What is Programmatic Bidding and How Does it Work?

In programmatic advertising, an ad exchange is an online marketplace in which advertisers, agencies, demand platforms, publishers, and supply-side platforms can bid on the advertising inventory of several publishers using RTB. Advertisers determine the price by participating in the bidding process.

Programmatic advertising

is a form of automated buying and selling of online advertising space that provides advertisers and publishers with real-time access to data on the location and activity of advertisements. This helps to maximize transparency and allows for more effective research into which programmatic ad exchanges and ad networks are right for you.

Programmatic advertising spending increases every year, and the remarkable growth extends beyond display ads to native advertising, mobile advertising, and video advertising. With programmatic direct buying, advertisers can secure ad space on specific publisher sites, but there is less capacity to adjust audience segmentation. However, with the help of more advanced programmatic ad formats such as native ads and video ads, you can engage audiences even more effectively. Digital advertising inventory can be purchased programmatically on the web, mobile devices, applications, video, digital billboards, and social networks. The rapid growth of programmatic ad buying has increased the relevance of ad exchanges as most advertisers have seen the benefits of better segmentation and real-time auctions.

Demand-side platforms (DSPs) are responsible for buying programmatic advertising space from publishers at the lowest possible price while supply-side platforms (SSPs) have the opposite function: selling advertising space at the highest possible price. To make the most out of programmatic advertising, it's important to understand the difference between RTB (Real-Time Bidding) and programmatic advertising. RTB is a type of programmatic advertising that takes precedence in bidding on impressions rather than in an open auction. It involves private marketplaces, programmatic guarantees, and preferential bids. Additionally, there is still a market for direct purchases of advertisements with major publishers to obtain premium inventory. Outbrain's Strategy Manual provides more information about how to use programmatic advertising on their native ad network.

Understanding how RTB fits into the programmatic landscape will help you plan your campaigns with confidence. A guaranteed purchase (also known as “direct programmatic” or “programmatic guaranteed”) consists of the direct sale of reserved ad inventory between a buyer and a seller with automation replacing the manual insertion (IO) order process.

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