Breaking through the buzz on programmatic advertising

It’s the advertising revolution everyone is talking about – but does everyone fully understand programmatic advertising? Ross McNab, chief revenue officer at Kinected*, breaks through the buzz surrounding the term.

There are few industries undergoing such fundamental change today as advertising, according to Mr McNab, a speaker at the Media Connect, part of ADMA Global Forum in Sydney next month. “Digital advertising is the present and the future, and programmatic media is the tip of the spear,” he says.

So what is programmatic – also known variously as audience-based buying, data-based buying, exchange-based buying, trading, RTB and programmatic buying – and how does it actually work?

The main players

There are three parties to the programmatic process: ad exchanges, demand side platforms (DSPs) and third party data vendors, Mr McNab explains.

Ad exchanges represent the supply or inventory side, selling impressions to advertisers. Publishers and ad networks then place the impressions into ad exchanges, primarily as a way of monetising unsold inventory. Google AfX, Appnexus which powers Microsoft, Facebook Ad Exchange (FBX), Yahoo Right Media, Pubmatic, Rubicon, AdMeld and OpenX are among the largest AdExchanges.

DSPs represent the demand or buying side. Agencies and advertisers use them to connect to multiple ad exchanges, view inventory available, evaluate how much they are willing to pay and take part in the bidding process, Mr McNab says. Popular DSPs include MediaMath, Google BDM, DataXu and Turn.

Third party data vendors build profiles which advertisers can use to target their audiences. They do this by aggregating data from leading web publishers in the social network, dating and shopping sectors, allowing buyers to target consumers of certain demographics, interests and purchase intent (for example, if they recently searched for a flight to London).

How it works

While there is rapid growth in what is variously termed Private Marketplace / Private Exchange / Premium Programmatic, the majority of programmatic buying today is classed as real time bidding (RTB).

Instead of buying impressions in buckets of 1000, RTB enables buying on a per-impression basis – allowing it to be extremely targeted and buyers can decide how they think that impression is worth.

“Mostly it works on an auction model,” Mr McNab explains. “Each party makes their bid, highest wins and pays one cent more than the next highest bidder.”

For example: if Bidder 1 bids 50 cents, Bidder 2 bids 60 cents, and Bidder 3 bids 80 cents, Bidder 3 wins and pays 61 cents.

According to Mr McNab, the actual bidding process looks like this:

1. The Exchange makes a call to the DSP with an available impression.

2. DSP checks to see if the buyer wants the impression – it could be someone in their re-targeting pool, or in a desired audience segment according to a third party data vendor. If the response is ‘yes’:

3. DSP makes a bid for it based on how much it thinks it is worth or the buyer can afford to pay

4. Exchange sells the impression to the highest bidder

5. Ad is delivered by the winning bidder.

Fully automated, it is a process that takes less than 100 milliseconds.

Mr McNab says the APAC market is on par with international markets when it comes to proportion of spending on programmatic, and the growth within the sector.

“Don’t fear programmatic,” he says. “Digital media, and then all media, is destined to be transacted this way. Embrace the change. I believe most are.”

News Corp Australia’s head of platforms and products, Cameron King, believes programmatic is firmly the way of the future.

“I’m very fond of saying the word ‘programmatic’ won’t exist in three years, it will just be called advertising,” Mr King said in conversation with The Newspaper Works earlier this year. Watch the video here.

* Kinected identifies, partners with, and releases leading global technologies, platforms and solutions in the online advertising space into the Asia Pacific region.  It runs the local operations of MediaMath, Integral Ad Science, Unified and BlueKai. Teams work within those individual businesses in Sydney, providing ad tech, training and support to clients including trading desks, individual agencies and marketers.

Mr McNab will speak at the ADMA Media Connect conference on July 29. The Newspaper Works has partnered with ADMA for the 2014 Global Forum.  As part of the partnership, readers and subscribers of The Newspaper Works can secure a 25% discount to various sessions of the conference if they enter the code NEWS25 when purchasing tickets from the ADMA Global Forum website.

For more news from The Newspaper Works, click here.

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