How The Programmatic Supply Chain Works

In our Beginner’s Guide to Programmatic Advertising, we covered the fundamentals of what programmatic advertising is, how it helps advertisers, how the pricing structure works and who it fits best. This blog is going to add a layer on top of those fundamental building blocks, diving into the technical aspects of programmatic advertising and investigating the complete supply chain that connects a website visitor with a brand’s advertisement.

Understanding the programmatic supply chain

AdX, DSP, SSP and DMPs: acronyms that boil down the programmatic supply chain into four primary elements. Each element serves a unique purpose and plays an integral role in connecting a website visitor with a highly targeted and relevant piece of ad creative.

Ad Exchange (AdX)
An ad exchange is the central hub of all buying and selling activity. It’s the marketplace that connects publishers with advertisers – available ad inventory with ad creative.

Where traditional media buyers handle price negotiations through a one-to-one conversation, an ad exchange negotiates each placement’s cost through real-time bidding within milliseconds of a visitor loading a website and being served an ad.

Pricing determined through a real-time bid essentially means an ad unit’s price is determined by the true market value of that placement. A publisher’s ad unit will only go for the cost that a advertiser is willing to pay. If no one is willing to pay for the placement, the unit will go unfilled.

Demand Side Platform (DSP)
A demand side platform is essentially a software platform that allows buyers of digital advertising inventory to manage and place ads across multiple ad exchanges through a single interface.

A DSP is where marketers go to manage their bids, budgets, targeting, optimize their ads and ultimately traffic their ads out to available digital ad inventory.

Imagine the DSP as a place where an advertiser says to the ad exchange, “Hey, I have this ad creative. Where should I place it and how much will it cost me?”

Supply Side Platform (SSP)
The supply side platform, or sell side platform, is a software platform that allows website publishers to add their available advertising inventory to ad exchanges, fill their available units with ads and earn revenue through their websites.

Think of the SSP as the place where a website says to an ad exchange, “Hey, I have ad space I need to sell.” The ad exchange then asks the demand side platform, “Anyone want to place ads here?” The exchange creates a match between publisher and advertiser and everyone is happy.

Data Management Platform (DMP)
A data management platform is a software that provides a central location for advertisers (buy side) to access and manage audience and campaign data to create targeting segments for their campaigns.

Publishers (sell side) also use DMPs to house data about their website visitors, which they can then bundle up and sell to advertisers.

Consumer insights and data provided by DMPs can include age, gender, household income, browsing behavior, purchase history, location, device information and so on. DMPs can then feed this consumer insight into the DSP (buy side) to further optimize ad targeting, placements and bids.

A high-level view of a complicated system

As the marketing and advertising world becomes more and more Jetsons, the fundamentals of what we’re trying to accomplish remains unchanged: connecting the right people with the right message at the right time.

Programmatic advertising is simply a tool that utilizes technology to enable advertisers to accomplish this more efficiently than ever before.

Right now, this tool can seem like a convoluted concept of intertwined technologies, markups and shady middlemen. This can be true – but it’s not entirely fair. As with any new tool, especially one reliant on technology, the people selling these solutions don’t always understand how they work, which has led to mixed results and some bad experiences.

This is all the more reason to invest the time in learning what programmatic is for yourself, how it works and how your brand can utilize it. Or, find yourself a trusted programmatic media buying partner who knows which questions to ask to earn your brand the best rates and available inventory.

At the end of the day, programmatic advertising—when placed in the right hands—is proven to eliminate wasted impressions through highly refined targeting, lower costs, reduced labor hours due to the elimination of one-on-one negotiations and show an overall improvement in campaign performance.

Having a high-level understanding of the programmatic supply chain is a step in the right direction to arm yourself with the facts and information needed to successfully negotiate and place your first programmatic ads and reap the benefits of this relatively new technology.

The Definitive Beginner's Guide to Programmatic Advertising

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