problem with this process was that it was time consuming – having to negotiate deals with multiple publishers, and it was inefficient as it was very much a hit or miss in terms of reaching the right people.

So along came the ad networks – they negotiated deals with multiple publishers to sell inventory (much of it unsold or remnants) on behalf of the publishers. There were a few networks, each with a lot of inventory, which allowed agencies and advertisers to deal with fewer “sales” people and negotiate better rates. But there was a problem…the networks were not very transparent. A few sites would provide results – but they wouldn’t tell us which ones – and their pricing models could be described as dubious at best. In addition, the networks eventually all started to sell the same inventory on the same sites, driving up prices, decreasing efficiency and causing fragmentation.

Enter the ad exchanges – which essentially gave us access to multiple networks, giving us easier access to more inventory and greater audiences. Their pricing structures were more transparent – moving from CPM to a cost per click (CPC) model, which meant we only paid for audiences who engaged with our ads. They also started to realise the value of audience data, allowing us to finally start to understand who we were speaking to and what our impressions were actually worth! But the process was still tedious as there were still multiple ad exchanges that we had to negotiate with, creating endless paper trails of IOs, schedules and invoices.

Then an interesting thing happened – some Wall Street types realised that buying digital inventory was in reality not much different to trading stocks and shares…something which had long been automated overseas. And so the DSP was born. A DSP or a ‘demand side platform’ simply was a layer of technology that put buyers in touch with sellers and allowed us to bid (in real-time) on the inventory that we wanted, at the price we wanted to pay. The highest bidder got the inventory. But again, there was a problem – the various DSPs were each good at something, but not good at everything. Some DSPs were great in the online video space (think YouTube etc.), others were good at mobile, still others were unrivalled in the automotive or telecoms space – so depending on what my campaign needed to achieve and who I needed to speak to via what platform, I still had to deal with multiple service providers to buy inventory on behalf of my clients.

Changing times

This brings us to today… how do we bring all of this technology together, that gives us the access to the best inventory – regardless of which platform, network, industry sector we are dealing with? How do we ensure that we are getting the right inventory, at the right price, delivered to the right people? Who are the right people?

So the trading desk was born. A trading desk effectively pulls all the pieces of the puzzle together and sits above the DSPs – providing a single entry point to access multiple DSPs and allow us to bid (in real-time) on the inventory we want. But it is not just about the automated buying of digital inventory.

It is so much more than that. Using first and third party audience data, coupled with human intelligence, a trading desk is able to match up the right inventory to the right audience, across multiple DSPs, platforms, exchanges, networks and publishers. Simply, we can now reach exactly the right people, at the right time, with the right message, and most importantly at the right price!

It is one-on-one communication – at scale – letting us optimise the performance of our campaigns and giving our clients the results that they want.

So practically, what does this all mean? Let’s assume I am selling mountain bike components online and I want people to see my ads, click on them, go to my website and place an order… in the old days we would have approached cycling websites and bought inventory directly from them because that would be the right place to be. But we would have had a lot of wastage – because not everyone on a cycling website would be in the market for mountain bike components; but I would have negotiated a rate to reach everyone, whether they were in my market or not. Not very cost efficient. And we also know that mountain bikers don’t just visit cycling websites, so why couldn’t I sell them my components on other websites too? Financial websites for example, or news websites?

The problem was identifying them and being able to target only them – and pay for only them; not everyone else on the site. Through the trading desk we are now able to do just that! We can identify exactly the people we want to be selling to, reach them anywhere on the web that they happen to be, determine how much we want to pay for an impression to reach those specific people, pay for it and serve the impression…and all in milli-fractions of a second.

The beauty of programmatic buying is that the system learns and becomes smarter over time. The longer our campaigns run, the more data we generate, and the more targeted and efficient our campaigns become. Online campaigns are now ultimately measurable, right the way down the funnel to the point of purchase. 100% performance based!

These are truly exciting times. Change is inevitable – it is here. Are you ready?