What Is Programmatic Direct? – The Ultimate Guide11 min read14/07/2018
Programmatic Direct is one of the two basic ad buying models within programmatic advertising. This model implies selling or purchasing inventory using special software tools like demand-side and supply-side platforms. Advertisers use demand-side platforms (DSPs) to purchase ads while publishers use supply-side platforms (SSPs) to sell their inventory. The Programmatic Direct term basically means that those who buy ads have to directly communicate with those who sell their inventory in order to make a deal while still using automation capabilities of the programmatic advertising technology.
Programmatic Direct buying bridged a gap between the transparency of personal negotiations and automation capabilities of the other programmatic ad buying model called real-time bidding (RTB). According to eMarketer, 58% of the overall programmatic digital ad spending falls to Programmatic Direct as of 2018. By 2020, this value will grow to 61% with more than $40 billion of total investments.
History and etymology
Developers were creating the programmatic advertising technology with a couple of goals in mind. They include:
- Reaching target audiences in a precise manner by using advanced targeting capabilities.
- Facilitating the ad buying process through automation techniques.
Real-time bidding copes well with the latter task. With RTB, advertisers can buy inventory through open or invitation-only auctions. This eliminates the need for personal negotiations between those who purchase inventory and those who sell it. However, RTB has a lack of transparency when it comes to purchasing inventory. Advertisers may not even know where exactly their ad will appear.
Programmatic advertising has revolutionized the entire ad buying process. The adtech industry moved from fulfilling Excel tables to user-friendly interfaces with a lot of features that facilitate the ad campaign optimization. You can better understand the reasons why the industry turned towards direct deals with a set of automation capabilities by comparing Programmatic Direct vs RTB.
Despite all the advantages of the RTB-based ad buying model, it still had its drawbacks that further resulted in emerging Programmatic Direct.
Real-time bidding implies buying a particular type of the audience rather than a certain volume of inventory. However, brands may need to know the exact price for their planned ads and volume of inventory they purchase. This is what RTB cannot provide.
Poor quality of inventory
RTB provides a low control on the ad selling process for publishers that’s why they avoid offering their premium inventory. Therefore, publishers tend to sell their only extra or long tail inventory using RTB. Thus, advertisers often have no access to premium inventory using real-time bidding to purchase ads.
Low control over the brand reputation management
RTB is a great tool for achieving key performance indicators (KPIs) like return on investment (ROI) with an advertising campaign. However, when it comes to improving the brand reputation, those impressions purchased through RTB can affect the brand since advertisers don’t have control over where their ads appear. If users see the ad on a low-quality website or site with inappropriate content, they can associate the brand with a place where their ads have been shown. The context, format, and placement play a significant role in the user attitude toward a brand.
So Programmatic Direct appeared. This ad buying model allows publishers to get more control over the inventory selling process. They can set the price for their inventory and offer certain types of ads in certain categories while RTB makes those who sell their inventory agree on conditions from advertisers by default.
The adtech industry used to try automating the traditional ad buying process based on personal negotiations using the other approach. There used to be various companies like Shiny Ads, iSocket, and AdSlot that integrated their APIs into website ad servers and provided customers with a user interface for configuring campaigns, invoicing, etc. However, these companies couldn’t offer the benefits of Programmatic Direct and efficiency of the DSP infrastructure.
Programmatic Direct types
|Preferred Deal vs. Programmatic Guaranteed|
|Type||Preferred Deal||Programmatic Guaranteed|
|Price||Fixed CPM||Fixed CPM|
|Deal type||Personal deals||Personal deals|
|Volumes||Non-guaranteed volumes||Guaranteed volumes|
Programmatic Direct can be divided into Preferred Deal and Programmatic Guaranteed. These ad buying submodels combine particular advantages of direct advertising and automated techniques.
The Preferred Deal definition implies that advertisers purchase inventory at a fixed price using the automation capabilities of the RTB-based ad buying model. Thus, unlike RTB, advertisers avoid the need for participating in auctions to buy their ads using an SSP like Google’s DoubleClick AdExchange. In the case of a Preferred Deal, publishers don’t guarantee a certain number of impressions.
Advantages for advertisers
The Preferred Deal ad buying type has the following benefits for those who buy inventory.
Ad buyers can review their planned impression before open auction participants thus hypothetically get a chance to reach more potential customers compared to when using an open auction.
In the case where certain publishers don’t sell their inventory in the open auction, advertisers can get access to premium inventory through a direct Preferred Deal.
Advantages for publishers
The Preferred Deal ad buying type has the following benefits for those who sell their inventory.
More control over the selling process
Using the Preferred Deal model, publishers can offer their premium or premium residual inventory while having more control over the selling process compared to RTB as well as automation benefits of the programmatic advertising.
Increased cost-per-mille (CPM)
Publishers can increase their CPM for residual inventory by providing particular advertisers with primary access to planned impressions. Using a Preferred Deal option, those who sell their inventory can get more revenue compared to when using an open auction.
This deal type is best suitable in cases where the ad campaign is ﬂexible and advertisers don’t need their impressions to be guaranteed as well as when they only strive to reach the target audience.
Programmatic Guaranteed is a programmatic advertising transaction type that allows advertisers to buy a certain number of impressions at a fixed price. At the technical level, an SSP connects to the ad server and transmits the publisher’s consent on creating orders. Then a DSP like Google’s DoubleClick Bid Manager gets access to the ad server thus enabling advertisers to buy inventory.
