programmatic primer · the lumascape is a visual map of the many players in the programmatic space....

GENERAL ASSEMBLY WHITE PAPERPROGRAMMATIC ADVERTISING

PROGRAMMATIC PRIMERThe most comprehensive guide to the most loaded term in digital advertising


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Programmatic is perhaps the most loaded word in digital advertising today. Depending on whom you ask, when you ask and how you ask, you’ll hear as many thoughts on the topic as there are people sharing them. It’s been referred to as both the savior and bane of digital advertising, been applauded for improving inefficiencies while being accused of creating them, and been declared both a fad and the future.

Our expectations of our digital experience are greater than ever. We expect to connect with one another instantaneously and without interruption. We expect to gather real-time, relevant information whenever we need it, wherever we are. And, we expect that our technology systems be intelligent enough to seamlessly connect and create a fluid experience across our many devices.

It is these extraordinary expectations that gave rise to programmatic advertising. The idea that digital advertising can be relevant, customized, intelligent, automated, anticipatory and reactionary, has brought forth a new method of buying and selling digital media.

Programmatic spending is on the rise. A 2014 study from eMarketer predicts annual programmatic spend will exceed $20B in 2016, up from $4B in 2013.1

Note: Digital display ads are transacted via an API, including everything from publisher-erected APIs to more standardized RTB technology; includes advertising that appears on desktop/laptop computers as well as mobile phones and tablets; includes banners, rich media, sponsorship, video, and other. 1

The explosive growth of programmatic advertising is not only a reflection of the world’s greatest advertisers (e.g., P&G,2 American Express3) shifting substantial budgets to programmatic channels, but advertisers of all sizes looking for ways to improve the effectiveness and efficiency of their buys.

WHY DOES PROGRAMMATIC MATTER NOW?

1 eMarketer, “US Programmatic Display Digital Ad Spend Tops $10 Billion This Year, to Double by 2016,” October 20142 Ad Age, “Procter & Gamble AIms to Buy 70% of DIgital Ads Programmatically,” June 20143 Ad Age, “American Express Wants to Shift Online Ad Budget to Programmatic Technologies,” May 2014

2013 2014 2015 2016

Programmatic digital display ad spending in billions

$4.24

$10.06

$14.88

$20.41

63%55%

45%

24%

% of total digital display ad spending


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If you’ve ever managed a digital campaign, from either side of the table, you know it can be quite a headache. The advertiser wants to reach and engage with their desired audience as quickly as possible, while the publisher wants to be fairly compensated, deliver value to advertising partners and maintain the integrity of their content. The result of these desires is countless spreadsheets, endless email communication, lack of clarity on performance, and the mutual acknowledgement that there has to be a better way.

Fortunately, technology has evolved in such a way that improvements are not only possible, but happening in the advertising industry. Technology enables advertisers and publishers to gather data, utilize that data to develop personalized connections with consumers and assess performance in almost real-time.

An entire ecosystem has developed around programmatic advertising. At times, it can be confusing. And at times, that confusion is warranted. Complex transactions across multiple platforms are taking place. However, there are instances where confusion is leveraged to cloud a publisher’s or advertiser’s ability to understand what purpose a company serves.

The LUMAscape is a visual map of the many players in the programmatic space. These companies are bucketed based on their core function, but many operate in multiple areas. Keep in mind that this landscape is constantly shifting; though it is the latest version as of fall 2015, this map is likely already outdated as players emerge, shutter, pivot and acquire each other.4

We’ll use these pages to explain concepts, walk through processes, dispel myths, clarify buzzwords and provide a clear, holistic understanding of programmatic advertising.

4 Luma Partners, “Display Lumascape,” 2015


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Programmatic advertising is the practice of using technology and data to automatically buy and run an ad campaign in real time to reach the right consumer with the right message in the right context.5

Beyond operational efficiency, a noteworthy benefit of programmatic advertising, there are specific benefits for both advertisers and publishers.

WHAT IS PROGRAMMATIC ADVERTISING?

