Programmatic Advertising: The Basics

Introduction — What is Programmatic Advertising?

Imagine you are an advertiser who wants to show your product ad — say a new smartphone — to people who might actually buy it. Traditionally, you’d contact websites, negotiate prices, sign contracts, and manually upload banners. This process was slow and inefficient.

Programmatic advertising automates all of that. It uses artificial intelligence, data, and software to buy and sell ads online — automatically and in real time — just like stock trading. The goal is simple: show the right ad to the right person at the right time.

Key Players in the Programmatic Ecosystem

Think of programmatic advertising as a digital marketplace. There are four main roles:

How It Works — Step by Step

Let’s break it down using a simple example:

1. You open a website like TechNews.com that has ad spaces.
2. The website’s SSP sends a signal (called a bid request) saying “We have an ad space available for a male, age 22, interested in tech.”
3. Several advertisers through their DSPs respond instantly — “I’ll pay ₹5 for that impression”, “I’ll pay ₹6”, etc.
4. The highest bidder wins, and their ad (like the new Samsung Galaxy banner) is shown to you — all within 100 milliseconds!
5. The DSP and SSP record the results — impressions, clicks, conversions — for reporting and optimization.

This is called Real-Time Bidding (RTB).

Auction Types and Pricing Models

• Open Auction (RTB): Anyone can bid on ad inventory. Like an open eBay auction for ad space.
• Private Marketplace (PMP): Only invited advertisers can participate — premium inventory for trusted partners.
• Programmatic Guaranteed: No auction. Both parties agree on a fixed price and number of impressions — fully automated deal.

Pricing models:

• CPM (Cost per 1000 Impressions): Pay for visibility — best for awareness campaigns.
• CPC (Cost per Click): Pay only when someone clicks your ad — best for engagement.
• CPI (Cost per Install): Pay when a user installs your app — used in mobile app marketing.

Bidding Strategies & Targeting

Advertisers don’t bid blindly. They use smart strategies and data targeting:

• Bid Shading: Helps save money in first-price auctions by automatically reducing your bid amount without losing.
• Dayparting: Showing ads at the best time of day (for example, showing food ads at lunch hours).
• Frequency Capping: Limits how many times a user sees the same ad (to avoid annoyance).
• Geo & Device Targeting: Show ads only to people in specific cities or devices like “Mobile only”.
• Audience Targeting: Use user data (interests, behavior, age) to reach relevant people.

Measurement & Attribution

Once ads are running, advertisers must track how they perform. This is called measurement or attribution.

• Impressions: How many times the ad was displayed.
• Clicks: How many times users clicked on it.
• Conversions: Did users buy, install, or sign up after clicking?

Common tools for tracking:

• MMPs (Mobile Measurement Partners) like AppsFlyer, Branch, Adjust, Kochava.
• Analytics tools like Google Analytics or Looker Studio.
• Fraud detection & viewability tools like IAS, DoubleVerify, and Pixalate.

Example Setup — How to Run Your First Programmatic Campaign

1. Choose a DSP (like DV360, The Trade Desk, or a self-serve DSP).
2. Set your campaign goal (brand awareness, installs, sales).
3. Upload creative banners (image/video) with proper sizes (300x250, 728x90, etc.).
4. Select audience and geo targeting (e.g., males 20–30, India).
5. Set budget, bid strategy, and campaign duration.
6. Add tracking pixels or postback URLs from your MMP.
7. Launch the campaign and monitor results daily.

Example of a Bid Request (Simplified JSON)

{
  "id": "1234567890",
  "imp": [{
    "id": "1",
    "banner": { "w": 300, "h": 250 },
    "bidfloor": 0.5
  }],
  "site": { "page": "https://example.com" },
  "device": { "ip": "123.123.123.123", "ua": "Mozilla/5.0" }
}

This code shows how a website sends ad details (size, type, and user info) to an ad exchange.

Example of a Video Ad (VAST Format)

For video ads, a special XML code called VAST is used:

<VAST version="4.0">
  <Ad>
    <InLine>
      <Creatives>
        <Creative>
          <Linear>
            <Duration>00:00:15</Duration>
            <MediaFiles>
              <MediaFile type="video/mp4">https://cdn.example.com/ad.mp4</MediaFile>
            </MediaFiles>
          </Linear>
        </Creative>
      </Creatives>
    </InLine>
  </Ad>
</VAST>

Common Troubleshooting Tips

• No impressions? — Check if targeting is too narrow or if bid price is too low.
• Low CTR? — Try new creatives, headlines, or colors that stand out.
• Attribution mismatch? — Make sure your MMP and DSP use the same lookback window.
• Invalid traffic? — Add fraud detection tags like IAS or Pixalate.

Mini Glossary — Quick Terms

RTB:

Real-Time Bidding — live auctions for ads.

DSP:

Platform for advertisers to buy ad space automatically.

SSP:

Platform for publishers to sell their ad inventory.

VAST:

Template used for serving video ads.

Next Steps — Practice Ideas

1. Sign up for a free DSP demo account and create a test campaign.
2. Try uploading sample creatives and set different targeting combinations.
3. Track performance metrics (CPM, CTR, CVR) using dashboards like Looker Studio.
4. Read IAB’s Programmatic 101 guide to understand standard terms.

FAQs

Q: Is programmatic only for big brands?
A: Not at all! Many self-serve platforms allow small budgets and startups to run programmatic ads.

Q: How fast is a programmatic ad auction?
A: Usually between 50–120 milliseconds — faster than a blink!

Q: Can programmatic run on mobile apps?
A: Yes — app publishers use SDKs (like Google AdMob or MoPub) that support programmatic ads.

Further Reading & Free Tools

• IAB Programmatic 101 Guide
• The Trade Desk Learning Hub
• Google DV360 Skillshop
• PubMatic and Magnite blogs for publisher-side insights