To understand what Programmatic means, one has to first understand how advertising is traditionally bought and sold. It all begins with media buying contracts which are referred to as ‘Insertion Orders’. It is written up by the publisher/agency/DSP that will “execute the media buy”, and signed by the advertiser who will pay for the service.
The Insertion Order is then executed by a person manually configuring an ad server, trading desk or DSP console. In the past, a person would manually adjust the “TV ad schedule”, put the ad image on an ad slot on a page to be printed, or upload an audio ad into a panel which will play it on the radio station upon a button press.
“Programmatic” is just a term used to describe the elimination of the manual configurations. The Insertion Order may become an electronic submission like the “Submit” button in an online shopping cart. The interaction between the media buyer and the publisher is mostly (if not entirely) done via computers.
Real-time Bidding (RTB) is the process that allows multiple media buyers to bid on an ad slot. The media buyer (Demand Side Platform “DSP”) has up to 1/100 of a second to decide on a bid. This process is completed on an impression basis. A transaction takes place for a single impression which is shown on a single website/app for a single user. Every time a user loads a page, a new RTB auction is held.
Broadly speaking, the RTB way of buying media is a specialize form of Programmatic buy. RTB is picking each individual apple (impression) from 10 different fruit stands, while Programmatic is picking the best looking bag from a pile.
RTB requires the ability to separate each user’s interaction with the publisher. Hence websites and apps are perfect for RTB. Other channels such as printed media, radio, and TV do not currently have the ability to personalize the user’s experience. Thus, these channels can only be completed programmatically.
In the future, TV and radio will have the capability to be personalized and their associated ad impressions can be auctioned off by RTB.
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