ADVERTISERS

PUBLISHERS

» Deliver relevant messages to consumers

» Locate and target consumers with greater efficiency and speed

» Understand how specific messages resonate with consumers

» Provide differentiated advertising experiences at scale

» Assess and attribute performance in real time

» Determine exactly where and how ads were served in real time

» Maximize revenue by evaluating advertising opportunities in real time

» Empower advertisers to reach their desired consumer quickly

» Differentiate advertising programs from other content producers

» Determine which type of advertising and advertisers are best suited for specific pieces of content

The foundation of programmatic advertising is data. In order to deliver the right message to the right user in the right context, advertisers and publishers must have information about who the user is, and the context in which she is consuming the content, to deliver the most appropriate message.

5 Ad Age, “The Programmatic Revolution: How Technology is Transforming Marketing,” September 2014


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Data has few letters but many meanings. The data an advertiser or publisher chooses to collect can vary greatly, as can the technology he uses to collect it. The easiest way to think about data is in four buckets.

This is data about the user/consumer. It can include: device type, operating system, carrier, location and demographics. User data is used to qualify users based on the advertiser’s desired audience. For example, if a mobile phone carrier wants to advertise an upgrade opportunity to its existing customers, it can use carrier data to eliminate consumers who use a different provider.

Note: The subset of user data known as demographic data (e.g., age, gender, household income) is typically gathered if the publisher or advertiser requests it and the user provides it. Demographic data is not the kind of information inherently stored on a device or that can be accurately derived from the content being consumed.

This is data about the user’s behavior. It can include: ads clicked, products viewed and purchases made. Behavioral data is used to engage with consumers based on their previous behaviors. For example, if a consumer regularly clicks on an advertiser’s ads for vitamins and subsequently purchases, it makes sense for the advertiser to continue delivering similar offers to that consumer.

This is data about the content the user is consuming. While there isn’t always a direct correlation, the likelihood that a user is interested in products and services based on the content he is consuming is high. Contextual targeting is how most advertising has been done throughout history. For example, if someone is watching a program on financial literacy, he is likely interested in products that can help him become financially literate. If someone watches sports, she is likely interested in tickets to live games.

This is data about what’s happening in the world around us because, as we know, our surroundings often impact our purchases. Environmental data includes things like weather, the stock market and current events. Incorporating weather data into programmatic campaigns is a growing trend. Advertisers recognize that there are direct correlations between the weather and consumers’ likelihood to purchase specific products. Kingsford Charcoal leveraged weather data to deliver messages to consumers when the weather was right for grilling.6

WHAT IS THE DATA?

USER DATA

BEHAVIORAL DATA

CONTEXTUAL DATA

ENVIRONMENTAL DATA

6 Eyeview, “Kingsford Charcoal Successfully Incorporates Weather Targeting in Marketing Campaign,” August 2015


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WHERE DO WE GET THE DATA?

When thinking about how data is gathered, it’s easiest to think about it in three settings — the web environment (including mobile web), the in-app environment and offline.

The web environment is when a user visits a website via a browser on their desktop, tablet or mobile device. In a web environment, user data is found in the browser header — a repository for data about the user. The user agent gathers data like: operating system, browser type, device type and IP address (for location).

Behavioral data is gathered via a cookie. Each time the user loads the website, the browser sends the cookie back to notify the website of the user’s previous activity. The data gathered in the cookie is determined by the person who sets the cookie.

Think about this:

When you visit your favorite website, you’re not required to login with your username and password each time. The login information is stored in the browser, making the login experience convenient for you. When you place a product in a shopping cart and then leave the website, the product is still in the shopping cart when you return. Again, the website’s cookie stored that data in the browser, making the shopping experience convenient for you.

Cookies typically contain encrypted data like: login information, forms you’ve completed, shopping cart history and content you’ve consumed. Overall, cookie data is geared towards capturing your activity on a website. And, as you see in these examples, cookie data is not only used for advertising purposes; it is designed to optimize your experience on the website.

The combination of user agent data and cookie data is powerful because it understands who the user is and how he behaves.

Cookies in an app environment function differently than in a web environment. It’s a common misconception that cookies don’t exist at all in mobile—they do. There are just limitations that make it difficult to utilize them. Each app that a user visits stores cookies in a unique manner, which means that apps cannot easily share cookie data with each other or the user’s web browser. This makes in-app tracking via cookies extremely difficult, if not impossible.

