Programmatic advertising is the process of automating the buying and selling of ad inventory in real time through an automated bidding system. There are several types of auctions used in programmatic advertising, each with its own advantages and disadvantages. The two main types of programmatic auctions are first price and second price. In first price auctions, the highest bidder wins the auction and pays the amount they bid.
In second price auctions, the highest bidder wins the auction but pays the amount of the second highest bid. This model offers a level playing field for all buyers, regardless of size or income. Cascade auctions were introduced to address the inequitable nature of cascade auctions. In this model, bids are placed in a series of auctions, with each auction having a higher minimum bid than the previous one.
This allows buyers to bid on inventory that may not be available in open auctions. The header-bidding model is another type of auction used in programmatic advertising. In this model, all buyers bid at the same time, allowing them to compete for the same inventory. This model offers a level playing field for all buyers, regardless of size or income. Preferential offers are another type of programmatic auction.
In this model, advertisers can choose the inventory of advertisements at a fixed price even before it is available on private platforms and then at open auctions. This type of auction gives advertisers more control over their ad campaigns and allows them to target specific audiences. Programmatic direct is another type of programmatic auction. Also known as buying in cash, negotiating preferred offers takes a refined approach, since both parties agree on prices, segmentation, etc. Unlike other types of media purchases that we analyzed, programmatic direct does not follow a bidding process.
The inventory is sold directly to the advertiser after negotiation. Real-time bids (RTB) have become synonymous with programmatic media buying, mainly due to their widespread use. RTB is used to sell all types of inventory, including premium inventory. In RTB, the private market, programmatic guarantee and preferential offers take precedence in bidding on impressions rather than in an open auction. Manual optimization usually involves advertisers adjusting their CPC, CPA and CPM bids, usually on a daily basis. Header bids (also known as pre-bids, pre-bids, and comprehensive performance management) are a media buying process that allows publishers to simultaneously collect bids from several sources of demand.
Bid shading is essentially an algorithm that aims to tell advertisers how much they should bid in first-price auctions. Originally designed to help publishers sell remaining inventory to advertisers, RTB is now used to sell all types of inventory, including premium inventory. Programmatic advertising offers many advantages for both advertisers and publishers alike. Advertisers know precisely what type of environment their ads will appear in, while publishers can be sure that their inventory won't be flooded with low-quality ads.
To learn more about the benefits of offer shading, see Why offer shading should be part of your programmatic strategy.