Programmatic advertising has become one of the key tools of digital marketing, allowing to automate the process of buying ad impressions and precisely target ads to the desired audience. With its help, companies can manage their budget more effectively, improve personalization, and achieve high results. Among the many formats of programmatic advertising, e-commerce solutions attract special attention, including retail ads, which help brands promote products in the digital environment. In this article, we will analyze how programmatic advertising works and what technologies underlie it.

What Is Programmatic Advertising?

Programmatic advertising is the process of buying digital ads using software. Traditional advertising methods require requests for proposals, bids, quotes, and more. But in programmatic advertising, an algorithm performs most of the necessary steps, replacing human negotiations with machine learning, AI solutions, and other algorithmic processes.

What Is a DSP?

A DSP is a software that powers programmatic ad buying. Companies bid on display, video, mobile, and search ads, and the platform determines when and where they will be served.

DSPs make the ad-buying process more efficient and cost-effective. They connect to an ad exchange where advertisers bid for ad space on publishers’ websites. A centralized ad exchange allows companies to buy ad space from a wide range of publishers through one interface, targeting specific users based on location, browsing behavior, and demographics.

A real-time auction is sometimes used to determine the price of these impressions. Since impressions are awarded to the highest bidder, there is no need for actual negotiations with buyers. Once a visitor lands on a publisher’s website, a script determines whether they are in the advertiser’s target audience and sends an ad request to the publisher’s SSP.

What Is The Difference Between a DSP And an Ad Network?

DSPs are similar to ad networks in that they provide publishers with a huge amount of inventory and opportunities for targeted advertising. However, there are distinct differences between the two technologies.

An ad network is an intermediary between advertisers and publishers. Publishers and advertisers are required to have an account, and the ad network tags their media. A DSP allows publishers to connect to multiple ad exchanges that charge a small fee to process the transactions.

A DSP provides transparency. Advertisers know exactly which publishers they are buying ad space from and can bid on the price. With an ad network, the details of the ad space being purchased are often masked and a fixed cost per thousand impressions (CPM) is applied.

What Is an SSP?

An SSP, also known as a supply-side platform, is a technology that helps publishers manage the supply and distribution of their ad inventory.

With this platform, publishers can list their ad inventory on multiple ad exchanges and reach a wide range of advertisers using DSPs. An ad exchange is where SSPs and DSPs meet.

When an SSP lists ad space, DSPs price and buy impressions on behalf of companies based on certain characteristics of the ad space (such as where and to whom they are shown).

In addition to providing publishers with a large pool of potential ad buyers, an SSP gives them complete control over their ad space and the pricing for it. Publishers can set a minimum price per ad space and customize the minimum price for specific ad buyers or channels. For example, new buyers may receive a lower price per ad space as an introductory deal.

Publishers can also choose which advertisers and ad types are allowed on their sites.

What Is a DMP?

A DMP (data management platform) is a standalone software that organizes and stores audience data collected from online, offline, and mobile sources. This data is used to create customer profiles to drive ad campaigns. Programmatic advertising platforms use these anonymous customer profiles to improve personalization, targeting, and content customization.

Many DSPs integrate DMPs or DMP features into their software because it provides advertisers and brands with a better understanding of their customers.

A DMP can collect data from web analytics tools, mobile analytics tools, your CRM, POS systems, social media, etc. It then uses this data to create profiles of website visitors that are used in programmatic advertising algorithms to deliver ads to visitors who are most likely to convert.

For example, a user who, based on their browsing history, likes bicycles, will be shown ads related to bicycles. A user who matches the profile of a parent between the ages of 25 and 35 will see a different set of ads.

How Does Programmatic Advertising Work?

Programmatic advertising connects website owners who have ad space with advertisers who want to buy that space. What sets programmatic advertising apart from other advertising technologies is that this interaction occurs without actual negotiations.

Instead, it uses software to connect, for example, retail ad sellers with ad buyers. Buyers can bid on ad space rather than using a fixed CPM for all impressions on a site.

Programmatic advertising occurs at the intersection of DSPs, SSPs, and DMPs. Each platform manages specific parts of the process. The end result is a distributed, transparent ad network that maximizes both the price publishers can get for ad space and the ROI marketers get from their ad campaigns.

The bidding process happens dynamically during the first seconds a visitor loads a page (depending on how the SSP and DSP are configured). DMPs allow DSPs to optimize ads for visitors based on anonymous profiles. Ad exchanges facilitate this process by connecting SSPs that own ad spaces with DSPs that host ads.

Final Thoughts

Programmatic advertising opens up broad opportunities for automated and precise targeting for businesses, helping companies effectively interact with their audiences. In the e-commerce sector, retail advertisements are especially in demand, allowing brands to promote products in the online environment and attract interested buyers. Using retail marketing ads in combination with modern advertising technologies makes marketing campaigns more personalized and effective, which means it helps businesses grow in the conditions of digital competition. If you are looking for a reliable provider of high-quality solutions for working with programmatic advertising, we recommend paying attention to SmartyAds.