App developers have adapted to these limitations by gathering and storing data via an SDK - software development kit.7

WEB ENVIRONMENT

IN-APP ENVIRONMENT

Cookie

A string of text that uniquely identifies a user. When a user visits a website, data is sent from the website and stored in a user’s web browser while the user is browsing that website

7 Interactive Advertising Bureau, “Understanding Mobile Cookies,” 2015

Software Development Kit (SDK)

Gathers and stores data about users and their behavior, similar to the user agent and the cookie in the web environment


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WHERE DO WE STORE THE DATA?

FIRST PARTY DATA

Think about this:

When you visit the Google Play Store to download an app, you receive a notification asking if you’re okay with the app accessing your location, camera and device ID. Once you agree and download the app, this data is stored in the app and used to both improve your experience within the app and for advertising purposes.

Offline data consists of user information and transactions that originate offline. This is not the kind of data gathered via a cookie, user agent or SDK. Instead, think in-store transactions, credit reports and vehicle registration records. Publishers and advertisers who have their own offline data often map it to their online data to create a holistic view of their audience.

When it comes to storing, managing and using data in the programmatic advertising space, it’s all about the DMP — data management platform.

To understand how a DMP operates, there are three data concepts to master.

First party data is data collected by a publisher or advertiser through a direct relationship with the user or consumer.

Here’s an example:

A sneaker brand wants to market a new type of running shoe. So they develop an app that helps its users train for marathons. Let’s say Kathy is running a marathon early next year and downloads the app to help her prepare. Because she downloaded the app, the brand is able to gather user data about Kathy. Because the brand itself owns Kathy’s user data, this is an example of first party data. In this case, the brand would be able to use Kathy’s user data to target ads about the running shoes to Kathy (a likely buyer considering her marathon plans) in other apps on her phone.

Here’s another example:

If an app publisher knows that 80% of its users are consuming the app on iPhone devices and has those users’ device IDs, that is the publisher’s first party data.

OFFLINE DATA

Data Management Platform (DMP)

A data warehouse that stores and categorizes data and makes it useful for buyers and sellers


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Second party data is when the owner of first party data gives access to another entity with which they have a relationship.


A rental car company wants to target people who’ve traveled domestically within the last year. The rental car company makes arrangements with a travel-booking site to get access to the booking site’s domestic travelers user segment. The next time these users enter the web environment, the rental car company can identify who they are and is able to target its products to them. This is known as second party data because the advertiser got the data directly from the travel booking website.

Third party data is data collected by an entity that doesn’t have a direct relationship with the user or consumer. DMPs often buy data, from a variety of sources, and make that data available to their clients.


A pharmaceutical company wants to target people who’ve purchased an allergy product in the last year. The pharmaceutical company contracts with a DMP who gives the pharmaceutical company access to their segment of allergy product purchasers. Where did the DMP get this data? From a drugstore chain who sells their loyalty card data.

Now that the data picture is clear — what is it, where we get it and how we use it — let’s transition to programmatic transactions.

What do you as an advertiser need to think about when venturing into the world of third party data?

» Where did this data come from?

» How does the DMP determine which users fit in each segment? Is it a proven source or an educated guess?

» How often is the data refreshed before it’s considered no longer reliable?

» Does the data contain any personally identifiable information? Email address, name, social security number, etc.

» How much is the DMP charging for the data?

» How will you have to run the campaign in order to use the data?

ADVERTISER EVALUATION TOOLS: THIRD PARTY DATA

SECOND PARTY DATA

THIRD PARTY DATA


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Before programmatic advertising became the behemoth it is today, digital advertising transactions were one-to-one relationships between publishers and advertisers.

A publisher’s sales team sold advertising space to an advertiser and the advertiser, in turn, ran campaigns on that publisher’s inventory.

In some instances, publishers and advertisers worked with ad networks to manage their sales and campaigns, respectively. Ad networks are companies who handle ad sales for pub-lishers and provide a single point of access to inventory for buyers. Think of them as middle-men and brokers. An ad network aggregates a bunch of publishers and sells the inventory on the publishers’ behalf. They find advertisers interested in buying ads on the websites they represent. In exchange for their service, the ad network takes a share of the sales revenue.

In these direct deal arrangements, the publisher/advertiser/network work together to set and negotiate pricing, set impression volumes, select creative and determine where ads will run—all in advance of the campaign’s launch.

