Programmatic buying is often described as the future of online advertising.

It’s an alternative to traditional ad buying, but not “the beginning of the end for all manual processes in digital advertising” as some may claim.

Before we can even begin to discuss any of the above points however, it’s important to make sure that we know exactly what programmatic buying means (and by ‘we’ I probably mean ‘me’).

The trouble with a lot of existing guides to programmatic is that they assume an awful lot of jargon is already known by the reader: ad inventory, real-time bidding (RTB), demand-side platforms… uh… programmatic.

That’s fair enough, being as there’s a large probability that if you’re in a position where you need to research programmatic buying, you’re probably going to already know a lot of this stuff anyway.

However, if you’re working in digital and have brushed up against the terms programmatic buying and RTB, and need a basic guide to what the heck it all means, you’ve come to the right place…

The Internet Advertising Bureau (IAB) has decreed there are two types of programmatic buying: programmatic direct and programmatic RTB.

Let’s take this one step at a time…

Programmatic buying

Programmatic quite simply means automatic. Programmatic buying refers to any ad space bought automatically on a web page, through either bidding for the space or buying it directly so it’s guaranteed to be yours.

Programmatic RTB

Let’s first start with a simplified description: programmatic RTB is like Google AdWords, only it’s for display ads rather than search results.

If that sentence doesn’t mean anything to you, don’t worry, we have published a very simple explanation of how Google AdWords works, so please read if you’re unsure.

Real-time bidding is used for serving internet users with display advertising around the internet.

As a webpage loads, if it has ad space on it that is available for real-time bidding, information about the webpage and the user viewing it is passed on to an ad exchange. An ad exchange is a platform that auctions off the available ad space to the highest bidder. The winning ad will then appear on the webpage when it has finished loading.

These auctions are held in the miliseconds it takes for a webpage to load.

This available ad space is also known as an impression. Every time an ad loads this is one impression. Some impressions are more valuable to certain marketers than others, depending on the particular website it appears on, it’s relevance and the likelihood that a user will click-through on the ad.

The price of an impression is determined by what buyers are willing to pay in real-time.

Advertisers often use demand-side platforms (DSPs) to help them decide which ad impressions to purchase. A DSP is a fully automated piece of software that bids on impressions from an ad exchange.

This removes the need for human sales people, negotiation skills and a huge amount of time as the decision to bid on an impression is made immediately, and simply the highest bidder wins.

As an extra bonus piece of jargon busting, you may hear the phrase ad inventory a lot. Ad inventory is the amount of ad space a publisher has available to sell to an advertiser.

The use of RTB means that advertisers no longer have to purchase display ad space for a set amount of money over a set period of time on a website they assume will bring it traffic.

Instead ads can be specifically targeted to relevant people across a wide range of sites, and budgets can be managed in real-time.

Programmatic direct

This is also known as ‘automated guaranteed’, ‘programmatic guaranteed’, and ‘programmatic premium’. These are all the same thing, so don’t worry about the jargon.

Basically, this is an automated process of buying guaranteed ad space that doesn’t involve an auction.

The typical process for buying ad inventory was notoriously inefficient before programmatic, often taking up to 42 steps for an ad to go from conception to its eventual display.

An agency would have to research the best space to place an ad, rely on an admin heavy process of sending requests to discover pricing and availability from publishers, transact deals with paper insertion orders and manually add the advertisement into the ad server. This is before the ad has even begun running.

Now that more automatic solutions are available thanks to the rise of programmatic advertising (RTB, Google AdWords) marketers can now have faster access to ad inventory, complete pricing control, immediate and seamless delivery and various performance analytics.

Go beyond the basics

Learn how to optimise your channels, applications and performance by attending our Get With The Programmatic conference, in partnership with Marketing Week, taking place on Tuesday 29 September in London.

This year’s ​conference will provide real-time information on developing your programmatic strategy plus how to optimise your programmatic spend. Book your ticket now.