The Four Types of Programmatic Advertising

Reading time: 7 minutes

The ad tech[14] world has advanced significantly over the past decade. Of course, with all the new and emerging digital technology, if it hadn’t advanced we’d be worried. The point is that now, in today’s digital world, when we talk about programmatic deals and programmatic advertising[1], we’re talking about a wealth of methods in which publishers can sell their ad inventories.

For example, digital ad inventories can be sold in bulk. They can also be sold privately or in an open-source ad exchange[6] — there’s almost no wrong way to make a deal. 

To understand the various ways in which a publisher[15] can sell ad inventories, we’re going to discuss the four types of programmatic deals as well as their advantages and disadvantages for publishers looking to increase their bottom line.

Let’s dive in:

What Is Programmatic Advertising?

When we talk about programmatic advertising we’re talking about the process in which programmatic deals are made — as in programmatic ad buying and selling.

Programmatic ad buying and selling involve using software to purchase digital ad inventories and impressions as opposed to the traditional ways of sending requests for ad proposals which involve tenders, quotes, and lots of negotiation tactics. With programmatic advertising, the software uses an algorithm to take care of all these things, with the end result being the assurance that all ad inventories will get sold and all online spaces will be filled with a (hopefully relevant) ad.

What’s more, is that programmatic advertising also uses user data[16] as well as online display targeting. These elements are what help drive impressions to scale, resulting in a higher ROI for marketers running campaigns for businesses of all sizes. 

However, programmatic advertising should not be mistaken for complete automation when it comes to the ad buying process. Human involvement is still a necessary and essential component as insertion orders, ad tags, passback[17] tags, and other forms of coding must be done manually. While these things are all very tedious and labor-intensive, programmatic advertising still allows more time for marketers to focus on the optimization of their ad campaigns for the most success.

What Are Programmatic Deals?

In a nutshell, programmatic deals (also referred to as Programmatic Guaranteed) allow publishers (sellers) and advertisers (buyers) to negotiate a specific price and terms for the ad inventory[18][7] that’s already reserved (or, guaranteed) for the intended buyer. This means that the inventory is designated at that agreed-upon price but only for the specific buyer.

This is as opposed to a Preferred Deal, in which the actual purchasing is optional after the negotiations. 

Now, let’s talk about the four types of programmatic deals and what they mean for publishers:

1. Open Auction

Open auctions are also referred to as open exchanges, real-time bidding[2] (RTB), and the open marketplace. The auction happens in real-time, and the players involved are the eligible buyers and publishers who segment[19] their inventories for multiple demand partners to bid on.

The open auction, while it may not seem like it, is very much a controlled environment. Publishers in open auctions are allowed to choose which ad units they want to be placed for the auction, and they’re also allowed to block advertisers as well as filter out ad types to meet their own requirements. More importantly, they get to set their own floor price for the chosen inventory.

Additionally, the advertisers are allowed to set up their ad campaigns before the bidding behinds, which saves time and allows them to improve their ad targeting[20][8].

The Pros:

  • Perfect for remnant[21] inventories as they’re available to a wide range of buyers
  • The setup is simple as publishers only have to select their ad units, choose a floor price, and choose their auction filters. There’s no authentication process requiring deal IDs.
  • It’s a fact-paced environment, making incoming bids instantly visible and allowing publishers to make changes at any time.
  • Publishers have control over their inventories at all times from the ad creatives being placed to the type of targeting allowed.
  • Demand is always there, providing unlimited revenue potential

The Cons:

  • Bid requests store a lot of data, making them vulnerable to data leakages.
  • Deals are not exactly guaranteed, which is usually an issue if floor prices are too high or ad inventory is irrelevant.
  • eCPMs are generally lower compared to other programmatic channels as there’s a much larger supply of ad impressions.
  • There’s little protection from ad fraud[22], leaving you vulnerable to malicious ads.

2. Private Auction

Private auctions, also referred to as closed auctions, private marketplaces (PMPs), and invitation-only auctions involve only the buyers that are invited. These types of auctions are placed at a higher priority by the ad servers[9], making these types of programmatic deals safer and better for premium impressions.

Essentially, in a private auction, publishers send an invite to various buyers and demand partners to place bids on their inventory. These are usually buyers and demand partners the publisher has established a relationship with, hence the reason for offering premium inventories and varied ad inventory packages built around first-party data

Lastly, private auctions require the use of deal IDs to identify the sellers and buyers. Deal IDs are automatically assigned to the inventory package which is what allows them to be purchased.

The Pros:

  • Thanks to the deal ID requirement, sellers and buyers have total transparency[10] during the exchange.
  • There’s a higher CPM[3] since premium inventories are offered to chosen buyers. Premium inventories equate to higher viewability[11], hence the higher pricing.
  • Since these programmatic deals are invite-only and there’s total transparency, ad fraud is virtually eliminated.
  • PMP[4] deals are automated through the DSPs and SSPs, making these types of auctions much less labor-intensive.
  • The nature of PMPs allows publishers and advertisers to build strong and mutually beneficial relationships.