PRE-PROGRAMMATIC TRANSACTIONS: ADVERTISER MEETS PUBLISHER

Ad Networks

Companies who handle ad sales for publishers and provide a single point of access to inventory for buyers

Ad networks have an industry reputation of being bad actors. But that isn’t always the case. There are reputable ad networks with strong value propositions. How do you, as a publisher, tell the good from the bad?

» Does the ad network have direct relationships with demand partners? Meaning, can your ad network rep pick up the phone and call someone at an agency or trading desk? You want your ad network to have substantive buy-side partnerships.

» Does the ad network handle display, mobile or video? Ideally, you’d like a company who can handle it all.

» What technology does the ad network use? It’s okay if they white label technology from other platforms, but be aware of ad networks who claim to have proprietary technology and have none.

» Are there revenue guarantees? If so, what are they?

» How will they decide to price your inventory? Is it a collaborative decision? You want to be involved in this.

» What is the revenue share? Are they transparent on pricing? Meaning, do they tell you what the buyer paid them for the ad?

» What is the policy on ad quality? How will they ensure poor quality ads are not served on your inventory?

» What happens if the ad network cannot fill an impression? Do they resell it to another ad network? This is not an arrangement you want. Many things out of your control can happen here.

» What are they going to do with your data? You may or may not be okay with them using your data for other purposes.

» What is the service model? It is not good if you cannot call and/or physically see someone at your ad network. Email is not an adequate substitute.

PUBLISHER EVALUATION TOOLS: AD NETWORKS


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Many publishers, advertisers and networks still engage in these direct buying arrangements. Some do because it remains an effective way to execute brand awareness campaigns, while others aren’t quite ready to make the transition to programmatic buying and selling.

When buying bulk impressions at a fixed price via a direct deal, it has implications for both the publisher and the advertiser.

Advertiser’s Headaches Publisher’s Headaches

Spend on users who are not in the desired audience

Miss potential revenue from advertisers who were willing to pay more for certain users

Unable to make adjustments and optimize campaign performance in real time

Unable to price inventory and/or user segments effectively

Slow, painstaking set-up process

Unable to incorporate user data in campaigns easily

Lack of transparency

Out of these inefficiencies and technology advancements, the advertising exchange was born (circa 2007).

WHAT’S MISSING?


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An advertising exchange is a marketplace where advertisers, publishers, and intermediaries (i.e. ad networks) buy and sell publisher inventory in a centralized place.

Instead of buyers and sellers maintaining a series of one-to-one relationships, buyers can access a ton of publisher inventory in a single place, and sellers can access a ton of buyers in a single place.

Not too familiar with ad exchanges? Here are some exchanges you may recognize: AppNexus, Google Ad Exchange and OpenX. Some ad exchanges focus on one channel only, like video, while others enable you to purchase across multiple channels.

The primary method for buyers and sellers to transact on the ad exchange is through a process called real-time bidding.

Let’s walk through what happens behind the scenes of real-time bidding:

1. When a user visits a website or an app, the ad tag sends data about the user to the adexchange. (Remember all the data we discussed earlier? This is where the data is used for decisioning in an RTB setting.)

2. Buyers use that data to evaluate the impression.

3. Buyers place a bid on the impression based on what it’s worth to them.

4. The exchange holds an auction and determines the winner. Whoever is willing to pay the highest price wins.

5. The winning ad is served to the webpage or app and the end user sees or hears the ad.

This may seem like a complex process, but it happens in less than 300 milliseconds.

Exchanges facilitate billions of real-time bidding auctions on a daily basis. Because of the volume of impressions and numerous data points to consider, technology is used to improve the bidding process.

WHAT IS THE ADVERTISING EXCHANGE?

REAL-TIME BIDDING

Buyer

Advertiser or anyone responsible for buying on the advertiser’s behalf

Seller

Publisher or anyone responsible for selling on the publisher’s behalf

Real-Time Bidding (RTB)

The process of a seller sending a single impression to the ad exchange, the buyer evaluating that impression and placing a bid. An auction is held. The highest bidder wins the impression and can serve their desired ad

Ad Tag

A snippet of code on a webpage that sends an ad call to an ad server, and then displays an ad of a designated size at that location

12GENERAL ASSEMBLY WHITE PAPERPROGRAMMATIC ADVERTISING

A technology used to improve the process of buying online ad inventory is a DSP — demand-side platform. When an ad exchange auctions billions of impressions per day, how does a buyer know what to buy? How much to pay? How to adjust pric-ing based on the impression, the time of day, historical performance, and so on? The DSP handles the decisioning.