Advantages for advertisers
The Programmatic Guaranteed ad buying type has the following benefits for those who buy inventory.
Increasing brand awareness
When using Programmatic Guaranteed, advertisers can be sure that their guaranteed impressions will appear on high-quality inventory approved by them. However, those who purchase inventory should understand what kind of audience mostly visit a certain website or its particular category. Thus, advertisers purchase access to the right audience, but in a broader sense. Instead of targeting “40-year-old men who have searched for mobile devices costing up to $600 in online stores over the past 20 days,” advertisers will target something like “adult middle-income men”.
Therefore, that’s not the best approach for selling mobile devices when the main goal is reaching the highest possible number of sales. However, when it comes to increasing brand awareness, it’s hard to find a better tool than Programmatic Guaranteed. Thus, this Programmatic Direct type is a marketing instrument for the top of the sales funnel.
Despite ad buyers cannot decline a certain impression provided by the system, they still can customize their advertising campaign. Since programmatic advertising manages sets of user data, advertisers can use it for displaying creative impressions. Furthermore, Programmatic Guaranteed enables those who buy ads to combine different types of impressions.
For example, if an advertiser is sure that he or she hardly can sell something to a certain user, the ad buyer can set up an impression aimed at making the user aware about the brand instead of trying to make this user make a purchase. The advertiser can follow the user from one website to another if those sites have been a part of the initial media plan. After a few unsuccessful impressions for the same user, the advertiser can modify his or her tactics by showing another, different impression instead of bombarding with the same one. When it comes to display ads, such an approach is possible only within a single website.
Advantages for publishers
The Programmatic Guaranteed ad buying type has the following benefits for those who sell their inventory.
Using Programmatic Guaranteed, both publishers and advertisers no longer need commercial offers, contracts, and invoicing. This significantly reduces the workload of sales department representatives at media companies. However, it doesn’t fully eliminate the need for the human communication since publishers should allocate employees for working with ad buying agencies.
Higher inventory cost
Guaranteed impressions also mean that advertisers cannot choose which impressions they want to buy and which ones they don’t, and thus they lose the opportunity to benefit from user data. However, publishers can use this data. Websites can collect the enormous amount of first-party data that provide more insights about site visitors than aggregated third-party data. That’s why some websites can segment their audience and show the advertiser’s ad only to a certain segment of the audience. This is an extremely useful capability, especially for E-commerce and booking sites. For example, an online ticket booking service can show an ad of a suntan cream for those users looking for air tickets to South countries.
Programmatic Guaranteed can be compared with the direct ad buying rather than with RTB as in the case with Preferred Deal. Programmatic Guaranteed combines the flexibility and efficiency of programmatic advertising with the advantages of the traditional ad sales process.
This deal type is best suitable for cases where advertisers need to secure publisher’s top inventory, within a specific time period, for an agreed upon budget.
How to implement Programmatic Direct
When turning towards programmatic advertising, brands may face the problem of how to integrate this marketing channel into the existing promotion ecosystem. When it comes to advertisers, they will have to deal with a Trading Desk, programmatic ad agency. This can confuse those companies that have never used programmatic advertising. This is a completely unexplored territory that’s why the first experience with this technology can turn to be ineffective.
Therefore, brands should approach professionals who can help them adopt the new technology. This includes hiring either an outsource agency or in-house employee. While it mostly refers to advertisers, publishers also should allocate resources to start selling their premium inventory using Programmatic Direct. The success of the technology deployment depends on how fast the sales department will be able to learn, try, and properly use the capabilities of the programmatic advertising and Programmatic Direct in particular.
Programmatic Direct use cases
This technology remains in its early stages despite it has been for more than five years. Many companies still hesitate to adopt programmatic techniques to promote their products or services. According to IAB Europe, their most significant barrier to deploying programmatic advertising is a lack of qualified talents. However, such brands as Global Media, a media agency, and an insurance company called Insure Co. have already started exploring the new promotion technology and benefiting from its capabilities.
The media agency called Global Media created an advertising campaign for their client, an online store of sporting goods. The goal was to make the target audience associate the retailer with the 2016 Summer Olympic Games in Rio. During the event, Global Media delivered 25 million impressions on the Olympic Games topic to a certain popular sports site. Using Programmatic Guaranteed, the media agency got access to this premium inventory and ensured their content to be shown in specific page sections.
When launching their advertising campaign, Insure Co. strived to get males subscribers aged from 35 to 44 in large cities. To reach their goals, the insurer decided to target their audience across multiple websites. They also decided to focus mostly on one specific automotive website with a high number of visitors per month. However, the insurance company determined that only a small part of the overall website traffic is their target audience. Insure Co. used a Preferred Deal to benefit from its flexibility and only purchase those impressions that would be seen by their potential subscribers. This approach enabled the insurer to invest the remaining budget in reaching their target audience on other websites.
With the growing popularity of programmatic advertising, more companies will deploy this technology to effectively reach their target audiences. According to eMarketer, more than 86% of all digital display ads will be programmatic by 2020, and Programmatic Direct will be a significant part of all programmatic spending. Programmatic Direct was born as a smart solution that combined the automation advantages of real-time bidding and control capabilities of traditional direct ad sales as well as minimized the drawbacks of these ad buying methods.