The Cons:

  • Buyers will only agree to premium prices for premium inventories. Therefore, publishers must maintain a high fill rate[23] with consistent premium inventory to keep up.
  • In some instances, publishers don’t have enough information regarding potential buyers, which means they may miss out on potential premium demand partners.

3. Preferred Deals

Preferred deals, also referred to as private access, spot buying, and unreserved fixed rate deals involve only one buyer. Ad servers also tend to place preferred deals above private and open auctions.

Preferred deals essentially work within the private marketplace. This is where participating buyers can get a “first look” at the criteria in place for the inventory and decide from there whether or not to buy it. Therefore, the buyer is not bound to the deal, which ensures they’re purchasing exactly what they need. 

What’s more, is that since a pre-negotiated and fixed price is set, the buyer in question also gets first priority to this exclusive inventory access before it can be made available to other buyers in either private or open auctions.

Lastly, while the number of impressions cannot be guaranteed in a preferred deal, the target audience is. This is because the DSPs that advertisers partner with use their specific audience data to review the ad impression[12] before making a purchase.

The Pros:

  • The impressions won in preferred deals are highly targeted to specific audiences, which means more relevant ad content for your website visitors.
  • In these deals, the buyer reaches out directly to publishers for the exclusive access and negotiations, which allows for better relationship building.
  • There’s more creative[24] control since publishers can also review the campaign[25] creatives before agreeing to the deal.

The Cons:

  • Since buyers can cancel the deal at any time, the inventory can potentially end up in the open exchange, leaving you with a low fill rate.
  • There’s less competition in preferred deals, which means that impressions bought may get sold at an even lower price.

4. Automated Guarantee

Automated guarantee, also referred to as programmatic guaranteed[5] or direct/reserved/premium deals, also focuses on one buyer and is considered the highest priority by ad servers.

With automated guarantee deals, only premium inventories are offered up, and the publisher is in charge of choosing one buyer to whom they’ll guarantee a certain number of impressions for a fixed price. Of course, the price is also pre-negotiated.

Since the seller and buyer are dealing directly, the chances of ad fraud are 100% eliminated. Additionally, publishers also get the best prices for their inventory since there’s a fixed number of impressions and they create better relationships with their buyers over time.

As previously mentioned, programmatic guarantee differs from direct deals because in direct deals, publishers maintain total control over the inventory and only offer up what they want to sell. In automated guarantee deals, the buyers are allowed to see all the impressions and choose accordingly to their own criteria.

The Pros:

  • Premium inventory is more effective as the ad units with higher engagement rates and less instances of banner blindness are sold appropriately.
  • There’s more transparency and control since it’s a one-on-one deal and parties are free to go through with the deal or back out for any reason. 
  • There’s more creative control since publishers can review the campaigns before signing off on the deal.

The Cons:

  • Despite negotiations for premium inventory, there’s a lot of underselling since publishers can’t account for all targeting criteria or viewability on the buyer’s side.
  • Publishers still require a lot of resources from ad ops[13] partners to ensure the campaign runs smoothly and efficiently, despite all the automation involved.

When it comes to both automated and direct selling, publishers need to know how to appropriately trade their premium and remnant inventories for the best rates possible. Think of each programmatic advertising type as the steps you would take from beginner to expert, as the more direct programmatic deals require a more hands-on approach and strong relationships that can only be built up over time. 

Terms
1. programmatic advertising. Programmatic advertising entails using machine learning and technology suites to buy and sell ad inventory with a data-driven process.
2. real-time bidding. Real-time bidding is a technology-driven auction process where ad impressions are bought and sold almost instantaneously. Once an advertiser wins a bid for an ad impression, their ad is shown on a website. Real-time bidding plays a crucial part in the digital advertising ecosystem together with other players such as ad exchanges and supply side platforms.
3. Cost Per Mille/Thousand [CPM] ( CPM ) Cost per mille, or thousand (mille = thousand in Latin). A pricing model in which advertisers pay for every 1000 impressions of their advertisement served. This is the standard basic pricing model for online advertising. See also CPC and CPA.
4. Private Marketplace [PMP] ( PMP ) Private Marketplace deals or PMP is a direct deal made between a publisher and buyer for programmatic ad inventory. A PMP can also be called Preferred Deals. This practice contains much more human interaction unlike the alternative of selling ad inventory through an ad exchange. Often higher rates for ad inventory can be negotiated through this method.
5. programmatic guaranteed. This type of programmatic advertising enables a programmatic buyer to agree beforehand or guarantee a cookie/device ID matched audience for a fixed price.

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