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Understanding the Basics of Programmatic Advertising

2 MINUTE READ | April 24, 2018

Understanding the Basics of Programmatic Advertising

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Jason Porras

Jason Porras has written this article. More details coming soon.

Last updated: November 2021

In this first piece of a 3-part series on programmatic advertising, we start with the basics and clearly define some of the most important concepts in order to have a good foundation for more advanced topics in the future.

So let’s start from the beginning.

What the heck is programmatic advertising all about?

Simply stated, programmatic advertising leverages a technology ecosystem to automatically buy and sell targeted online advertising in real-time.

Programmatic Advertising Ecosystem

Here is a brief description of the main players involved in the programmatic ecosystem:

  • Demand-Side Platforms (DSPs) enable advertisers to buy ad impressions and help determine how much to bid for each impression opportunity

  • Supply-Side Platforms (SSPs) enable publishers to offer inventory and help maximize how much their inventory sells for

  • Ad Exchanges connect DSPs and SSPs and facilitate the auction process to determine who gets to serve in each impression opportunity

  • Ad Servers actually place the winning ad in the corresponding page slot

  • And last but not least, Data Providers enhance the ecosystem by offering additional pieces of information to better inform each transaction. Things like the context or topic of the page where the ad would serve, pre-built third-party audiences, lookalike audience building, hyper-local targeting, fraud detection and prevention, and first-party data onboarding.

So, basically, an advertiser using programmatic technology uploads an ad to an Ad Server and uses a DSP to help decide where, when and whom to serve an ad to, as well as how much to bid for each impression opportunity.  The bid is submitted through an auction held by an Ad Exchange and if the bid is won, the ad funnels through an SSP into the Publisher’s Ad Server and is placed on the intended webpage.

For advertisers, the most important part of this ecosystem is the DSP, where programmatic bidding actually occurs, and where most of the data providers connect to. Given that there are billions of impressions opportunities out there on any given day, DSP helps narrow the field by establishing rules and parameters on which audiences and websites to bid on. But most importantly, DSPs use algorithms to ingest insane amounts of data and determine how much to bid for each impression opportunity in order to meet the campaign goals.

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