What is Programmatic Buying, and Why Should I Care?

Programmatic buying can be a very effective form of advertising, but there is still a great deal of mystery about what happens behind the curtain. But that’s not slowing down digital media buyers! EMarketer reports that programmatic display will account for 45% of all display advertising in 2014 and is expected to grow to 63% in 2016.

What is programmatic buying, you ask? Is it all auction-based bidding on display impressions bought in real time? Currently, yes. 92% of display ad spending in 2014 is allocated to real-time bidding (RTB), versus only eight percent in programmatic direct*. EMarketer expects the investment in programmatic direct to grow to 42% in 2016.

*A confusing phrase that really just means a guaranteed ad buy (no bidding necessary) using the same automation mechanisms that were popularized by RTB.

RTB & DSPs:  A Match Made in Heaven

Advertisers (or their ad agencies) typically use demand-side platforms (DSPs) to bid on impressions in real-time. These impressions are housed in ad exchanges, where publishers (like Yahoo and Huffington Post) sell ad inventory that they haven’t sold directly. DSPs are smart, with technology that knows whether to bid higher on a particular user, because they’re more likely to convert.

How do you decide which DSP to use? In December 2011, Forrester Research conducted an in-depth study on the leading DSPs in the market based on a number of criteria. Based on overall offering, Forrester concluded that DataXu, MediaMath, and Turn lead the pack. I have worked with a few of these vendors and have my own personal favorite, which I would be happy to share with you in a private email.

Since that time, I haven’t seen another comprehensive report released as thorough as this one, but the landscape can change quite a bit in just a few short years. Videology bought LucidMedia Networks in 2012 to complement their robust in-stream video direct-to-publisher offering. While these DSPs may have had the market cornered in 2011, a number of new ad-tech companies have sprung up or enhanced their offering to play in this space, such as The Trade Desk, SiteScout, and TubeMogul. An alternative approach for agencies to buy programmatic is through their own trading desk—essentially a sister company to the ad agency with personnel who are trained to manage the DSP buy, using their platform of choice. This approach also offers agencies (or their parent companies) another source of revenue stream.

More and more, we see technology vendors wanting to be everything to everyone—for good reason, too. You want campaign insights to be applied to all parts of the campaign—not just display or video or social. So how do you decide which DSP to use?

5 Questions to Ask When Interviewing Your Programmatic Buying Platform

  1. Are you transparent? Down to the site level? Can you see conversions by site?
  2. Do you have a private exchange? This allows you to buy direct with a specific publisher without buying direct-to-publisher. For example, during the course of your audience targeting campaign, you notice that a particular site is showing better-than-average results. A private exchange allows you to buy more impressions with that site without having to create a separate insertion order and buy directly from a new sales rep.
  3. Can someone manage the buy for me or is it all self-serve, and does that affect pricing? It is important to set expectations. If you are already strapped for time, then learning a new platform and optimizing your campaign is not very realistic or even the best use of your time. There are plenty of well-trained individuals that know how to use their platform, so don’t feel guilty letting them take the reins. Alternatively, if your sole job is programmatic buying, then it makes sense to dig in and get your hands dirty!
  4. Can you deliver my message across desktop, mobile, and connected TV? Can you achieve frequency to the same user across devices? If your media budget is limited, being able to buy display, video, and mobile with a single partner can avoid minimum spend issues.
  5. What does your platform look like? Can I see a demo? What about your analytics? How often will I receive campaign insights?

While it may take a bit of research to determine which DSP is right for you and your company, it is time well spent. Demand-side platforms offer marketers a number of benefits. A few of these benefits are shown below.

The Key Benefits of Using a DSP:

Personalized Marketing

Unique ads can be targeted to unique audiences. We’ve all heard that saying, “right place, right time”. Let’s say you want your display banner to dynamically update from a sporty sedan to a 4-wheel drive SUV when it starts snowing or raining outside. Instead of manually trafficking new creative when that happens, programmatic buying (via a DSP) can plug into a weather API and make the change in seconds. Increase the relevance of an ad, and you are guaranteed to increase the likelihood of its effectiveness.

Optimization in Real Time

With a DSP, you’re not stuck with a single publisher that you purchased $20k on an insertion order with. Tactics can be changed in real time and budget moved swiftly. Insights are used to determine next steps, and there are insights ALL the time. Although no client likes the word “test”, programmatic gives you the freedom to test on your own terms, modify, and refine. Compared to other mediums, testing can be done in days at a fraction of the cost!

Before starting a campaign, the KPIs (key performance indicators) should be established. If you’re a car manufacturer, your measure of success might be when someone schedules a test drive or interacts with the color palette of a car’s interior and exterior. Whatever are the best indicators of a potential purchase (e-commerce shows them easily), start tagging those pages or events as a “conversion”. Without this information, programmatic buying is essentially worthless. The platform needs to know what success looks like in order to find more users who will make a purchase. In addition, when you can measure cost per conversion, you’re able to compare success among tactics such as search, social, mobile, and video. Aren’t you feeling smarter already?


Depending on which DSP you work with, you’ll have access to a number of ad exchanges, which house the majority of ad online impressions (not sold direct via an insertion order). We’ve already seen programmatic take center stage in the Out of Home space; expect the same to happen on radio and television. Google actually sold a product (Google TV Ads) a few years ago that allowed to you bid on unsold ad inventory on cable networks using audience targeting methods. Unfortunately, they failed because the TV networks were afraid of losing control of their inventory pricing.  Since that time, AudienceXpress has made a splash, albeit a quiet one, with their programmatic TV buying platform, which is designed to give more control to the media sellers of cable TV.

Speed to implementation

With programmatic buying, you can launch a campaign in a day if you need to, and begin buying ad impressions in real time.

Put the ‘Pro’ in Programmatic. While every new tool brings with it a set of challenges, the industry is investing in programmatic in a big way; and you should too.

Don’t give up. It takes time to learn a new platform, test audience segments, generate learnings from different tactics, and form insights. Don’t be afraid to fail (cue Jeff Bezos and Amazon as an example).

Programmatic buying allows marketers to make more educated decisions on where or who to target, and eventually it will save you time and deliver meaningful insights from your media buys. I’ll drink to that! Who’s buying (don’t say the DSP!)?  😉