DSPs have bidders. Bidders are smart. They learn behaviors over time and make new buying decisions based on historical data.

For example, let’s just say that for the past three years, women, 18 – 25, living in New York City, visiting fashion websites during the holidays, have been more likely to click on weight loss ads. A bidder recognizes and stores this historical behavior. Then, on December 20th of this year, the bidder would know to recommend vogue.com inventory, at the right price, to an advertiser promoting weight loss products, especially if the bidder knows that a 23-year-old woman living in Manhattan is the one browsing.

The counterpart to the DSP is the SSP — supply-side platform. In the same way that buyers need help determining what to buy and how much to pay, sellers need help determining what they should sell and how to price it.

SSPs can plug their supply into the ad exchange or they can plug into DSPs directly. Both arrangements yield the same result — enabling buyers to purchase the supply on their platform.

A key value proposition for SSPs is that they simplify the monetization process for sellers.

DSPDemand-Side Platform

SSPSupply-Side Platform

What questions do you, as a publisher, need to ask to make the most of your SSP?

» Do I want my direct sold campaigns to compete with buyers on the exchange or SSP?

» Do I want pricing recommendations? Do I want those to just be recommendations or do I want the platform to make pricing changes for me?

» Do I want 100% fill?

» Do I need complete transparency? Meaning do I need to know which buyers are purchasing my inventory and how much they’re paying?

» What am I willing to accept as a revenue share?

» Do I need ad quality controls?

» Do I want to set pricing floors so my inventory cannot be sold below a certain dollar amount?

PUBLISHER EVALUATION TOOLS: SSPs

Supply-Side Platform (SSP)

Aggregates inventory from publishers and ad networks and sells it to buyers

Demand-Side Platform (DSP)

A technology platform that provides digital media buying capabilities

Bidders

A technology that uses algorithms and historical data to make decisions on how buyers should bid. They’re designed to ingest data and make decisions on where to buy and how much to pay based on the advertiser’s goals


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They have proprietary technology designed to help publishers maximize their yield. Maximize their yield simply means make them more money. If a publisher has a direct sales team, works with ad networks and sells across the exchange, how does the publisher know which of these efforts will make the most money? SSPs help publishers prioritize their inventory based on his-torical payments from buyers. The SSP technology helps the publisher realize what’s working in their selling strategy, what’s not and how they can adjust.

As you now know, the advertising exchange is a centralized place for buyers and sellers to connect. However, the exchange environment is too open for some buyers and sellers. These buyers and sellers want greater control around their transactions. Thus, the private marketplace.

Private marketplaces (PMPs) operate just like the open exchange with one key difference. In a PMP, buyers and sellers mutually agree to buy and sell from one another in a closed environment. The open exchange does not require this type of permission. If a buyer wants to purchase an available impression on the open exchange, the buyer simply need bid enough. In a PMP however, buyers and sellers must be approved by one another to buy and sell from one another. Think of it as an elite country club.

Real-time bidding is one method of buying and selling on the advertising exchange. But, there are others. Not every programmatic transaction involves bidding. There’s also something called programmatic direct. Programmatic direct is when a buyer and seller mutually execute a direct deal using programmatic technologies. The purpose of this is to take advantage of the efficiency, technology and audience data associated with programmatic, but maintain the spirit of a directly negotiated deal. According to eMarketer, programmatic direct transactions will represent $8.5B in spend by 2016.8


A women’s lifestyle website is working with a major athletic brand. The brand wants to target women, 18 – 34 years of age who’ve downloaded the brand’s new running app. The brand also wants to modify the campaign’s creatives in real time depending upon whether users are clicking on the ads or not. These asks — using first-party data (app downloaders), leveraging third-party data (women, 18 – 34) and modifying the campaign in real time, are the hallmarks of programmatic. This campaign is easily executed when done via programmatic channels. However, the publisher and the advertiser negotiated this deal and set pricing in advance.

PRIVATE MARKETPLACES

PROGRAMMATIC DIRECT

8 eMarketer, “US Programmatic Ad Spend Tops $10 Billion This Year, to Double by 2016,” October 2015.


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You’re an advertiser working with several agencies. You inform your digital agency that you want to develop a programmatic strategy. You’re (somewhat) confident it will improve your digital footprint and benefit the business overall. Your agency develops a media plan, as they’ve always done, but allo-cates a portion of the budget for spend via programmatic channels. The agency passes the media plan and budget along to their trading desk. An agency trading desk is an entity within the agency designed to handle programmatic buying.

You begin working with the trading desk and decide that you want to leverage your cus-tomer data in the campaign. You use a DMP to capture and save your customer data. You work with the trading desk to establish cam-paign goals. You’d like to drive your current customers to a landing page to show them a new product. You’re willing to pay more to target customers who’ve purchased more than one product in the past. The trading desk informs you it’ll be using a DSP to buy the inventory. After researching the DSP a bit, you’re ready to move forward and launch your first programmatic buy.

You receive daily reports from the trading desk, giving you and your customer acquisition team opportunity to adjust the campaign in real time. You make tweaks to the creative, land-ing page and targeting. You’re paying more for users you find more valuable.

The flexibility in the campaign and overall buying process enables you to hit your goals quickly. Your foray into programmatic buying is successful, and it’s only the beginning.

WALK A MILELet’s walk in an advertiser’s shoes…

A note about trading desks

The trading desk often operates independently of the agency, and has its own management structure and pricing. Programmatic buying is thought by many to be a specialized skill set, requiring a dedicated staff who understand the technology, processes and data. At some agencies, trading desks are alive and well. At others, trading desk staff have been reabsorbed into the larger agency; these agencies believe that programmatic advertising is growing at such a rapid speed, that everyone within the agency must be empowered to handle programmatic buying.


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Programmatic, while a loaded word, doesn’t have to be confusing. It can be a tool to enhance your advertising program, empower your sales/marketing teams and grow your business. Here are a few takeaways to keep in mind…

Programmatic advertising is constantly changing — new companies, new technologies, new services, new strategies. However, the fundamentals outlined here are consistent. So, although the change may be confusing and even frustrating at times, remember that you’re empowered with a strong foundation and that innovation leads to progress. Change is a good thing!

Technology is the foundation of programmatic advertising, so it’s critical to cultivate the right partnerships with the right vendors. You’ll want to strike a balance between relying too heavily on one vendor and working with too many. There are consequences for operating at either end of the spectrum. Carefully assess your company’s needs, based on where you are currently and where you want to be, and review multiple vendors. Ask questions liberally, require explanations and test judiciously. Your business is valuable, and the right vendor will treat it as such.

Having a siloed approach to programmatic advertising is like having no approach at all. For your programmatic strategy to work most effectively, empower your organization — marketing, sales, sales operations, ad operations, design and planning — to understand and speak the language of programmatic advertising.

In a constantly evolving industry, it’s okay to change direction and try new things. You won’t know which strategy works best until you implement it, and while you can gather as much information as possible to make the best decision in advance, there’s no teacher like your own experience.

IN CLOSING...

General Assembly’s Corporate Training Team provides practical online and offline education

for executives, advertisers and sales teams to help large organizations succeed in the digital

age. To find out more, visit generalassemb.ly/corporate-digital-training.

PROGRAMMATIC ADVERTISING IS AN EVOLVING INDUSTRY

CHOOSE YOUR TECHNOLOGY PARTNERS CAREFULLY

EMPOWER EVERYONE ACROSS YOUR ORGANIZATION

DON’T BE AFRAID TO CHANGE THE STRATEGY

THE AUTHOR Desiree Tunstall is an instructor with General Assembly’s corporate training team, where

she specializes in teaching Fortune 500 companies about adtech and programmatic

advertising. She is also the Founder and Managing Director of Verto Media, a digital audio

technology firm. Prior to founding Verto, Desiree was the Director of Publisher Sales

at AppNexus where she established its mobile business, growing it from zero to several

million in revenue. Desiree also formerly acted as the Vice-President of Client Services at

Zarca Interactive, a technology research firm.

programmatic primer · the lumascape is a visual map of the many players in the programmatic space....

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